


Hardcover
Published: 25th November 2001
ISBN: 9780691087948
Number Of Pages: 320
Corporate finance is the area of finance that studies the determinants of firms' values, including capital structure, financing, and investment decisions. Although there are several excellent texts in corporate finance, this is the first to focus on the theoretical foundations of the subject in a consistent and integrated way at the Ph.D. level. In addition to a textbook for advanced graduate students, it can also serve as a general reference to researchers and sophisticated practitioners.
The material presented is carefully selected with an eye to what is essential to understanding the underlying theory, ensuring that this text will remain useful for years to come. The book is divided into three parts. The first section presents the basic principles of valuation based on the absence of arbitrage, including a discussion of the determinants of the optimal capital structure based on the seminal results of Modigliani and Miller. The second section discusses the implications of agency problems and information asymmetries to capital structure, giving particular attention to payout policy and to debt contract design. The concluding portion presents different ways of restructuring capital, including going public, going private using stock repurchases or leveraged buyouts, and mergers and acquisitions. Each chapter includes exercises that vary in difficulty, with suggested solutions provided in an appendix.
This book will assuredly be the standard doctoral- and professional-level explication of corporate finance theory and its appropriate applications.
List of Figures | p. xi |
Preface | p. xiii |
Intended Audience | p. xiv |
Organization of the Text | p. xv |
Acknowledgments | p. xvi |
Foundations | p. 1 |
Valuation | p. 3 |
Valuation under Certainty | p. 5 |
The Robinson Crusoe Economy | p. 5 |
Time Preferences | p. 7 |
Production Opportunities | p. 8 |
The Role of Capital Markets | p. 9 |
Consumption and Investment with Capital Markets | p. 11 |
The Value of an Investment Project | p. 14 |
Multiperiod Economy with Capital Markets | p. 15 |
Exercises | p. 17 |
Valuation under Uncertainty | p. 18 |
One-Period Model | p. 18 |
Value and the Absence of Arbitrage | p. 22 |
Arbitrage Opportunities and Investment | p. 23 |
Value and the Martingale Measure | p. 24 |
Beta Values | p. 26 |
Exercises | p. 28 |
Multiperiods and Flexibility under Uncertainty | p. 29 |
The Multiperiod Setting | p. 30 |
Real Options | p. 33 |
Some General Properties of Options | p. 34 |
Exercises | p. 37 |
Optimal Capital Structure | p. 39 |
The MM Propositions | p. 40 |
The Irrelevancy Statement | p. 40 |
Cost of Capital | p. 42 |
The MM Propositions with Taxes | p. 44 |
Empirical Evidence | p. 46 |
Exercises | p. 47 |
Personal and Corporate Taxation | p. 48 |
Demand for Bonds | p. 49 |
Supply of Bonds | p. 50 |
The Equilibrium | p. 51 |
Comparing with MM | p. 53 |
Changes in Taxations: An Alternative Equilibrium | p. 54 |
Empirical Evidence | p. 57 |
Exercises | p. 58 |
Agency and Information | p. 59 |
Implications for Capital Structure | p. 61 |
The Role of Agency Costs | p. 62 |
Agency Costs of Outside Equity | p. 64 |
Principal-Agent Problems | p. 66 |
Agency Costs of Debt | p. 71 |
Empirical Evidence | p. 75 |
Exercises | p. 77 |
Informational Asymmetries | p. 78 |
Managers' Signaling because of Fee Schedules | p. 79 |
When Managers Are Also Investors | p. 82 |
Signals Conditioned by Investment Opportunities | p. 85 |
Stock Repurchase as a Signal | p. 89 |
Empirical Evidence | p. 93 |
Exercises | p. 95 |
Payout Policy | p. 97 |
Dividend Policy | p. 98 |
Another Irrelevancy Proposition | p. 98 |
Alternative Valuations | p. 100 |
Growth Rates | p. 102 |
Relaxing Certainty | p. 103 |
Dividends and Taxes | p. 104 |
Empirical Evidence | p. 105 |
Exercises | p. 109 |
Dividends and Information | p. 110 |
The Informational Content of Dividends | p. 110 |
A Signaling Model | p. 111 |
A Consistent Signaling Model | p. 114 |
Empirical Evidence | p. 116 |
Exercises | p. 119 |
Stock Repurchases | p. 119 |
Trends in Payout Policies | p. 120 |
Reasons for Stock Repurchases | p. 121 |
Empirical Evidence | p. 122 |
Financial Contracting | p. 125 |
Contracting and Allocation of Control | p. 126 |
The Model | p. 127 |
Entrepreneur Control | p. 129 |
Investor Control | p. 131 |
Contingent Control | p. 133 |
Financing Contracts | p. 133 |
Exercises | p. 134 |
Debt Contract Design | p. 134 |
Extending the Model | p. 134 |
The Case of Many Creditholders | p. 137 |
The Choice of the Duration | p. 139 |
The Effect of Seniority | p. 146 |
Exercises | p. 148 |
Capital Restructuring | p. 149 |
Going Public | p. 151 |
The Going Public Decision | p. 152 |
The Model | p. 152 |
The Equilibrium | p. 154 |
Empirical Evidence | p. 160 |
Exercises | p. 160 |
Underpricing and Information Asymmetries | p. 160 |
Asymmetry between Issuers and Underwriters | p. 162 |
Asymmetry between Investors | p. 163 |
Reputation of Bankers and Uncertainty | p. 165 |
How Underwriters Become Informed | p. 167 |
Legal Liabilities | p. 171 |
Empirical Evidence | p. 172 |
Exercises | p. 175 |
Going Private | p. 177 |
Stock Repurchases | p. 177 |
Leveraged Buyouts | p. 179 |
The Mechanism of Leveraged Buyouts | p. 179 |
A Model for MBOs | p. 181 |
Empirical Evidence | p. 186 |
Exercises | p. 189 |
Mergers and Acquisitions | p. 191 |
Tender Offers and the Free-Rider Problem | p. 192 |
Largely Diffused Ownership | p. 193 |
The Role of a Large Shareholder | p. 196 |
Uncertain Outcome of a Takeover | p. 199 |
The Optimal Size of [alpha] before a Takeover | p. 201 |
Exercises | p. 205 |
Merger Bids | p. 205 |
Competition between Bidders | p. 206 |
Choosing the Means of Payment | p. 207 |
Cash as a Preemptive Instrument with Many Bidders | p. 212 |
The Choice of Takeover Methods | p. 214 |
Empirical Evidence | p. 218 |
Exercises | p. 223 |
Appendices | p. 225 |
Optimization Principles | p. 227 |
Unconstrained Optimization | p. 227 |
Constrained Optimization | p. 228 |
Equality Constraints | p. 228 |
Inequality Constraints | p. 231 |
Notions of Game Theory | p. 233 |
Introduction | p. 233 |
Informational Equilibrium | p. 234 |
The Revelation Principle | p. 238 |
Suggested Solutions | p. 241 |
Valuation | p. 241 |
Valuation under Certainty | p. 241 |
Valuation under Uncertainty | p. 244 |
Valuation of Flexibility | p. 250 |
Optimal Capital Structure | p. 251 |
The MM Propositions | p. 251 |
Personal and Corporate Taxation | p. 255 |
Implications for Capital Structure | p. 255 |
The Role of Agency Costs | p. 255 |
Informational Asymmetries | p. 260 |
Payout Policy | p. 261 |
Dividend Policy | p. 261 |
Dividend and Information | p. 263 |
Financial Contracting | p. 266 |
Contracting and Allocation of Control | p. 266 |
Debt Contract Design | p. 267 |
Going Public | p. 268 |
The Going Public Decision | p. 268 |
Underpricing and Information Asymmetries | p. 268 |
Going Private | p. 270 |
Leveraged Buyouts | p. 270 |
Mergers and Acquisitions | p. 271 |
Tender Offers and Free-Rider Problem | p. 271 |
Merger Bids | p. 276 |
Notes | p. 279 |
Bibliography | p. 285 |
Index | p. 297 |
Table of Contents provided by Syndetics. All Rights Reserved. |
ISBN: 9780691087948
ISBN-10: 0691087946
Series: International Studen
Audience:
Tertiary; University or College
Format:
Hardcover
Language:
English
Number Of Pages: 320
Published: 25th November 2001
Country of Publication: US
Dimensions (cm): 23.62 x 16.26
x 2.29
Weight (kg): 0.61