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Corporate Financial Management, 3rd edition
Glen Arnold
Lecture 1
The objective of the firm
Describe alternative views on the purpose of      the business and show the importance to any     organisation of clarity on this point.
Draw a distinction between profit maximisation     and shareholder wealth maximisation.
Describe the impact of the divorce of corporate     ownership from day-代写留学生论文to-day managerial control.
Which claimants are to have their objectives       maximised, and which are merely to be         satisficed?
Pro-capitalist economists
The rules of the game
Left-wing
Primacy of workers’ rights and rewards
Balanced stakeholder approach
Achieving a target market share
Keeping employee agitation to a minimum
Survival
Creating an ever-expanding empire
Maximisation of profit
Maximisation of long-term shareholder wealth
The company should make investment and         financing decisions with the aim of maximising        long-term shareholder wealth.
The practical reason
The theoretical reasons
The ‘contractual theory’
Practicalities of operating in a free market system
Society is best served by businesses focusing on returns to the owners
The company should make investment and         financing decisions with the aim of maximising        long-term shareholder wealth.
The practical reason
The theoretical reasons
The ‘contractual theory’
Practicalities of operating in a free market system
Society is best served by businesses focusing on returns to the owners
Attacks the stakeholder approach (and its derivative, the     Balanced Scorecard of Kaplan and Norton (1996)). Criticisms   include:
Confusion resulting from a multiplicity of targets to aim for
Leaving managers unaccountable for their actions
Allowing managers to pursue their own interests at expense of the firm
However, Jensen argues that companies cannot create      shareholder value if they ignore important constituencies.
They must have good relationships with customers, employees, suppliers, government etc.
Simply telling people to maximise shareholder value is not
enough to motivate them to deliver value.
They must be turned on by a vision or a strategy.
Attacks the stakeholder approach (and its derivative, the     Balanced Scorecard of Kaplan and Norton (1996)). Criticisms   include:
Confusion resulting from a multiplicity of targets to aim for
Leaving managers unaccountable for their actions
Allowing managers to pursue their own interests at expense of the firm
However, Jensen argues that companies cannot create      shareholder value if they ignore important constituencies.
They must have good relationships with customers, employees, suppliers, government etc.
Simply telling people to maximise shareholder value is not
enough to motivate them to deliver value.
They must be turned on by a vision or a strategy.
Attacks the stakeholder approach (and its derivative, the     Balanced Scor