Answer to Question #174952 in Economics for Nyazumu

Question

Discuss the reasons maximiяation of shareholder wealth is the primary objective of profit oriented organiяations compared with other financial objectives such as profit maximiяation, expansion of market share and increased earnings per share

Answer 1

The shareholder wealth maximization goal states that management should seek to maximize the present value of the expected future returns to the owners (that is, shareholders) of the firm. In addition, the greater the risk associated with receiving a future benefit, the lower the value investors place on that benefit.