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Do Publicly Traded Corporations Act in the Public Interest?

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  • Gordon Roger H.

    (University of California, San Diego)

Abstract

Models of corporate behavior normally assume that a firm acts in the interest of shareholders, and that shareholders care only about the returns they receive on the shares they own in that firm. But shareholders should also care about the effects of a manager's decisions on the value of shares they own in other firms, on the price they pay as consumers for the firm's output, on the costs they bear from pollutants emitted by the firm, on the value of the firm's bonds they own, on government tax revenue that finances public expenditures benefiting shareholders, etc. These effects are normally presumed to be of second order. This paper reexamines this presumption, argues that many of these effects are likely to be important, and explores the resulting implications for forecasted corporate behavior.

Suggested Citation

  • Gordon Roger H., 2003. "Do Publicly Traded Corporations Act in the Public Interest?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-20, June.
    • Handle: RePEc:bpj:bejeap:v:advances.3:y:2003:i:1:n:2
    DOI: 10.2202/1538-0637.1013
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    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • G3 - Financial Economics - - Corporate Finance and Governance
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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