2nd October 2019


What is maximizing shareholder value?

Shareholder value is a business term, sometimes phrased as shareholder value maximization or as the shareholder value model, which implies that the ultimate measure of a company's success is the extent to which it enriches shareholders.

So, what is the maximization of shareholder wealth?

Shareholder Wealth Maximization. When business managers try to maximize the wealth of their firm, they are actually trying to increase their stock price. As the stock price goes up, the value of the firm increases and the net worth of the individual who owns the stock increases.

Why is maximization of shareholder wealth important?

Because the goal of shareholder wealth maximization is a long term goal achieved by many short-term decisions to maintain or exceed the expected value of shareholders. Because serving the interests of stakeholders can create profit for the firm, create value for shareholders.

How shareholder wealth is represented in a firm?

"Shareholder wealth" in a firm is represented by: the number of people employed in the firm. the book value of the firm's assets less the book value of its liabilities. the amount of salary paid to its employees.
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