Business finance

Shareholders focus on maximizing their wealth, which involves balancing the potential risks and returns of management decisions. This is important for the long-term success of the company.

In the case of closely held corporations, which do not sell shares on the stock market, it becomes more difficult to apply the concept of shareholders' wealth maximization. This is because there is no market price for their stock that reflects its value.

Despite this challenge, management still must recognize various factors that can influence stock prices. For instance, if new investors decide to buy into the company or if the existing shareholders plan to list shares on the Philippine Stock Exchange, accurate stock valuation will be crucial.

Thus, even when there isn't a current market price, it is essential for management to be prepared to assess the value of their stock adequately whenever these opportunities arise. This ensures that they can take informed actions to maximize shareholder wealth effectively.