do you expect the goal of shareholder wealth maximization conflict with efficiency wage theory? Explain your...

do you expect the goal of shareholder wealth maximization conflict with efficiency wage theory? Explain your answer.

Expert Solution

The basic premise of efficiency wage theory is that increasing wage shall lead to an increased productivity.Increased wage shall lead to staff retention and increased efficiency thereby benefiting the firm. Therefore we can say that shareholder wealth maximization does not conflict with efficiency wage theory as it benefits the firm in the longer run. In a short run it may seem so but the benefits are greater as the firm does not have to lose its production and sales due to searching for a lower wage emplyee. Also the employe who is alreasy working in a company knpws its functioning better anc can provide a greater productivity than a newer employee.

The other reasonsfor the same that benefit the firm as well as shareholder are:

A employees with a higher wage will work at an effort level which involves no shirking.
If workers receive a higher pay, they may just feel more loyalty towards the company and be willing to work harder and with more determination.
It shall lead to low cost of supervision.
If a firm pays above the market clearing level, it will attract a better quality worker who will feel they can get the relatively better-paid job.

jeff jeffy answered 2 years ago

Explain the concept of shareholder wealth maximization. Is there a conflict between the goal of shareholder...

Explain the concept of shareholder wealth maximization. Is there a conflict between the goal of shareholder wealth maximization and the financial manager's need to act in an ethical manner? Why or why not?

A major advantage of using the maximization of shareholder wealth as the primary goal of the...

A major advantage of using the maximization of shareholder wealth as the primary goal of the firm is that this goal considers the timing and the risk of the expected benefits to be received the investor's consumption utility the value of closely held partnerships all the above

Currently, maximization of shareholder wealth is widely accepted as the primary goal of management.

Chapter 1 Discussion: Primary Goal of ManagementCurrently, maximization of shareholder wealth is widely accepted as the primary goal of management. However, like most economic theories, certain conditions must exist in order for the theory to accomplish its potential . Now, compare the theoretical world with the real world--if you were in charge of management decisions, how might you balance the theory with reality?

Do ethics play a critical role in the financial manager’s goal of shareholder wealth maximization? How...

Do ethics play a critical role in the financial manager’s goal of shareholder wealth maximization? How are the two related? Is the establishment of corporate ethics policies and guidelines, requiring employee compliance, enough to ensure ethical behavior by employees?

Is "profit maximization" consistent with "shareholder-wealth maximization"?

The goal of "maximization of the shareholders' wealth" is an adequate goal for a project. Do...

The goal of "maximization of the shareholders' wealth" is an adequate goal for a project. Do you agree? If you dont explain your justtification (please explain in detail)

The goal of “maximization of the shareholders’ wealth” is an adequate goal for a project. Do...

The goal of “maximization of the shareholders’ wealth” is an adequate goal for a project. Do you agree? If you don’t, explain your justification. Can you comment on this topic at least 5 pages on MS Word? Thanks.

Briefly share your thoughts about shareholder wealth maximization. Then, explain the advantages and disadvantages of wealth...

Briefly share your thoughts about shareholder wealth maximization. Then, explain the advantages and disadvantages of wealth maximization from the perspective of a company’s Chief Financial Officer. Include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders). Attention: Make sure that you include the effect on company stakeholders – internal (managers, employees) and external (suppliers, shareholders).

Why should maximization of shareholder wealth NOT be the primary goal? Hint – A common mistake...

Why should maximization of shareholder wealth NOT be the primary goal? Hint – A common mistake is to address a “strawman” instead of the true goal of maximizing shareholder wealth. This is done in some of the articles referenced above. An example of a “strawman” in this case is saying that maximizing shareholder wealth is focusing on the short-term AT THE EXPENSE of the long-term. Since firm value is the present value of ALL EXPECTED FUTURE CASH FLOWS, strategies that...

Which are advantages of focusing on shareholder wealth maximization as the goal of financial management? Check...

Which are advantages of focusing on shareholder wealth maximization as the goal of financial management? Check all that apply: It can be measured objectively. It's an unambiguous goal. It avoids conflicts with other goals. It takes into account both short-term and long-term effects and expectations. What are examples of a possible result of the conflict of interest between shareholders and corporate managers? Check all that apply: Managers paying themselves excessive salaries. Managers faking earnings to temporarily boost the stock price....

Question