Transition, Vol. 26 No. 53, 2025.
Review article
A CHANGE OF THE "SHAREHOLDER VALUE" PARADIGM
Džafer Alibegović
Abstract
In this paper, we consider the evolution and criticism of the theory focused on the
maximization of shareholder wealth as the primary goal of companies' operations.
Traditionally, this theory, developed by economic theorists such as Adam Smith,
Milton Friedman, Jensen and Meckling, and Eugene Fama, focuses on the creation of
shareholder value through corporate governance and market efficiency. However,
critics of this paradigm, such as Freeman and authors who research corporate social
responsibility (CSR), point out that such an approach ignores the interests of other
interested parties (stakeholders), including workers, communities and the
environment, which can lead to long-term economic and social problems. Presenting a
critical judgment regarding the role of the capital market in the calculation of the cost
of capital, the assessment of investment projects, but also in general in the context of
company management, we conclude that companies should direct their business
strategies towards a balance between the interests of all interested parties, not only
shareholders, in order to ensure sustainability and responsible business in the long
term.
Keywords
shareholder theory, CSR, cost of capital, CAPM, capital market
Hrčak ID:
336268
URI
Publication date:
6.10.2025.
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