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. The theorem therefore separates management's "productive opportunities" from the entrepreneur's "market opportunities". It was proposed by—and is named after—the economist Irving Fisher.
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The Fisher separation theorem states that:
Fisher showed the above as follows:
- The firm can make the investment decision — i.e. the choice between productive opportunities — that maximizes its present value, independent of its owner's investment preferences.
- The firm can then ensure that the owner achieves his optimal position in terms of "market opportunities" by funding its investment either with borrowed funds, or internally as appropriate.
- Irving Fisher's Theory of Investment, The History of Economic Thought, The New School
- Great Moments in Financial Economics: Present Value (archived), Prof. Mark Rubinstein, Haas School of Business
- Model: Perfect capital market - Fisher separation theorem, Dr. Henrik Mathiesen, encycogov.com
- Fisher's Separation Theorem, investopedia.com