Shareholders own companies and are therefore entitled to a return on their investments when the companies are performing well. It becomes the financial managers' role to ensure that shareholders are receiving a maximum return on their investment. This project will concentrate on defining the different roles and objectives of financial managers in their attempt to maximize shareholder value. Furthermore, the viewpoint of stockholders will also be compared to those of financial managers with regards to maximization of shareholder value.
Maximizing Shareholder Value
In today's competitive global environment, financial managers are continually faced with the ability to engage in activities bringing value to the firm and the shareholders. In order to achieve their goals successfully, financial managers need to set strategies to influence the direction and success of the company. Such strategies include internal company performance goals. For instance, financial managers need to be information providers to top management for strategy development and implementation. Furthermore, they also need to be narrow strategic partners by engaging in narrowly defined financial areas (Twomey, 2005). As strategy implementers, the role of financial managers also includes maximizing shareholder value. Many businesses that previously thought of shareholders as little more than another source of funds are now starting to place shareholder interests at the core of their strategies, and are reconfiguring capital structures to do so (Currie,1998). There are various ways to create and increase value from the firm's capital budgeting, financing, and net working-capital activities. For instance, financial managers can buy assets which generate more cash than they cost or they can sell bonds and stocks and other financial instruments which all produce more money than they cost (Ross et al., 2005). Additionally, the role of...