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Notes
- 1.
The philosophical roots of this focus can potentially be traced back to moral philosophy and the utilitarianism of Jeremy Bentham and John Stuart Mill. Although with much reductionism and simplification, Adam Smith’s invisible hand and the assumptions of classical economics along with Alfred Marshall’s introduction of the utility function into economics have contributed to this focus. Friedman’s doctrine (Friedman 1970) has provided the business rationale of shareholder value maximisation which is a key aspect of this focus.
- 2.
Note that the shareholder value maximisation rationale has also been critiqued extensively in the literature (See Stout, 2012, for a discussion of the theory, history, and critique of ‘shareholder value maximisation’).
- 3.
I would like to state clearly that there are many forward-looking risk-taking and legacy defining investors who invest to build and improve human society and the future of our children. The discussion here is about the value framework in finance theory and practice, and not a blanket qualification of actual investors.
- 4.
The NPV equation is sometimes written in the below formats, where the first cash flow CF0 (II) is included in the right-side term as the first cash flow at t = 0, or excluded but without the negative sign as the negative sign of the first cash flow CF0 is assumed:
\(\begin{array}{*{20}c} {NPV = \sum_{t = 0}^T {\frac{CF_t }{{\left( {1 + r} \right)^t }}} } & {NPV = CF_0 + \sum_{t = 1}^T {\frac{CF_t }{{\left( {1 + r} \right)^t }}} } \\ \end{array}\)
- 5.
- 6.
The authors have addressed the recent trend in sustainable finance by integrating ESG Factors in their 7th edition of the same book (2020). More on ESG factors in the next chapter.
- 7.
My own doctoral research (Papazian, 2004) utilised this RPR methodology to identify stock market winners and losers on the London Stock Exchange using the stocks included in the FT500 index between 1988 and 1992. I subsequently applied clinical methodology (Jensen et al., 1989) to explore and scrutinise the firms included in the portfolios in real time and space between 1988 and 1996.
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Papazian, A.V. (2022). Finance: A Value Paradigm and Equations Without Space. In: The Space Value of Money. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-59489-1_2
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