One of the most frequently used terms in business today is Shareholder value. The "equity culture" wildfire is spreading rapidly from the US to the rest of the world (Thakor et al, 2000). It is seen as crucial all over the world. In Sweden the new measurement systems of shareholder value creation were introduced in the last decade and have been slowly introduced in various companies. Indeed, some of the leading companies like SCA and SKF have made the creation of shareholder value one of their key corporate objectives.
Moreover shareholders are the owners of the corporation and the board of directors are their representative and elected by them. The objective function of the corporation is to maximize the shareholder value. Managers in most of the developed world must focus on building shareholder value
Objective of the Research
The purpose is to conduct an analytical study of different methods used by companies to measure shareholder value creation. The study also aims to give a general picture of how shareholder value is created as a background to measuring shareholder value. Furthermore all that will be done will be based on an empirical study.
Creating and measuring shareholder value can be studied from different perspectives. When studied from the shareholder or other stakeholder perspective, the research is mostly based on the information collected from the shareholder or stakeholders. When it is the stock market perspective, the information used in the study is collected mainly from the stock market. If the study is based on the company perspective then the information used will mainly be collected from the company. Every perspective is very important to investigate. However due to the time limit and the scope of the problem we are obliged to make some limitations.
Many factors can affect shareholder value such as the environment surrounding the firm, weaker business climate, political situation, and currency fluctuations. We are not going to cover the above factors in our study since the background information will be covered in general and it is not the main focus of our research. However they are discussed partially only when our sample companies consider them to be crucial factors affecting their operations.