SHERP

Mutual Trust : A Critical Linkage Between Value Appropriation and Value Maximization

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Authors
Park, Choelsoon
Issue Date
1998-06
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business Vol4(1): 5~38(1998)
Keywords
two processes; roles of managers; shareholder value
Abstract
Although value appropriation and value maximization are
fundamental for any firm's economic activities, previous research has
tended to treat them separately and to focus on each issue while taking
the other for granted. This paper suggests that the two processes, i.e.,
value appropriation and value maximization, are not separate; rather,
they are highly interrelated and reinforce each other through mutual
trust among major stakeholders, a crucial linkage between the two
processes. Specifically, this paper presents that fair value appropriation
- i.e., appropriating value to the stakeholders in proportion to their
stakes in the firm - contributes to the development of trust from the
stakeholders, not only directly, but also indirectly through strengthening
moral obligations of internal organizational members, particularly
managers, to the stakeholders. The present paper also shows how
mutual trust with the stakeholders leads to value maximization. After
examining the reinforcing effects of value maximization on value
appropriation, this paper concludes with some discussion about social
legitimacy of a firm and the roles of managers.
ISSN
1226-9816
Language
English
URI
http://hdl.handle.net/10371/1635
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 04, Number 1 (1998)
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