Name: Yiyi Fu
Course: FIN 480
Time: 12:45
Assignment: Chapter 2 HW
3. Corporate Goals: Shareholder Wealth Maximization.Explain the assumptions and objectives of
the shareholder wealth maximization model.
The Anglo-American markets are characterized by a philosophy that a firm’s objective should be
to maximize shareholder wealth. Anglo-American is defined to mean the United States, United
Kingdom, Canada, Australia, and New Zealand. This theory assumes that the firm should strive to
maximize the return to shareholders—those individuals owning equity shares in the firm, as
measured by the sum of capital gains and dividends, for a given level of risk. This in turn implies
that management should always attempt to minimize the risk to shareholders for a given rate of
return
4. Corporate Goals: Stakeholder Wealth Maximization. Explain the assumptions and objectives of
the stakeholder wealth maximization model.
Continental European and Japanese markets are characterized by a philosophy that all of a
corporation’s stakeholders should be considered, and the objective should be to maximize
corporate wealth. Thus a firm should treat shareholders on a par with other corporate stakeholders,
such as management, labor, the local community, suppliers, creditors, and even the government.
