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Shareholder value

Shareholder value Definition

Shareholder value refers both to the value of the firm to shareholders and to the management principle of maximizing the worth of a corporation to shareholders. The term was introduced by Alfred Rappaport in his 1986 book Creating Shareholder Value.

For a publicly traded company, SV is the part of capitalization that is equity as opposed to long-term debt. In the case of only one type of stock, this would roughly be the number of outstanding shares times current share price. Things like dividends augment shareholder value while issuing of shares (stock options) lower it. This Shareholder value added should be compared to average/required increase in value, aka cost of capital.

For a privately held company, the value of the firm after debt must be estimated using one of several valuation methods, s.a. discounted cash flow or others.








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