Shareholder Wealth

In: Business and Management

Submitted By konrad30
Words 394
Pages 2
One of the main goals of financial mangers is shareholder wealth (Ross, Westerfield & Jaffe, 2010). Stakeholders are important but not the ultimate goal of a business. In order to maximize wealth potential for all invested the risk and reward should be carefully considered (Adams, 2008). One technique for doing this is capital budgeting because financial managers are able to make decisions with the proper information about risk and reward (Bloom & Van Reenee, 2010). This may also allow for stakeholder incentives and a share at the wealth.
The question may come down to concern over cash flows or profits (Charron, 2007). Cash flows can be a goal of stakeholders where profits are a goal of stockholders. Both stakeholder goals and stockholder goals have benefits. An example, is when dealing with externalities such as pollution with cause maximizing the value of the firm to cause a misallocation of resources (Yoshimori, 1995). In today’s volatile markets and combined focus including stakeholders could be more conducive.

The U.K. is similar to the U.S. with corporate governance goals of maximizing shareholder wealth (Yoshimori, 1995). But, Japan is an example of a country that has much broader goals. In
Japan the concern is with the larger group of shareholders (Yoshimori, 1995). Japanese
Ensures businesses are run in such a way that resources are used efficiently and customers suppliers and employees are taken care of as well as shareholders.

Financial managers may have many goals. In the US the focus is on shareholder but in other countries like Japan the focus is much broader. Both strategies have benefits and negatives but the economic times might just call for different strategies.
References
Adams, S. (2008, February). Fundamentals of business economics. Financial Management (UK), 46–48. Retrieved from Business Source Premier database.…...

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