GROWTH AND VALUATION IN ‘MANAGERIAL’ THEORY: AN ALTERNATIVE VIEW

The general aim is to represent managerial thinking on strategy choice in a context other than steady‐state growth. The model has the following features: (i) Strategy choice is defined as the adoption of rules governing investment choice; (ii) given its strategy, management sees growth in terms of a probability distribution of growth‐paths of expected dividend; (iii) managment's valuation model closely matches its probabilistic view of growth prospects; (iv) the managerial utility function has an extended horizon. Discussion of strategy choice yields no general presumption that managment senses a conflict between its own preference and its commonsense interpretation of investors' preferences.