There are numerous reasons that contribute to corporate firms’ interest in realizing short term returns. For instance, the average holding period for stocks in corporations has significantly dropped to less than one year as compared to about seven years in the 1960s. According to Alfred Rappaport, some executives prefer to address the concerns of the majority of shareholders while neglecting the interest of long term shareholders. It takes approximately ten years of value-creating cash flows for majority of companies to justify their stock prices. It is, therefore, extremely essential for companies to emphasize the pursuit of long term value maximization. In Ten Ways to Create Shareholder Value, Alfred Rappaport outlines governance principles that are necessary for companies’ value creation. The author mainly arrives at critical conclusions following his research and immense consulting experience. Majority of public companies pays extraordinary attention to earnings by engaging in the “earnings expectation game” (Rappaport, 2006). Focusing on earnings alone has detrimental implications. It is, therefore advisable for executives to shun the practice of managing earnings or providing guidelines regarding earnings. The author further asserts that it is vital for companies to emphasize only those strategies that maximize expected value above all the other considerations. In addition to this, the author addresses the significance of making acquisitions that maximize expected…
Alfred Rappaport (born 1932) is an American economist. He is the Leonard Spacek Professor Emeritus at Kellogg School of Management at Northwestern University and is best known for developing the idea of shareholder value,[1] in his book Creating Shareholder Value (1986, revised 1997).[2] He also is the co-author, with Michael Mauboussin, of Expectations Investing: Reading Stock Prices for Better Returns (2001).[3] His other works include Saving Capitalism from Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future (2011) and Ten Ways to Create Shareholder Value.[4]
References[edit]
Laczniak and Patrick E. Murphy, “Stakeholder Theory and Marketing: Moving from a Firm-Centric to a Societal Perspective,” Journal of Public Policy & Marketing 31 (Fall 2012), pp. 284–92; Alfred Rappaport, Creating Shareholder Value: The New Standard for Business Performance (New York: Wiley, 1988).
- ^'Interview: Alfred Rappaport of Saving Capitalism from Short-Termism'. GMI Ratings. Retrieved 9 January 2015.
- ^Rappaport, A., Creating Shareholder Value
- ^Rappaport, A. and Mauboussin, M. Expectations Investing
- ^Rappaport, A., Ten Ways to Create Shareholder Value, Harvard Business Review, September 2006, accessed 22 February 2017
External links[edit]
- 'Alfred Rappaport'. JSTOR.
- Alfred Rappaport; John C. Bogle (19 August 2011). Saving Capitalism From Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future. McGraw Hill Professional. ISBN978-0-07-173637-4.
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