What should companies do? What is the main objective for companies? For many observers, companies should focus on maximising shareholder value or shareholder wealth. This ideology of maximising shareholder value is prevalent in most Western economies. In the video below, Bill Lazonick critiques this ideology and suggests that it is bad for economic prosperity in the long run. Click here for a paper by Lazonick on this topic.
My colleague and former PhD student Gareth Campbell has created a website about the British Railway Mania - click here . This episode has been described by the Economist as probably the greatest bubble in human history. Gareth's website provides background on the Mania and posits some explanations for the 'bubble'. In his explanation of why the bubble happened, Gareth places a lot of emphasis on investor myopia regarding future dividends and uncalled capital. His study of investors during the episode does not support the view that this episode was fuelled by naive and irrational investors.