Börsenlexikon: Shareholder Value

Shareholder value is defined as the market value of equity and corresponds in simplified terms to the enterprise value and the value of the shares dependent on it. The shareholder value approach is a business management concept developed by Alfred Rappaport, which views the company's operations as a series of payments (cash flows), analogous to the series of payments resulting from a (tangible) investment. The valuation of the company is determined on the basis of the free cash flows. The shareholder value is calculated from the free cash flows discounted to the valuation date less the market value of the debt capital (e.g. bank liabilities). The asset value of a shareholder of a stock corporation is the market value of the corresponding share multiplied by the number of securities held. A corporate policy based on shareholder value will therefore attempt to increase the market value of the shares and thus the market value of the company as a whole. This is understood to mean not only a short-term increase in the stock market price, but also a long-term optimization of competitiveness and profitability. Today, the shareholder value principle is applied by companies worldwide.