The merge between Renault and Nissan: the best for shareholder or instant solution

As a business, having high rate of return is, in most cases, a specific central objective (Hayek, 1960), but in broader vision, this is one of the consequences of shareholders’ wealth maximization. Normally, the shareholder value is linked to corporate’s market share price. It goes down signalling a difficulty period or showing that there are problems with the business. This is what Renault has been facing recently.

The scandal of leaking company’s plan has contributed largely to the decline in share price of Renault. This probably has direct impact on shareholders’ benefits. Merging with Nissan is considered as a bright solution. However, the issue is whether this is the best long run strategy for both companies. This case was also seen as government level in Hollinger and Daneshkhu’ article on FT.com. In personal view, this movement of Renault did not really aim at maximizing shareholder value. This is only the reaction of a business suffering crisis. Because it possibly involves two governments, the consequences might be over-controlled. It can bring more benefits to shareholders, but whether it is also good for other stakeholders. Corporation had better be concerned about stakeholders’ value rather than just shareholders’ (Freeman, 1984).