Modeling Managers As EPS Maximizers

Itzhak Ben-David and Alexander M. Chinco

No 31125, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Textbook theory assumes that firm managers maximize the net present value of future cash flows. But when you ask them, the people running large public corporations say that they are maximizing something else entirely: earnings per share (EPS). Perhaps this is a mistake. No matter. We take 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 issuance and repurchases, M&A payment method, cash accumulation, and capital budgeting.

JEL-codes: G30 G31 G32 G34 G35 (search for similar items in EconPapers)
Date: 2023-04
Note: AP CF
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Working Paper: Modeling Managers as EPS Maximizers (2023)
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