Stock Price
Stock Price
Stock price maximization is one of the significant factor for value maximization objectives. Stock prices are the most observable of all measures which can be used to judge the performance of a listed company. Stock prices are constantly updated to reflect new information about a firm. Thus managers are constantly judged about their actions with the benchmark being the stock price performance. Book value measures like sales and earnings are obtained only at the end of year or in each quarter. Stock prices reflect the long term effects of a firm’s business decisions. When firms maximize their stock prices, investors can realize capital gains immediately by selling their shares in the firm. An increase in stock price is often automatically attributed to management’s value creation performance. At the same time, the stock price might have increased due to macro-economic factors.