A reappraisal of share price maximization as a corporate financial objective

Simon Keane

The European Journal of Finance, 1995, vol. 1, issue 1, 1-17

Abstract: This paper challenges the conventional share price maximizing objective and the assumption that a successful company can expect to achieve share price growth above the normal drift caused by inflation and earnings retention. The share price is an expectations-based measure, and more efficient companies have no greater prospect of outperforming market expectations than less efficient companies. The paper concludes that, given the potentially dysfunctional effects of pursuing a share price maximizing goal, it may be significant that share-price centred economies such as the UK and the US tend to be associated with a more short-termist perspective than bank-centred economies such as Germany and Japan.

Keywords: share price maximization; zero NPVs; short-termism (search for similar items in EconPapers)
Date: 1995
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DOI: 10.1080/13518479500000001

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