Discuss why corporations should pursue market value maximization vs maximizing profit.

Question

Question

business finance

Answer 1

Answer #1

A corporation should pursue towards the market value maximization against maximizing profits because

1) The maximizing profits are the short term goal of the corporation and market value maximization is the long term goal of the corporation.

2) The market value concentration by the corporation will continuously increase the profits for the longer periods.

3) The recognition of the corporation and its products/services in the market will more beneficial to the corporation than having short term profits.

4) The shareholder’s wealth would be apprehended more by gaining market valuation only.

Thus, a corporation should establish its products/services in the market to gain in the longer period.

Answer 2

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