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My professor claims that a company want the value of its stocks will be as high as possible. Why should the company care? The company "minds its own business" and make its money. Why should it cares if the value of its stocks is \$25 or \$300?

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One way of raising funds is by issuing new (additional) shares. The price of the new shares will largely depend on the current share price.

Thus, companies usually prefer that their share price is \$300 rather than \$25, so that any new issue raises more funds.

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  • $\begingroup$ Based on your answer and H2ONaCl's answer, if the company doesn't want to sell more shares and in addition the shareholders, the owners, don't want to sell theur shares, does the company have an interest to maximize the shares' value? I guess that in a various of cases a company can increase the shares' value which will come on the expense of the income of the company. (For example, delay/preceed expanses/incomes or make the papers look pretty with nice numbers but actually being bad for incomes). $\endgroup$ – J. Doe Mar 20 '19 at 13:58
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The board of directors is supposed to represent (or work for the interests of) share owners. Share owners prefer higher prices if and when they want to sell their shares. The board chooses the CEO and will retain the CEO if he helps share owners realize their preferences.

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Objectively, the value of a share is the discounted stream of dividends. That is, an investor buys a share because she expects the firm to distribute dividends (which are at least positively correlated to profits). Different traders may have different beliefs regarding these dividends and their beliefs are aggregated in a price "on the market".

The board of directors is elected by the shareholders. The shareholders either want to keep the stock and continuously receive large dividends or they want to sell at a high price. If you want to keep your job in the board, you want to make shareholders happy and you do this by running a successful business in the sense of high profits $\rightarrow$ high dividends $\rightarrow$ high stock prices $\rightarrow$ happy investors $\rightarrow$ job security and high salary for the CEO (you).

The idea behind this is shareholder value.

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