ABSTRACT
Theories which have been developed within the maximisation paradigm retain many of the characteristics – both virtues and defects – of traditional theory. The major departure from received theory lies in the choice of the maximand, that is, the objective which it is assumed the firm attempts to maximise. Whereas the utility maximisation and sales maximisation theories retain the static framework of received theory, growth theories discard this in favour of dynamic considerations. Management policies directly influence share prices. The latter indirectly affect policy through the valuation ratio, which in the manager’s utility function is the proxy for security. Behavioral theories of the firm belong in the category of theories developed outside the profit-maximising paradigm. The behavioral theory of the firm has been brought to the highest state of development by Cyert and March. The behavioral theory selects five goals: profit, growth, sales, market share and inventory. This list can be rationalised quite easily and appears to be eminently reasonable.
