Should shareholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action would probably increase the firm’s stock price from a current level of $20 to $25 and then to $30 in 5 years — but another action would probably keep the stock at $20 for several years but then increase it to $40 in 5 years,
Should shareholder wealth maximization be thought of as a long-term
or a short-term goal? For example, if one action would probably increase the firm’s stock price from a current level of $20 to $25 and then to $30 in 5 years — but another action would probably keep the stock at $20 for several years but then increase it to $40 in 5 years, which action would be better? Can you think of some specific corporate actions that might have these general tendencies?
Why is profit maximization, by itself, an inappropriate goal?
What is meant by the goal of maximization of shareholder wealth? What does it mean to say that managers should maximize shareholder wealth “subject to ethical constraints”? What ethical considerations might enter into decisions that result in cash flow and stock price effects that are less than they might otherwise have been?
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