Links Between Net Present Value and Shareholder Value from a Business Economics Perspective

Mária Illés ()
Additional contact information
Mária Illés: University of Miskolc

Theory Methodology Practice (TMP), 2012, vol. 8, issue 02, 31-36

Abstract: One of the oft-quoted theorems of finance is that decision making based on net present value will lead to the maximisation of shareholder value. The study analyses the reality background of this theorem within the disciplinary borders of business economics. Since finance is based directly on the bases of microeconomics, the study touches upon the presentation of the different disciplinary frames of business economics and microeconomics. The paper demonstrates that the economic content of shareholder value of a firm calculated from its business value and the project’s net present value fundamentally differ from one another. With their summing up, in general cases, no index emerges with meaningful economic content. Moreover, only in exceptional cases does the ranking based on the net present value lead to the maximization of the shareholder value.

Keywords: business economics; capital budgeting decisions; net present value; shareholder value (search for similar items in EconPapers)
JEL-codes: G31 G32 M21 (search for similar items in EconPapers)
Date: 2012
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
http://tmp.gtk.uni-miskolc.hu/volumes/2012/02/TMP_2012_02_05.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mic:tmpjrn:v:8:y:2012:i:02:p:31-36

Access Statistics for this article

Theory Methodology Practice (TMP) is currently edited by Zoltan Bartha

More articles in Theory Methodology Practice (TMP) from Faculty of Economics, University of Miskolc Contact information at EDIRC.
Bibliographic data for series maintained by ().