Editing Shareholder value (section)

==Definition==
The term ''shareholder value'', sometimes abbreviated to ''SV'',<ref>Chilosi, A. and Damiani, M., [https://mpra.ub.uni-muenchen.de/2334/1/MPRA_paper_2334.pdf Stakeholders vs. shareholders in corporate governance], MPRA Paper No. 2334, [[Ludwig Maximilian University of Munich|Munich Personal RePEc Archive]], published 21 March 2007, accessed 30 July 2021</ref> can be used to refer to:
* The [[market capitalization]] of a company;
* The view that the primary goal for a company is to increase the [[wealth]] of its [[shareholders]] (owners) by paying [[dividends]] and/or causing the [[stock price]] to increase (i.e. the [[Friedman doctrine]] introduced in 1970);
* The more specific concept that planned actions by management and the returns to shareholders should outperform certain bench-marks such as the [[cost of capital]] concept. In essence, the idea that shareholders' money should be used to earn a higher return than they could earn themselves by investing in other assets having the same amount of [[risk]]. The term in this sense was introduced by [[Alfred Rappaport (economist)|Alfred Rappaport]] in 1986.<ref name=Rappaport>{{Cite book|last1=Rappaport|first1=Alfred|title=Creating Shareholder Value: The New Standard for Business Performance|year=1999|url=https://play.google.com/store/books/details/Creating_Shareholder_Value_A_Guide_For_Managers_An?id=bc0PjplGR5gC&hl=en_US|access-date=2021-07-03 |publisher=[[Simon and Schuster]] |isbn = 9780684844565|language=en}}</ref>

For a publicly traded company, shareholder value is the part of its capitalization which is [[Shareholders' equity|equity]] as opposed to long-term [[debt]]. In the case of only one type of [[share capital|stock]], this would roughly be the number of outstanding shares times current shareprice. Things like [[dividend]]s augment shareholder value while issuing of shares ([[stock options]]) lower it. This '''shareholder value added''' should be compared to average/required increase in value, making reference to the organizations [[cost of capital]].

For a privately held company, the value of the firm after debt must be estimated using one of several [[Valuation (finance)|valuation]] methods, such as [[discounted cash flow]].