A reappraisal of share price maximization as a corporate financial objective

This paper challenges the conventional share price maximizing objective and the assumption that a successful company can expect to achieve share price growth above the normal drift caused by inflation and earnings retention. The share price is an expectations-based measure, and more efficient companies have no greater prospect of outperforming market expectations than less efficient companies. The paper concludes that, given the potentially dysfunctional effects of pursuing a share price maximizing goal, it may be significant that share-price centred economies such as the UK and the US tend to be associated with a more short-termist perspective than bank-centred economies such as Germany and Japan.