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Handbook of the Economics of Finance

Book Description

Volume 1A covers corporate finance: how businesses allocate capital - the capital budgeting decision - and how they obtain capital - the financing decision. Though managers play no independent role in the work of Miller and Modigliani, major contributions in finance since then have shown that managers maximize their own objectives. To understand the firm's decisions, it is therefore necessary to understand the forces that lead managers to maximize the wealth of shareholders.

Table of Contents

  1. Cover image
  2. Title page
  3. Table of Contents
  4. Copyright page
  5. Introduction to the series
  6. Preface
    1. 1 Corporate finance
    2. 2 Financial markets and asset pricing
  7. Chapter 1: Corporate Governance and Control
    1. Abstract
    2. 1 Introduction
    3. 2 Historical origins: a brief sketch
    4. 3 Why corporate governance is currently such a prominent issue
    5. 4 Conceptual framework
    6. 5 Models
    7. 6 Comparative perspectives and debates
    8. 7 Empirical evidence and practice
    9. 8 Conclusion
  8. Chapter 2: Agency, Information and Corporate Investment
    1. Part A. Investment at the firm level
    2. Part B. Investment inside firms
  9. Chapter 3: Corporate Investment Policy
    1. Abstract
    2. 1 Introduction
    3. 2 The objective of the firm and the net-present-value rule
    4. 3 Valuation by discounting
    5. 4 Practical approaches to estimating discount rates
    6. 5 The certainty equivalent approach to valuation
    7. 6 Summary
  10. Chapter 4: Financing of Corporations
    1. Abstract
    2. 1 Introduction
    3. 2 The Modigliani–Miller value-irrelevance propositions
    4. 3 The trade-off theory
    5. 4 The pecking-order theory
    6. 5 Agency theories of capital structure
    7. 6 What next?
  11. Chapter 5: Investment Banking and Securities Issuance
    1. Abstract
    2. 1 Introduction
    3. 2 Seasoned equity offerings (SEOs)
    4. 3 Short-run and long-run reactions to corporate financing activities
    5. 4 Initial public offerings (IPOs)
    6. 5 Summary
  12. Chapter 6: Financial Innovation
    1. Abstract
    2. 1 Introduction
    3. 2 What is financial innovation?
    4. 3 Why do financial innovations arise? What functions do they serve?
    5. 4 Who innovates? The identities of and private returns to innovators
    6. 5 The impact of financial innovation on society
    7. 6 Issues on the horizon: patenting and intellectual property
    8. 7 Summary
  13. Chapter 7: Payout Policy
    1. Abstract
    2. 1 Introduction
    3. 2 Some empirical observations on payout policies
    4. 3 The Miller–Modigliani dividend irrelevance proposition
    5. 4 How should we measure payout?
    6. 5 Taxes
    7. 6 Asymmetric information and incomplete contracts – theory
    8. 7 Empirical evidence
    9. 8 Transaction costs and other explanations
    10. 9 Repurchases
    11. 10 Concluding remarks
  14. Chapter 8: Financial Intermediation
    1. Abstract
    2. 1 Introduction
    3. 2 The existence of financial intermediaries
    4. 3 Interactions between banks and borrowers
    5. 4 Banking panics and the stability of banking systems
    6. 5 Bank regulation, deposit insurance, capital requirements
    7. 6 Conclusion
  15. Chapter 9: Market Microstructure
    1. Abstract
    2. 1 Introduction
    3. 2 Markets, traders and the trading process
    4. 3 Microstructure theory – determinants of the bid–ask spread
    5. 4 Short-run price behavior and market microstructure
    6. 5 Evidence on the bid–ask spread and its sources
    7. 6 Price effects of trading
    8. 7 Market design
    9. 8 The market for markets: centralization versus fragmentation of trading
    10. 9 Other markets
    11. 10 Asset pricing and market microstructure
    12. 11 Conclusions
  16. Subject index
  17. Contents of Volume