- Thursday, October 1, 2020 at 4:10PM - 5:40PM
- To access the Workshop, please go to the LEO main page (https://law.yale.edu/LEO) on Thursday, Oct. 1st after 9:00 a.m.
- Open To The Yale Community
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James Park '00, Professor of Law at UCLA School of Law and Faculty Director of the Lowell Milken Institute for Business Law and Policy, will be presenting from his draft paper, "From Managers to Markets: Valuation and the Shareholder Wealth Paradigm." The abstract of the draft paper reads:
"The shareholder wealth paradigm displaced a managerialist model where investors deferred to managers with the expertise to efficiently allocate resources within the firm. The corporate managers who administered such internal capital markets faced less pressure to increase profits than they do today. The conventional explanation of the transition from managerialism to shareholder wealth maximization points to changes in ideology favoring shareholders. This Article argues that a more significant cause of the decline of the managerialist model was a fundamental shift in the way that investors valued companies. As the ability of public companies to internally forecast their performance improved, investors became more confident in predicting the trajectory of corporate earnings. As stock prices increasingly reflected the present value of the company’s future performance, it became more important for public companies to demonstrate that their earnings would increase. One way of doing so has been to consistently meet financial projections. Rather than mainly reflecting ideology, shareholder wealth maximization is part of the structure of markets that value stocks based on their future earnings. As investors have recently shifted their valuation methods to deemphasize immediate profitability, some companies may gain more discretion to make meaningful commitments to stakeholders."
The complete draft paper is available here.
Yale Law School Center for the Study of Corporate Law
Law, Economics & Organization Workshop