Modeling Managers as EPS Maximizers

Itzhak Ben-David and Alex Chinco
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Alex Chinco: Baruch College, CUNY

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, real-world firm managers consistently say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take firm managers at their word and show that EPS maximization provides a single unified explanation for a wide range of corporate policies such as leverage, share repurchases, M&A payment method, cash accumulation, and capital budgeting.

JEL-codes: G30 G31 G32 G34 G35 (search for similar items in EconPapers)
Date: 2023-03
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Working Paper: Modeling Managers As EPS Maximizers (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2023-06

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