The Fisher separation theorem, in economics and corporate finance, holds that a firm's investment decisions can be separated from its owners' individual consumption preferences: regardless of shareholders' personal preferences for consumption now versus later, a firm's managers should choose the set of investments that maximizes the firm's present value, since shareholders can then borrow or lend in capital markets to reach their own preferred consumption pattern. It is named for the economist Irving Fisher, who first proposed this separation of a firm's production decisions from its owners' market decisions.
Facts
Statementin efficient capital markets, a firm's investment decisions should be independent of shareholders' preferences 1 Classification
Statement FormCharacterization Theorem 1 Connections
Sources
1. Fisher's Separation Theorem - SuperMoney
Overview section
Fisher's Separation Theorem posits that, in efficient capital markets, a firm's investment decisions should be independent of shareholders' preferences.
Introduction
Fisher's Separation Theorem, proposed by economist Irving Fisher in 1930, is a fundamental concept in finance and economics.
View the SourceFisher separation theorem (Wikipedia)
In Group: Economic Theory, Lead paragraphQuote, In Group: Economic Theory, Lead paragraph
In Economics, the Fisher separation theorem asserts that the primary objective of a corporation will be the maximization of its present value, regardless of the preferences of its shareholders.
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