Value Maximization, Stakeholder Theory, And The Corporate Objective Function
AbstractThis paper examines the role of the corporate objective function in corporate productivity and efficiency, social welfare, and the accountability of managers and directors. The author argues that because it is logically impossible to maximize in more than one dimension, purposeful behavior requires a single-valued objective function. Two hundred years of work in economics and finance implies that, in the absence of externalities and monopoly, social welfare is maximized when each firm in an economy maximizes its total market value. 2001 Morgan Stanley.
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Bibliographic InfoArticle provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.
Volume (Year): 14 (2001)
Issue (Month): 3 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1078-1196
Other versions of this item:
- Michael Jensen, 2001. "Value Maximisation, Stakeholder Theory, and the Corporate Objective Function," European Financial Management, European Financial Management Association, vol. 7(3), pages 297-317.
- Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42.
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