When the firm earns lower-than-average returns,the highest priority is given to satisfying the needs of capital market stakeholders over the needs of product market and organizational shareholders.

Question

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When the firm earns lower-than-average returns, the highest priority is given to satisfying the needs of product market and organizational shareholders over the needs of capital market stakeholders. This is because, in the long run, the firm's ability to generate profits and create value for customers is crucial for its survival and growth. Capital market stakeholders, such as investors and creditors, are less likely to support the firm if it neglects the interests of its core stakeholders. Therefore, firms need to balance the needs of different stakeholders, but the product market and organizational shareholders should be given priority over the short-term demands of the capital market.

When the Firm Earns Lower-Than-Average Returns,the Highest Priority Is Given