Corporate Finance - Alternate Approaches

Alternate Approaches

A standard assumption in Corporate finance is that shareholders are the residual claimants and that the primary goal of executives should be to maximize shareholder value. Recently, however, legal scholars (e.g. Lynn Stout ) have questioned this assumption, implying that the assumed goal of maximizing shareholder value is inappropriate for a public corporation. This criticism in turn brings into question the advice of corporate finance, particularly related to stock buybacks made purportedly to "return value to shareholders," which is predicated on a legally erroneous assumption.