Maximizing is to make something as large as possible. When companies maximize shareholders’ wealth, people would be better due to the following reasons. The company will create a lot of profit when it maximizes the shareholder’s wealth, which helps increase dividends paid out for each common stock. It will also help shareholders who object to the firm’s policies to sell their shared under favorable terms freely. The objective also will totally consider the risks and the timing of the expected benefits to be received by stock ownership.
Financial markets help in financing companies by raising capital by issuing a bond or shares that enable companies to access long-term finance. The purpose of the financial markets can be accomplished efficiently by ensuring that the savings are put into more productive use. It will also be accomplished by making financial assets liquid, which will help buyers and sellers invest or sell their securities. Lowering transaction costs will help accomplish the purpose of financial marketing by making buyers get information concerning securities without spending. The prices of securities also should be determined since investors target to make profits from their securities.
Reference
Hart, O., & Zingales, L. (2017). Companies should maximize shareholder welfare, not market value. ECGI-Finance Working Paper, (521).