Please define and explain the difference between Shareholder Wealth Maximization and Stakeholder Wealth Maximization. Please articulate...

Please define and explain the difference between Shareholder Wealth Maximization and Stakeholder Wealth Maximization. Please articulate your views on what should be management's primary goal(s).

Expert Solution

The shareholder wealth maximization goal states that management should endeavour to maximize the net present (or current) value of the expected future cash flows to the shareholders of the firm. Net present value refers to the discounted sum of the expected net cash flows.

Although maximization of shareholder wealth is the primary goal, many firms broaden their focus to include the interests of stakeholders as well as shareholders. Stakeholders are groups such as employees, customers, suppliers, creditors, owners, and others who have a direct economic link to the firm. A firm with a stakeholder focus consciously avoids actions that would prove detrimental to stakeholders.. The goal is not to maximize stakeholder wealth but to preserve it.

In my view, the management's primary goal should be on Stakeholder Wealth Maximization because the stakeholders have a direct economic link to the firm. Also maximizing stakeholder wealth will improve the firms corporate social responsibility image and will provide maximum long term benefit to shareholders by maintaining positive stakeholder relationships.

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?

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

1. Are you in favor of a shareholder maximization or stakeholder maximization corporate model? Explain why...

1. Are you in favor of a shareholder maximization or stakeholder maximization corporate model? Explain why or why not and why a corporation would choose not to implement a stakeholder maximization corporate model? 2. Discuss ways in which you attempt to minimize principal-agent problems. Provide a real-life example of a strategy a company has implemented to better align the interests of shareholders and management.

The Stakeholder Capitalism or Corporate Wealth Maximization Model

The Stakeholder Capitalism or Corporate Wealth Maximization Model A) clearly places shareholders as the primary stakeholder. B) combines the interests and inputs of shareholders, creditors, management, employees, and society. C) has financial profit as its goal and is often termed impatient capital. D) is the Anglo-American model of corporate governance. E) none of these

The shareholder wealth maximization model is also known as Anglo American model. Please explain the model.

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).

Four ways to improve shareholder wealth maximization and how?

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?

١.Which of the following goals of the firm is equivalent to the maximization of shareholder wealth?...

١.Which of the following goals of the firm is equivalent to the maximization of shareholder wealth? Select one: a. Maximization of the total market value of the firm's common stock b. Stakeholder wealth maximization c. Risk minimization d. Profit maximization 2.Noncash items refer to: Select one: a. the ownership of intangible assets such as patents. b, expenses which do not directly affect cash flows. c accrued expenses. d. inventory items purchased using credit.

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