Advertisement

Optimum or Maximum Corporate Growth under Uncertainty

  • John Lintner

Abstract

Consider a firm selling in a less than perfectly competitive market. It produces and markets a more or less closely related set of products to customers who have varying degrees of preference for its output in the face of competitors’ offerings. It has an ‘image’, an established reputation, and a history. It has a vigorous, enterprising management who are charged with responsibility for the direction, allocation and use of the company’s resources. Its resources include its plants and a wide-ranging collection of equipment; its employees of all ranks and skills; the ‘goodwill’ of its established market position; and very importantly, the organization of its human and physical resources into effective economic units. This organization produces relatively efficient flows of work through the firm’s plants and distribution system; at the same time, it provides efficient flows of information to and from all operating and administrative levels for purposes of effective decision-making as well as control of operations and performance.

Keywords

Dividend Payment Dividend Payout Retention Ratio Payout Ratio Optimal Dividend 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. [1]
    Aitchison, J., and Brown, J. A. C., The Lognormal Distribution (Cambridge Univ. Press, 1963) (57).Google Scholar
  2. [2]
    Arrow, Kenneth J., ‘Optimal Capital Policy with Irreversible Investment’, in Value, Capital and Growth, ed. J. N. Wolfe (Edinburgh University Press, 1968).Google Scholar
  3. [3]
    Baumol, Wm J., Business Behavior, Value and Growth (Macmillan, New York, 1959).Google Scholar
  4. [4]
    Baumol, Wm J., ‘On the Theory of the Expansion of the Firm’, American Economic Review (Dec 1962).Google Scholar
  5. [5]
    Brittain, John A., Corporate Dividend Policy (Brookings Institution, Washington, 1966).Google Scholar
  6. [6]
    Brown, Donaldson, ‘Pricing Policy in Relation to Fiancial Control’, Management and Administration (Feb, Mar and Apr 1924).Google Scholar
  7. [7]
    Dean, Joel, Managerial Economics (Prentice-Hall, New York, 1951).Google Scholar
  8. [8]
    Dhrymes, Phoebus J., and Kurz, Mordecai, ‘Investment, Dividend and External Financing Behavior of Firms’, in Determinants of Investment Behavior (National Bureau of Economic Research, Columbia Univ. Press, 1967).Google Scholar
  9. [9]
    Donaldson, Gordon, Division of Research, Harvard Business School, Boston, 1961).Google Scholar
  10. [10]
    Downie, J., The Competitive Process (Duckworth, London, 1958).Google Scholar
  11. [11]
    Hakansson, N., ‘Risk Disposition, the Chauchy Equations, and the Separation Theorem’, forthcoming in Econometrica.Google Scholar
  12. [12]
    Hicks, John R., Value and Capital, 2nd. (Clarendon Press, Oxford, 1946).Google Scholar
  13. [13]
    Hicks, John R., Capital and Growth (Oxford University Press, 1965).Google Scholar
  14. [14]
    Kaplan, Donald M., The Corporate Capital, Structure and Marginal Financing Decisions’, unpublished dissertation, University of California at Los Angeles, 1969.Google Scholar
  15. [15]
    Leland, Hayne Ellis, ‘Dynamic Portfolio Theory’, unpublished Ph.D. dissertation, Harvard University, May 1968.Google Scholar
  16. [16]
    Lintner, John, ‘Distribution of Incomes of Corporations among dividends, Retained Earnings and Taxes’, American Economic Review (May 1956).Google Scholar
  17. [17]
    Lintner, John, ‘The Cost of Capital and Optimal Financing of Corporate Growth’, Journal of Finance (May 1963).Google Scholar
  18. [18]
    Lintner, John, ‘Optimal Dividends and Corporate Growth under Uncertainty’, Quarterly Journal of Economics (Feb 1964).Google Scholar
  19. [19]
    Lintner, John, ‘Corporate Finance: Risk and Investment’, in Determinants of Investment Behavior (N.B.E.R., Columbia Univ. Press, 1967).Google Scholar
  20. [20]
    Lintner, John, ‘Equilibrium in a Lognormal Securities Market’, Journal of Financial and Quantitative Analysis (forthcoming).Google Scholar
  21. [21]
    Lintner, John, Contributions to the Theory of the Firm and Capital Markets (Division of Research, Harvard Business School, forthcoming).Google Scholar
  22. [22]
    Lintner, John, Lewellen, Wilbur G., ‘Management and Ownership in the Large Firm’, Journal of Finance (May 1969).Google Scholar
  23. [23]
    Lintner, John, and Huntsman, Blaine, ‘Managerial Pay and Corporate Performance’, American Economic Review (June 1970).Google Scholar
  24. [24]
    Macauley, Frederick R., Some Theoretical Problems Suggested by the Movements of Interest Rates, Bond Yields and Stock Prices in the United States since 1856 (National Bureau of Economic Research, New York, 1938).Google Scholar
  25. [25]
    Marris, Robin, The Economic Theory of ‘Managerial’ Capitalism (Free Press of Glencoe, 1964).Google Scholar
  26. [26]
    Meyer, Richard, ‘On the Relationship among the Utility of Assets, the Utility of Consumption, and Investment Strategy in an Uncertain but Time-Invariant World’, Proceedings of the Fourth International IFORS Conference (Venice, June 1969).Google Scholar
  27. [27]
    Mossin, Jan, ‘Optimal Multi-Period Portfolio Policies’, Journal of Business (Apr 1968).Google Scholar
  28. [28]
    Nerlove, Marc, and Arrow, Kenneth J., ‘Optimal Advertising under Dynamic Conditions’, Economica (May 1962).Google Scholar
  29. [29]
    Penrose, Edith, The Theory of the Growth of the Firm (Blackwell, Oxford, 1959).Google Scholar
  30. [30]
    Pratt, John W., ‘Discounting Certainties, Stationary Preference, and the Value of Immediate Resolution’ (mimeo, 7 Dec 1966), paper read at Seminar on Decisions under Uncertainty, Harvard Business School.Google Scholar
  31. [31]
    Raiffa, Howard and Schlaifer, Robt, Applied Statistical Decision Theory (Division of Research, Harvard Business School, Boston, 1961).Google Scholar
  32. [32]
    Solow, Robert M., ‘Some Implications of Alternative Criteria for the Firm’, Chapter 10 of this volume.Google Scholar
  33. [33]
    Solow, Robert M., ‘Technical Progress, Capital Formation, and Economic Growth’, American Economic Review (May 1962).Google Scholar
  34. [34]
    Steiner, Peter O., and Dorfman, Robert, ‘Optimal Advertising and Optimal Quality’, American Economic Review (Sep 1954).Google Scholar
  35. [35]
    Tumovsky, Stephen J., ‘The Allocation of Corporate Profits between Dividends and Retained Earnings’, Review of Economics and Statistics (Nov 1967).Google Scholar
  36. [36]
    Williamson, John, ‘Profit, Growth and Sales Maximization’, Economica (Feb 1966).Google Scholar

Copyright information

© The President and Fellow of Harvard College 1971

Authors and Affiliations

  • John Lintner

There are no affiliations available

Personalised recommendations