Article 

Cossin, Didier, Lu, Abraham, Schlatter, Theophil H.,  Shareholder diversity and the cost of capital
Journal of applied corporate finance , 2008, 23 p.
For companies that view the primary corporate mission as increasing shareholder value, the evaluation of their own periodic operating performance (in terms of their return on invested capital or shareholders' equity) will typically be guided by some estimate of its shareholder's expected or required rate of return. The shareholders' required return is in turn a key variable in determining a company's "cost of capital", which is often used as a hurdle rate for major investment projects as well as other important decisions such as mergers and acquisitions, restructurings, performance measurement, and executive compensation. Figuring out shareholders' required returns is, of course, a challenge in itself. The authors analyse the example of Holcim.
This article begins by offering a taxonomy of the kinds of shareholders who invest in today's large global corporations. In so doing the authors discuss the measures of the risk/return tradeoff that seem most relevant for each shareholder type, as well as their relevance tot he case of Holcim. Then they consider the implications of shareholder diversity for not only a company's cost of capital and valuation, but also for corporate financial policy decisions such as disclosure, capital structure, payout policy, and risk management.

ISBN :
Keywords : SHAREHOLDER VALUE, SHAREHOLDERS, CAPITAL COSTS, RETURN ON INVESTMENT, INVESTMENT
Language : English
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Issue : Not yet published

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