Shareholder value is a term used in many ways:

• To refer to the market capitalization of a company (rarely used)
• To refer to the concept that the primary goal for a company is to enrich its shareholders (owners) by paying dividends and/or causing the stock price to increase
• To refer to the more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the cost of capital concept. In essence, the idea that shareholders money should be used to earn a higher return then they could earn themselves by investing in risk free bonds for example. The term in this sense was introduced by Alfred Rappaport in his 1986 book Creating Shareholder Value (ISBN 0684844109)

Market capitalization, often abbreviated to market cap, is a business term that refers to the overall value of a companys stock. ... The cost of capital for a firm is a weighted sum of the cost of equity and the cost of debt (see corporate finance#the financing decision). ... Jump to: navigation, search 1986 is a common year starting on Wednesday of the Gregorian calendar. ...

Definition

For a publicly traded company, SV is the part of its capitalization that is equity as opposed to long-term debt. In the case of only one type of stock, this would roughly be the number of outstanding shares times current shareprice. Things like dividends augment shareholder value while issuing of shares (stock options) lower it. This Shareholder value added should be compared to average/required increase in value, aka cost of capital. This article is about concept of equity in Anglo-American jurisprudence. ... Debt is that which is owed. ... See stock (disambiguation) for other meanings of the term stock A stock, also referred to as a share, is commonly a share of ownership in a corporation. ... Jump to: navigation, search A dividend is the distribution or sharing of parts of profits to a companys shareholders. ... A stock option is a specific type of option with a stock as the underlying instrument (the security that the value of the option is based on). ... The cost of capital for a firm is a weighted sum of the cost of equity and the cost of debt (see corporate finance#the financing decision). ...

For a privately held company, the value of the firm after debt must be estimated using one of several valuation methods, s.a. discounted cash flow or others. Valuation can mean: Valuation (accounting) Price-to-earnings ratio Valuation (finance) Valuation (mathematics) This is a disambiguation page, a list of pages that otherwise might share the same title. ... In finance, a discounted cash flow is the value of a net cash flow (cash inflows less cash outflows) adjusted for the time value of money. ...

Shareholder Value Maximization

This management principle, also known under value based management, states that management should first and foremost consider the interests of shareholders in its business decisions. Although this is built into the legal premise of a publicly traded company, this concept is usually highlighted in opposition to alleged examples of CEO's and other management actions which enrich themselves at the expense of shareholders. Examples of this include aquisitions which are dilutive to shareholders, that is, they may cause the combined company to have twice the profits for example but these might have to be split amongst three times the shareholders.

Criticism

The sole concentration on SV has been widely criticized. While SV might be best for the owners of a corporation, for society other aspects like employment, environmental/ethical issues or business practices (monopoly) play a higher role. A management decision can maximize SV while lowering global welfare. It can also threaten the long-term health of a company, for example by emphasizing dividends and returning cash to shareholders rather than investment. Employment is a contract between two parties, one being the employer and the other being the employee. ... This article needs a complete rewrite for the reasons listed on the talk page. ... Ethics is a general term for what is often described as the science (study) of morality. In philosophy, ethical behavior is that which is good or right. ... In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ...