Answer to Question #244545 in Management for muf

Question

In recent years, there have been a number of environmental, pollution, and other regulations imposed on businesses. In view of these changes, is the maximization of shareholder wealth is still a realistic objective. Explain

Answer 1

Is maximization of shareholders' wealth still a realistic objective?

           The government has introduced several regulations that have spread widely in the industries. They are of four forms whose aim is to make all businesses responsible socially regardless of the firm size. However, the regulations have resulted in several commercial effects on organizations, customers, and stakeholders.  Maximizing shareholders' wealth is a significant objective of any organization, and it helps boost profits that increase dividends paid out for all stock. However, too much concentration on maximizing shareholders' wealth can affect a company's focus on customer needs or engage in non-optimal activities for their customers (Khan & Hussanie, 2018). Due to the regulations at hand, it would be less realistic to focus on wealth, and managers can seek satisfactory performance levels and exploit their welfare.

References

Khan, Z. A., & Hussanie, I. (2018). Shareholders wealth maximization: Objective of financial management revisited. International Journal of Enhanced Research in Management & Computer Applications, 7(3), 739-741.