Jan 13, 20080
Fisher Separation Theorem
Irving Fisher’s Separation Theorem is the bedrock of modern financial theory. Essentially it asserts that in the modern, listed, business entity there is a divestiture of ownership (Shareholders) and control (The Board) and as such, this separation produces the need for the control to maximize the present value (see article on NPV) regardless of the market opportunities of the owners. In simple terms, the interests of the owners of a firm are always served by utilizing NPV as a tool of investment appraisal. It’s main assumptions are therefore that:
