Do firms really act or should solely act to further shareholders welfare?
Firms may follow or have to follow several other aims. Business firms seek out to achieve a high rate of growth, enjoy a considerable market share, achieve product and technological leadership, encourage employee welfare, additionally customer satisfaction, support education and research, progress community life, and solve other collective problems. Some of these aims, may course be in consonance with the aim of shareholders affluence maximization. For a quick growth rate, leading market position, and a higher customer satisfaction may lead to increasing income for equity shareholders. Even efforts toward solving societal problems may further the attention of shareholders in the long run by improving the image of the firm and intensification its relationship with the environment .When these other goals seem to clash with the aim of maximizing the wealth of equity shareholders, it is helpful to know the cost of pursuing these goals. The transaction has to be understood .It should be valued that the maximization of wealth of equity shareholders composes the principal assurance for efficient allocation of resources in the economy and hence is to be regarded as the goal from the economical point of view.
Related Project Management posts
- Maximization of the wealth of equity shareholders Are there other aims, besides the aim or maximum shareholders wealth, expressing the shareholders viewpoint? Several alternatives have been suggested for this, such as maximization of profit, maximization of earnings per share, maximization of equity which is defined as equity earnings/ net worth. Maximization of profit is not as all-encompassing a goal...
- What are the objectives of capital budgeting? What are the objectives of capital budgeting? Financial theory, in general, rests on the principle that the aim financial management should be to make the most of the present wealth of the firm’s equity shareholders. For a firm whose equity shares are dynamically traded on the stock market, the assets of...
- What are the Pros and cons of conglomerate diversification? What are the Pros and cons of conglomerate diversification? The protagonists of conglomerate diversification argue that it helps a company in reducing its overall risk exposure. As the business are characterized by cyclicality it is desired that there are at least two to three distinct lines of business in a...
- How does project management becomes a part of strategic planning? How does project management becomes a part of strategic planning? Strategic planning sets the mission, objective, goal and strategy of organization. Strategic design and implementation are related with planned use of resource by an organization. Strategies can include short term action plans, policies, procedures, resource allocation directions, programs and projects....
- Importance and difficulties of Capital expenditure Here you can understand about the importance and difficulties of Capital expenditure. Importance Capital expenditure decisions represent the most important decision taken by a company. Their importance from three inter – related reasons. Effects in the long Run: the consequences of capital expenditure decisions extend into the feature. The scope...
- What is Market Analysis? What is Market Analysis? Market analysis is associated primarily with two questions: What would be the collective demand of the planned product / service in future? What would be the market share of the project under evaluation? To answer the above questions, the market analyst needs a broad variety of information...
- What is the scope of Project Management What is the scope of Project Management? Projects are managed by project management techniques and project management processes. PMI defined the project management as “…the art of directing and co-ordination of human and material resources throughout the life of a project by using modern management techniques to achieve predetermined objectives...
- Definition of a Project Definition of Project Project can be defined as a temporary endeavor to create a unique product or service. Newman et al. defined a project and described its value as simply a that cluster of activities that is relatively separate and clear cut. Its examples are designing a new package, building...
- What do you mean by Selection in capital budgeting ? What do you mean by Selection in capital budgeting ? Selection follows, and usually overlaps, analysis. It addresses that -Whether the project worthwhile? A broad range of appraisal criteria have been suggested to evaluate the worth while ness of a project. They are usually divided into two broad categories, viz,...
- What is the conceptual phase? What is the conceptual phase? This phase is established and the management approach is always formulated. Goals are identified and well established, and resources are estimated and key personnel are appointed....