The purpose of the corporation:
Shareholder-value maximization?
Finance Working Paper N°. 95/2005
Revised version: February 2006
Petra Joerg
Institut für Finanzmanagement, Universität Bern
Claudio Loderer
Institut für Finanzmanagement, Universität Bern
Lukas Roth
The Pennsylvania State University
Urs Waelchli
Institut für Finanzmanagement, Universität Bern
© Petra Joerg, Claudio Loderer, Lukas Roth and Urs
Waelchli 2006. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.
This paper can be downloaded without charge from: http://ssrn.com/abstract=690044 www.ecgi.org/wp
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It can also be interpreted, however, as a debate about the purpose of the corporation—or about whose interests the corporation should ultimately serve.
Various academics have joined the debate, arguing that there is an increasing consensus that managers should strive to maximize shareholder value, and that doing so maximizes social welfare. There is also a claim that managers are increasingly setting shareholder-value maximization as their main corporate target. This paper questions the existence of a widespread consensus that companies maximize shareholder value or should do so.
Theoretical reasons to doubt the existence of a strong consensus are often related to the externalities that a focus on shareholder-value maximization would create.
How corporations are run can affect, for example, the welfare of entire regions.
Tirole (2001, p. 3) summarizes this line of reasoning by writing, “There is no denying that such externalities may be substantial […]. Why should institution design ignore the natural stakeholders, and favor the investors, who are ‘stakeholders by design,’ by giving them full control rights and by aligning managerial compensation with their interests?” The doubts about the consensus on shareholder-value maximization, however, transcend financial externalities. Take the case of managerial compensation. Critics throughout the Western world have called for legal
According to my analysis of the Accessline’s proposed term sheet, I do not believe that Apex would serve its own interests, or those of its investing partners, by investing in Accessline according to the terms proposed. By investing at the proposed valuation, according to the proposed control and incentive structure, Apex would be shouldering a disproportionate share of the risk should Accessline fail to meet its performance targets, or require fresh inflows of capital from future investment rounds. Nor can Accessline take the sort of steps necessary to protect its investment in the case of management failure.
Which classification system is available with EQS as a criteria for your screen of equities?
Week 7 Chapter 6: Investors in the Share Market True/False QUESTIONS 1. Investing in shares of publicly listed corporations should, on average, over time provide a higher return than investing in fixed-interest securities. a. True b. False 2. Investments through a stock exchange are limited to ordinary shares issued by listed corporations. a. True b. False 3. Portfolio theory contends that a diversified share portfolio enables an investor to significantly reduce the portfolio’s exposure to systematic risk. a. True b. False 4. A share that has a beta of one is twice as risky as an average share listed on a stock market. a. True b. False 5. Shares that typically demonstrate a negative price correlation will usually move in the same direction
'The Landlady' is a short story about a young lad called Billy travelling to Bath on a business trip. He arrives in Bath in the evening and looks for accommodation. Bath was an unfamiliar place to Billy so he was unsure of the area. Billy was guided by a porter who recommended the 'Bell and Dragon' because it was close by, but Billy never went. Although the landlady offered cheap prices and cosy surroundings, she changes her attitude towards Billy as the story unfolds. He then realises that this landlady doesn't appear to be all that she seems to be. He begins to become concerned during his stay but never manages to uncover the landlady's secret before she murders the young lad.
If the number of outstanding shares is reduced by a buyback of shares then the EPS will increase if the EAT remains unchanged. However the EAT is reduced since there is interest expense. If the dividend payout remains the same then the dividend paid per share will increase as well. The debt interest would be 13% of $3 billion which is $390 million. EBIT in 2001 was $527,366,000. So the EBIT is $137,366,000. Then this is taxed at 40% so the EAT is $82,420,000. So by taking on more debt the EAT diminishes so the earnings per share will drop dramatically. Dividends affect next years earnings as they are taken out of the EAT.
Conversely, looking at the income statement for PMWL, operating income shows healthy gains of $45,862, which means the operating expenses are significantly lower in comparison to AWBL’s. However, PMWL’s cost of goods sold appear abnormally high, which makes an investor question whether this company is at it’s maturity phase in the product life cycle, and how much additional capital is necessary to bring this figure down to a number that leverages economies of scale and allows for profit maximization.
is one of Canada’s top hoteliers in the mid-market, owning interests in 16 hotels in Canada and the United States. Furthermore NGI is in ownership of 2,200 rooms in 17 hotels across Canada and the United States. The Company is expert in all facets of the hotel business, from marketing to building to management. Focused on creating the best return and value for all stakeholders, Northampton’s market-sensitive strategy is to acquire or build hotels that provide great value and superior accommodation. Gratefully, NGI excels in this sector by offering services that exceed expectations while still posting industry-leading margins. Besides acquiring and developing undervalued and underutilized hotel assets, NGI also provides superior overnight accommodations at mid-market prices. This has been done through aggressive marketing, re-branding and ongoing hotel upgrades.
“Let me keep my distance, always, from those who think they have the answers. Let me keep company always with those who say “Look” and laugh in astonishment and bow their heads” (Oliver, 2009, p. 62). The words of Mary Oliver surface the value of ambiguity in the face of certitude. They reflect the stance of humility integral to the role of a truth seeker. It is anticipated that in proving a theory or belief, one seeks evidence in pursuit of truth to provide clarity around unanswered questions. For some, evidence is understood as a “collection of facts believed to be true” (Melnyk, 2015, p. 4). For others, evidence is “something that yields relative confidence in the truth of some proposition that can’t be either logically proven or directly
I. Introduction of company valuation methods and process........................................................3 1. Abstract................................................................................................................................3 2. Valuation methods...............................................................................................................3 2.1 Balance sheets – Based methods
Corporate values and personal values align together in a parallel structure, it is difficult to abide by one of the values, when your character does not believe in the other set of values. If we begin to dissect the first statement Pottruck relayed to the readers, he states that his company had a defined set of business ethics. The company was built on the principle of “no conflict of interest”, they believed in expressing their values without compromising their guidelines, organizational values, and their codes. However, as time grew onwards, they realized that maximizing their brokerage commissions off of their “we will not give investment advice” towards their clients resulted in what can be assumed to be hostility and upset in the pit of their clientele. In this specific case, I do believe that corporate values should adapt to what the company’s target market may be relaying to the company in the masses. Otherwise, I do believe it is safe to assume that if ancient corporate values that were founded within a company
goals that promote individuation, and those that promote affiliation in generating individual differences in self-construals (Guisinger and Blatt, 1994)( Kagitcibasi,2005)( Markus and Kitayama, 1991) (Singelis, 1994). Others have created details that formulations that refer to differences in the perspective people take vis-à-vis the self (Kitayama and Imada,2008), distinctive variations of propositional and, to a lesser degree, conceptual self-representations (Schlicht,2009), diverse levels of inclusiveness of the self's conceptualization (Brewer and Gardner, 1996), and diverse degrees and extends to which people are connected in an informal community (Muthuswamy,2007).
ohnson, J., & Higgins, A. (2014). Evaluating the fair market value to pay for performance. Healthcare Financial Management, 68(4), 80-54.
Shareholder Value or Financial Perspective: Holy Grounds will find its niche and be competitive in that it is a different kind of coffee house to the norm appealing to a uniquely religious market. It is a coffee house that offers uplifting Christian-based music along with thought provoking lectures that strengthen the mind and spirit of the typical Christian college student. Holy Grounds will also offer organic healthy food choices and by doing so will support local farm growers as well as support the local economy. This will provide further value to the shareholder. In the United States with a population of over 290 million people, only 21,400 coffee houses exist. These numbers leaves opportunity for Holy Grounds within the competitive marketplace of coffee houses. Customer Value Perspective: The customer will gain both nutritious and religious value. He/ she will have quality organic treats whilst being treated to Christian music and motivational speaking opportunities that will be interesting to a diversified Christian denominational population. Events such as lectures and concerts will be presented by regional pastors and top-selling authors as well as regional church ministries and national recording artist on the Christian radio networks. There will be room too for small meetings for various Christian events. Its appliances and technology will be up to-date with the cafe, for instance offering new coffee machines that make mocha iced coffees as thick as a milkshake.
Symptoms. Schizophrenia is a chronic and severe mental disorder which is characterized by an inability to distinguish what is real and subsequent abnormal behavior. Literally translating from the Greek skhizein and phrēn meaning ‘split-mind’, schizophrenia is characterized by both positive symptoms, e.g. hallucinations, delusions, and disorganized thinking, and also negative symptoms, e.g. apathy, Anhedonia, and deficits in executive functioning. The Diagnostic and Statistical Manual of Mental Disorders, fifth edition (DSM-5) requires for a diagnosis that the individual exhbit at least two dysfunctional symptoms that are active for at least one month (American Psychiatric Association, 2013).
The name of my nursing home is called Sun Shine in the Valley. My nursing home supports the age of 65 years or older. Sun Shine in the Valley is located in Clearwater, Florida, since this city is the second largest older adult populations. Sun Shine in the Valley can take in a hundred residents at a time. In my nursing home, I have designed programs that will help each of my residents improve on their changing sensory loss, physical, health, cognitive, and social abilities.