Shareholder primacy rests on a single-valued objective argument.
Evidence
The scholarly rationale for an orientation toward share price is not that shareholders are somehow more morally worthy than other stakeholders, but that trade-offs, and even rational action itself, require having a single-valued objective. According to the efficient market hypothesis, for which Eugene Fama was awarded the Nobel Memorial Prize in Economic Sciences in 2013, the stock market is the best-available device for putting a value on the firm, and maximizing the value of the firm is the best way to enhance the well-being of society. Thus, “200 years’ worth of work in economics and finance indicate that social welfare is maximized when all firms in an www. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 58
Categorization
- QUESTION: The passage cuts off mid-sentence at ‘in an’ — worth chasing the full argument in Lazonick & O’Sullivan (2000) about how the efficient-market argument yields the shareholder-primary conclusion.
- XREF: connects to: Shareholder value maximization is defended as a social-welfare criterion. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 63
Related
- Shareholder value maximization is defended as a social-welfare criterion. (similarity 0.88)
- Shareholder-value maximization went unanswered by any countervailing force (similarity 0.79)
Broader Connections
- Shareholder value maximization is defended as a social-welfare criterion.
#expands(0.90) — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 63