What are some of the problems involved in implementing the goal of maximization of shareholder wealth?

Question

Edward Kemp

Social Studies

7 May, 11:10

What are some of the problems involved in implementing the goal of maximization of shareholder wealth?

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Answers (1)

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Houston Washington · Answer 1

Answer: Agency problem, where managers and stakeholders don't align in view for the interest of the firm.

Explanation:

Managers tend to operate the firm without the interest of the stakeholders in mind and this causes a disconnect. This is called an agency problem and it's observed when the manangers and stakeholders share different interest.