Shareholder Value Maximization: What Managers Say and What They Do

Abstract

This paper examines whether Swiss firms maximize shareholder value. To find out, we survey the goals of 313 listed and unlisted firms. We then examine whether managers' decisions are consistent with their goals and analyze whether performance corresponds to intentions. Our results show that most managers pursue conflicting targets. Moreover, they mention maximization of shareholder value only about half of the time. And when they do, it is often because share prices have fallen. Shareholder-value maximizing managers sometimes rely on inconsistent investment criteria. We also find that share-price performance is marginally better when managers claim to maximize shareholder value, particularly after a stock price decline.