What is Shareholder Value?
Shareholder value refers to the value of a publicly traded company, minus its debts. The value of a firm is often calculated as the Net Present Value of all future cashflows, plus the value of all non-operating assets owned by the company. Non-operating assets may include things such as excess real estate, stocks, and overfunded pension plans. The shareholder value of a company can also be seen as anything that would be left over of the company if all creditors are fully paid off. Things such as dividends increase shareholder value, while the issuing of additional shares of stock dilutes it. The phrase “shareholder value” originated as a business buzzword in the 1980s, and is often associated with businessman Jack Welch, who formerly served as the Chief Executive Officer (CEO) of General Electric. Apart from the mathematical definition, shareholder value can refer to other ideas as well. It is sometimes used to refer to the concept that the chief aim of a public company is to provide f
