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What induces managers to direct their activities towards maximising shareholders wealth.

What induces managers to direct their activities towards maximising shareholders wealth.

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Answer #1

Following are the reasons which induce manager to direct their activity towards maximizing shareholders wealth:
1) Shareholders are the owner of the business and as its the profit motive which is the primary reason shareholders investment in the company.
2) A company will grow faster and will have more resources and investors if it produces a good return for its investors. which will attract more investors and it will give the company huge resources to do big projects.
3) Surplus Profit will remove the financial crisis and loan requirements which reduce the burden of financing form lender and company can take the decision without the interference of lenders.
4) It can give freedom to take decision for long-term objective rather than short-term objective.

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