Shareholder value and corporate governance: some tricky questions

Shareholder value is not a new idea. But it entails a shift in control over businesses with far-reaching macroeconomic consequences. They are mostly apparent in the USA. The required financial return spurs a momentous equity price appreciation which discourages private saving. Meanwhile, the achievement of a financial profitability consistently above the economic rate of return on real capital induces a rising leverage cum share buybacks. The financial dynamic is highly procyclical and generates a financial fragility which questions the hypothetical advantage of private pension funds over pay-as-you-go retirement systems.