Corporate Finance

Corporate Finance


‘The history of corporate structure over the last one hundred and fifty years reflects that it fundamental purpose has been to maximize corporate profit with the view of increasing shareholder wealth.’ However, ethical considerations may be compromised with such financial modeling.The question of whether corporate management adopts strategies consistent with shareholder wealth maximization is an ongoing issue in corporate finance. Agency problems may arise when management decisions or actions flow from non- value or trivial maximizing strategies.For example, management may seek to increase the size of the firm for the sole purpose of empire building, or they may seek to diversify the firm's portfolio in order to increase their own job security. Further , ‘the managerial entrenchment thesis suggests that the separation of ownership and control offers managers an array of discretionary behaviors, including shirking, and risk aversion or the

Corporate Finance