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Theoretical Foundations of Corporate Finance : International Studen - Joao Amaro de Matos

Theoretical Foundations of Corporate Finance

International Studen

Hardcover

Published: 1st December 2001
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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 Figuresp. xi
Prefacep. xiii
Intended Audiencep. xiv
Organization of the Textp. xv
Acknowledgmentsp. xvi
Foundationsp. 1
Valuationp. 3
Valuation under Certaintyp. 5
The Robinson Crusoe Economyp. 5
Time Preferencesp. 7
Production Opportunitiesp. 8
The Role of Capital Marketsp. 9
Consumption and Investment with Capital Marketsp. 11
The Value of an Investment Projectp. 14
Multiperiod Economy with Capital Marketsp. 15
Exercisesp. 17
Valuation under Uncertaintyp. 18
One-Period Modelp. 18
Value and the Absence of Arbitragep. 22
Arbitrage Opportunities and Investmentp. 23
Value and the Martingale Measurep. 24
Beta Valuesp. 26
Exercisesp. 28
Multiperiods and Flexibility under Uncertaintyp. 29
The Multiperiod Settingp. 30
Real Optionsp. 33
Some General Properties of Optionsp. 34
Exercisesp. 37
Optimal Capital Structurep. 39
The MM Propositionsp. 40
The Irrelevancy Statementp. 40
Cost of Capitalp. 42
The MM Propositions with Taxesp. 44
Empirical Evidencep. 46
Exercisesp. 47
Personal and Corporate Taxationp. 48
Demand for Bondsp. 49
Supply of Bondsp. 50
The Equilibriump. 51
Comparing with MMp. 53
Changes in Taxations: An Alternative Equilibriump. 54
Empirical Evidencep. 57
Exercisesp. 58
Agency and Informationp. 59
Implications for Capital Structurep. 61
The Role of Agency Costsp. 62
Agency Costs of Outside Equityp. 64
Principal-Agent Problemsp. 66
Agency Costs of Debtp. 71
Empirical Evidencep. 75
Exercisesp. 77
Informational Asymmetriesp. 78
Managers' Signaling because of Fee Schedulesp. 79
When Managers Are Also Investorsp. 82
Signals Conditioned by Investment Opportunitiesp. 85
Stock Repurchase as a Signalp. 89
Empirical Evidencep. 93
Exercisesp. 95
Payout Policyp. 97
Dividend Policyp. 98
Another Irrelevancy Propositionp. 98
Alternative Valuationsp. 100
Growth Ratesp. 102
Relaxing Certaintyp. 103
Dividends and Taxesp. 104
Empirical Evidencep. 105
Exercisesp. 109
Dividends and Informationp. 110
The Informational Content of Dividendsp. 110
A Signaling Modelp. 111
A Consistent Signaling Modelp. 114
Empirical Evidencep. 116
Exercisesp. 119
Stock Repurchasesp. 119
Trends in Payout Policiesp. 120
Reasons for Stock Repurchasesp. 121
Empirical Evidencep. 122
Financial Contractingp. 125
Contracting and Allocation of Controlp. 126
The Modelp. 127
Entrepreneur Controlp. 129
Investor Controlp. 131
Contingent Controlp. 133
Financing Contractsp. 133
Exercisesp. 134
Debt Contract Designp. 134
Extending the Modelp. 134
The Case of Many Creditholdersp. 137
The Choice of the Durationp. 139
The Effect of Seniorityp. 146
Exercisesp. 148
Capital Restructuringp. 149
Going Publicp. 151
The Going Public Decisionp. 152
The Modelp. 152
The Equilibriump. 154
Empirical Evidencep. 160
Exercisesp. 160
Underpricing and Information Asymmetriesp. 160
Asymmetry between Issuers and Underwritersp. 162
Asymmetry between Investorsp. 163
Reputation of Bankers and Uncertaintyp. 165
How Underwriters Become Informedp. 167
Legal Liabilitiesp. 171
Empirical Evidencep. 172
Exercisesp. 175
Going Privatep. 177
Stock Repurchasesp. 177
Leveraged Buyoutsp. 179
The Mechanism of Leveraged Buyoutsp. 179
A Model for MBOsp. 181
Empirical Evidencep. 186
Exercisesp. 189
Mergers and Acquisitionsp. 191
Tender Offers and the Free-Rider Problemp. 192
Largely Diffused Ownershipp. 193
The Role of a Large Shareholderp. 196
Uncertain Outcome of a Takeoverp. 199
The Optimal Size of [alpha] before a Takeoverp. 201
Exercisesp. 205
Merger Bidsp. 205
Competition between Biddersp. 206
Choosing the Means of Paymentp. 207
Cash as a Preemptive Instrument with Many Biddersp. 212
The Choice of Takeover Methodsp. 214
Empirical Evidencep. 218
Exercisesp. 223
Appendicesp. 225
Optimization Principlesp. 227
Unconstrained Optimizationp. 227
Constrained Optimizationp. 228
Equality Constraintsp. 228
Inequality Constraintsp. 231
Notions of Game Theoryp. 233
Introductionp. 233
Informational Equilibriump. 234
The Revelation Principlep. 238
Suggested Solutionsp. 241
Valuationp. 241
Valuation under Certaintyp. 241
Valuation under Uncertaintyp. 244
Valuation of Flexibilityp. 250
Optimal Capital Structurep. 251
The MM Propositionsp. 251
Personal and Corporate Taxationp. 255
Implications for Capital Structurep. 255
The Role of Agency Costsp. 255
Informational Asymmetriesp. 260
Payout Policyp. 261
Dividend Policyp. 261
Dividend and Informationp. 263
Financial Contractingp. 266
Contracting and Allocation of Controlp. 266
Debt Contract Designp. 267
Going Publicp. 268
The Going Public Decisionp. 268
Underpricing and Information Asymmetriesp. 268
Going Privatep. 270
Leveraged Buyoutsp. 270
Mergers and Acquisitionsp. 271
Tender Offers and Free-Rider Problemp. 271
Merger Bidsp. 276
Notesp. 279
Bibliographyp. 285
Indexp. 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: 1st December 2001
Country of Publication: US
Dimensions (cm): 23.62 x 16.26  x 2.29
Weight (kg): 0.61