DEFINITION
Shareholder Value

"Shareholder value": Literally the value accruing to shareholders. Shareholder value calculations take account of: (i) The market value of shares; (ii) Dividends paid out to the shareholders; (iii) Capital introduced by the shareholders; and (iv) Capital returned to the shareholders. Often the term is used qualitatively to describe the general trend away from focusing on accounts-related measures of performance and towards economic value-based measures of performance. Shareholder value management emphasises the consequences of management decision-making in terms of resulting market values rather than in terms of purely accounting based measures such as accounting profits or earnings per share. In simple terms, shareholder value is added or created when the Internal rate of return from the firm's investment projects exceeds the appropriately risk-adjusted Weighted average cost of capital.
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