When Maximizing Shareholders' Wealth Is Not the Only Choice

Eastern European Economics, Vol. 39, No. 6, November-December 2001, pp. 64-93

Posted: 21 Dec 2013

See all articles by Dusan Mramor

Dusan Mramor

University of Ljubljana - Faculty of Economics

Aljosa Valentincic

University of Ljubljana - Faculty of Economics

Date Written: 2001

Abstract

This article presents an empirical analysis of the financial behavior of Slovenian firms. It focuses on the goal of the firm, capital budgeting, capital structure, and dividend-payout decisions. Three theories of financial behavior, neoclassical, post-Keynesian, and employee governance, with three different goals of the firm, maximization of share value, maximization of long-term probability of survival, and maximization of wages, provide the theoretical background. A sample of fifty-one important Slovenian firms is analyzed using the data from a questionnaire for chief financial officers and from financial statements. Two additional samples of listed and privatized firms are analyzed through financial statements only. We conclude that the average investigated Slovenian firm is still governed by employees, as it was before privatization, its primary goal is maximization of wages, it does not have net capital investment, it is financed predominantly by equity, and it pays very low dividends.

Keywords: Privatization, Eastern Europe, financial ratios, goal of the firm, capital structure

Suggested Citation

Mramor, Dusan and Valentincic, Aljosa, When Maximizing Shareholders' Wealth Is Not the Only Choice (2001). Eastern European Economics, Vol. 39, No. 6, November-December 2001, pp. 64-93. Available at SSRN: https://ssrn.com/abstract=2370313

Dusan Mramor (Contact Author)

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 1 589 2400 (Phone)
+386 1 589 2698 (Fax)

Aljosa Valentincic

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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