Handbook of the Economics of Finance

Note: Supplemental materials are not guaranteed with Rental or Used book purchases.

ISBN: 9780444513625 | 0444513620
Cover: Hardcover
Copyright: 11/4/2003

Buy Used

Usually Ships in 2-4 Business Days

$130.83
Buy New

Print on Demand: 2-4 Weeks. This item cannot be cancelled or returned.

$176.04
eBook

Available Instantly

Online: 1825 Days

Downloadable: Lifetime Access

$204.00

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.

VOLUME 1A

Introduction to the Series

Contents of the Handbook

vii

Preface

CORPORATE FINANCE

Chapter 1 Corporate Governance and Control

MARCO BECHT, PATRICK BOLTON and AILSA RÖELL

(110)

Abstract

(1)

Keywords

(1)

1. Introduction

(1)

2. Historical origins: a brief sketch

(1)

2.1. How representative is corporate government?

(1)

2.2. Whom should corporate government represent?

(1)

3. Why corporate governance is currently such a prominent issue

(1)

3.1. The world-wide privatization wave

(1)

3.2. Pension funds and active investors

(1)

3.3. Mergers and takeovers

(1)

3.4. Deregulation and capital market integration

(1)

3.5. The 1998 Russia/East Asia/Brazil crisis

(1)

3.6. Scandals and failures at major USA corporations

(1)

4. Conceptual framework

(1)

4.1. Agency and contracting

(1)

4.2. Ex-ante and ex-post efficiency

(1)

4.3. Shareholder value

(1)

4.4. Incomplete contracts and multiple constituencies

(1)

4.5. Why do we need regulation?

(1)

4.6. Dispersed ownership

(1)

4.7. Summary and conclusion

(2)

5. Models

(1)

5.1. Takeover models

(1)

5.2. Blockholder models

(1)

5.3. Delegated monitoring and large creditors

(1)

5.4. Board models

(1)

5.5. Executive compensation models

(1)

5.6. Multi-constituency models

(6)

6. Comparative perspectives and debates

(1)

6.1. Comparative systems

(1)

6.2. Views expressed in corporate governance principles and codes

(1)

6.3. Other views

(1)

7. Empirical evidence and practice

(1)

7.1. Takeovers

(1)

7.2. Large investors

(1)

7.3. Minority shareholder action

(1)

7.4. Boards

(1)

7.5. Executive compensation and careers

(1)

7.6. Multiple constituencies

(2)

8. Conclusion

(4)

References

(25)

Chapter 2 Agency, Information and Corporate Investment

JEREMY C. STEIN

111

(56)

Abstract

113

(1)

Keywords

113

(1)

1. Introduction

114

(1)

1.1. Scope of the essay: what's covered and what's left out

115

(1)

1.2. Organization

116

(1)

Part A. Investment at the firm level

116

(1)

2. Theoretical building blocks: investment at the firm level

116

(1)

2.1. Models of costly external finance

116

(1)

2.2. The agency conflict between managers and outside stockholders

120

(1)

2.3. Investment decisions when stock prices deviate from fundamentals

126

(1)

3. Evidence on investment at the firm level

127

(1)

3.1. Financial slack and investment

127

(1)

3.2. Direct evidence of agency-related overinvestment

130

(1)

3.3. Evidence on reputational models of investment

131

(2)

4. Macroeconomic implications

133

(1)

4.1. The financial accelerator

133

(1)

4.2. When banks face financing frictions

134

(1)

4.3. Cross-country differences in financial development, investment and growth

135

(1)

Part B. Investment inside firms

136

(1)

5. Theoretical work on internal capital allocation

136

(1)

5.1. Fundamental differences between internal and external capital markets

137

(1)

5.2. Implications for the efficiency of capital allocation

140

(1)

5.3. How information and agency problems shape firms' capital budgeting practices

145

(1)

6. Empirical work on internal capital allocation

145

(1)

6.1. The value consequences of diversification

145

(1)

6.2. Evidence on investment at the divisional and plant level

147

(5)

7. Conclusions: implications for the boundaries of the firm

152

(3)

References

155

(12)

Chapter 3 Corporate Investment Policy

MICHAEL J. BRENNAN

167

(48)

Abstract

168

(1)

Keywords

168

(1)

1. Introduction

169

(2)

2. The objective of the firm and the net-present-value rule

171

(4)

3. Valuation by discounting

175

(1)

3.1. Multi-factor asset pricing models

178

(1)

3.2. The capital asset pricing model

179

(1)

4. Practical approaches to estimating discount rates

180

(1)

4.1. Estimating equity discount rates in practice

180

(1)

4.2. From firm cost of equity to firm cost of capital

188

(1)

4.3. Performance of CAPM-based valuations

191

(1)

4.4. From firm cost of capital to project cost of capital

192

(2)

5. The certainty equivalent approach to valuation

194

(1)

5.1. The basic theory of martingale pricing

196

(1)

5.2. Estimating risk-adjusted drifts

197

(1)

5.3. Some real options

203

(5)

6. Summary

208

(1)

References

209

(6)

Chapter 4 Financing of Corporations

STEWART C. MYERS

215

(40)

Abstract

216

(1)

Keywords

216

(1)

1. Introduction

217

(1)

1.1. Theories of optimal financing

217

(1)

2. The Modigliani-Miller value-irrelevance propositions

218

(3)

3. The trade-off theory

221

(1)

3.1. Taxes

222

(1)

3.2. Direct costs of financial distress

226

(1)

3.3. Indirect costs of financial distress - conflicts between creditors and stockholders

226

(1)

3.4. Other indirect costs of financial distress

228

(1)

3.5. Evidence on costs of financial distress

229

(1)

3.6. Leverage and product markets

229

(1)

3.7. Evidence for the trade-off theory

230

(1)

3.8. Target-adjustment models

231

(1)

3.9. Computational models

232

(1)

4. The pecking-order theory

233

(1)

4.1. Debt vs. equity in the pecking order

234

(1)

4.2. What's wrong with the pecking order as theory?

236

(1)

4.3. Pecking order vs. the trade-off theory - time-series tests

237

(1)

4.4. Further tests of the trade-off and pecking-order theories

238

(1)

5. Agency theories of capital structure

239

(1)

5.1. Jensen and Meckling's pecking order

240

(1)

5.2. Free cash flow, leveraged buyouts and restructurings

242

(1)

5.3. Is there a general free-cash-flow theory of capital structure?

243

(1)

6. What next?

243

(1)

6.1. Compensation and incentives

244

(1)

6.2. Human capital and financing

245

(1)

6.3. Exporting capital-structure theory

246

(1)

References

247

(8)

Chapter 5 Investment Banking and Securities Issuance

JAY R. RITTER

255

(52)

Abstract

256

(1)

Keywords

256

(1)

1. Introduction

257

(1)

1.1. Overview

257

(1)

1.2. A brief history of investment banking and securities regulation

259

(1)

1.3. The information conveyed by investment and financing activities

261

(2)

2. Seasoned equity offerings (SEOs)

263

(1)

2.1. Announcement effects

263

(1)

2.2. Evidence on long-run performance

265

(1)

2.3. Reasons for underperformance

271

(3)

3. Short-run and long-run reactions to corporate financing activities

274

(5)

4. Initial public offerings (IPOs)

279

(1)

4.1. Overview

279

(1)

4.2. Short-run underpricing of IPOs

281

(1)

4.3. Alternative mechanisms for pricing and allocating securities

281

(1)

4.4. Explanations of underpricing

286

(1)

4.5. Underwriter compensation

291

(1)

4.6. Stabilization activities

292

(1)

4.7. Hot-issue markets

293

(1)

4.8. Market activity across countries

294

(1)

4.9. Long-run performance

295

(4)

5. Summary

299

(1)

References

300

(7)

Chapter 6 Financial Innovation

PETER TUFANO

307

(30)

Abstract

308

(1)

Keywords

308

(1)

1. Introduction

309

(1)

2. What is financial innovation?

310

(3)

3. Why do financial innovations arise? What functions do they serve?

313

(1)

3.1. Inherently incomplete markets stimulate innovation

314

(1)

3.2. Inherent agency concerns and information asymmetries stimulate innovation

315

(1)

3.3. Transaction, search or marketing costs stimulate innovation

317

(1)

3.4. Taxes and regulation stimulate innovation

318

(1)

3.5. Increasing globalization and perceptions of risk stimulate innovation

320

(1)

3.6. Technological shocks stimulate innovation

321

(3)

4. Who innovates? The identities of and private returns to innovators

324

(3)

5. The impact of financial innovation on society

327

(2)

6. Issues on the horizon: patenting and intellectual property

329

(2)

7. Summary

331

(1)

References

331

(6)

Chapter 7 Payout Policy

FRANKLIN ALLEN and RONI MICHAELY

337

(94)

Abstract

339

(1)

Keywords

339

(1)

1. Introduction

340

(2)

2. Some empirical observations on payout policies

342

(9)

3. The Miller-Modigliani dividend irrelevance proposition

351

(3)

4. How should we measure payout?

354

(4)

5. Taxes

358

(1)

5.1. Static models

359

(1)

5.2. Dynamic models

368

(1)

5.3. Dividends and taxes - conclusions

376

(1)

6. Asymmetric information and incomplete contracts - theory

377

(1)

6.1. Signaling and adverse selection models

377

(1)

6.2. Incomplete contracts - agency models

383

(3)

7. Empirical evidence

386

(1)

7.1. Asymmetric information and signaling models

386

(1)

7.2. Agency models

396

(3)

8. Transaction costs and other explanations

399

(5)

9. Repurchases

404

(1)

9.1. The mechanics and some stylized facts

404

(1)

9.2. Theories of repurchases

407

(1)

9.3. Repurchases compared to dividends

408

(1)

9.4. Empirical evidence

410

(1)

9.5. Summary

419

(1)

10. Concluding remarks

420

(2)

References

422

(9)

Chapter 8 Financial Intermediation

GARY GORTON and ANDREW WINTON

431

(122)

Abstract

432

(1)

Keywords

432

(1)

1. Introduction

433

(4)

2. The existence of financial intermediaries

437

(1)

2.1. Empirical evidence on bank uniqueness

437

(1)

2.2. Banks as delegated monitors

440

(1)

2.3. Banks as information producers

444

(1)

2.4. Banks as consumption smoothers

448

(1)

2.5. Banks as liquidity providers

453

(1)

2.6. Banks as commitment mechanisms

456

(1)

2.7. Empirical tests of bank-existence theories

458

(1)

2.8. Bonds versus loans

459

(1)

2.9. Banks versus stock markets

461

(1)

3. Interactions between banks and borrowers

462

(1)

3.1. Dynamic relationships and the pros and cons of bank monitoring

463

(1)

3.2. Monitoring and loan structure

469

(1)

3.3. Beyond lending: equity stakes, board seats, and monitoring

474

(1)

3.4. Banking sector structure and lending

479

(1)

3.5. Credit cycles and the effect of bank funding on lending

490

(4)

4. Banking panics and the stability of banking systems

494

(1)

4.1. Definitions of banking panics and the relation of panics to the business cycle

495

(1)

4.2. Panics and the industrial organization of the banking industry

499

(1)

4.3. Private bank coalitions

501

(1)

4.4. Are banks inherently flawed institutions?

503

(1)

4.5. Information-based theories of panics

505

(1)

4.6. Other panic theories

507

(1)

4.7. Tests of panic theories

508

(1)

4.8. The banking crises during the Great Depression

511

(1)

4.9. Contagion

516

(2)

5. Bank regulation, deposit insurance, capital requirements

518

(1)

5.1. The origins of government bank regulation and government deposit insurance

519

(1)

5.2. Deposit insurance and moral hazard

520

(1)

5.3. Corporate governance in banks and the moral hazard argument

526

(1)

5.4. Bank capital requirements

529

(1)

5.5. Other issues

532

(1)

6. Conclusion

532

(2)

References

534

(19)

Chapter 9 Market Microstructure

HANS R. STOLL

553

Abstract

555

(1)

Keywords

555

(1)

1. Introduction

556

(1)

2. Markets, traders and the trading process

557

(1)

2.1. Types of markets

557

(1)

2.2. Types of orders

558

(1)

2.3. Types of traders

559

(1)

2.4. Rules of precedence

560

(1)

2.5. The trading process

561

(1)

3. Microstructure theory - determinants of the bid-ask spread

562

(1)

3.1. Inventory risk

563

(1)

3.2. Free-trading option

566

(1)

3.3. Adverse selection

566

(1)

4. Short-run price behavior and market microstructure

567

(1)

4.1. A model of short-term price behavior

568

(1)

4.2. The realized spread

569

(1)

4.3. Serial covariance of price changes

570

(2)

5. Evidence on the bid-ask spread and its sources

572

(1)

5.1. The spread and its components

572

(1)

5.2. Cross-section evidence

575

(2)

6. Price effects of trading

577

(1)

6.1. Block trading

577

(1)

6.2. Herding

578

(1)

6.3. Other studies of the effects of trading

579

(1)

7. Market design

579

(1)

7.1. Call-auction markets

580

(1)

7.2. Dealer versus auction markets: the Nasdaq controversy

583

(1)

7.3. Other issues in market design

586

(3)

8. The market for markets: centralization versus fragmentation of trading

589

(1)

8.1. Evolution of equities markets in the USA

589

(1)

8.2. Global markets

592

(1)

8.3. Economic forces of centralization and fragmentation

593

(1)

8.4. The future structure of markets

595

(1)

9. Other markets

595

(1)

9.1. Bond market

596

(1)

9.2. Currency market

596

(1)

9.3. Futures markets

597

(1)

9.4. Options markets

597

(1)

10. Asset pricing and market microstructure

598

(1)

11. Conclusions

598

(2)

References

600

Subject Index

I-1

Please wait while the item is added to your bag...

FREE SHIPPING

Rent More, Save More! Use code: BBRENTAL

5% off 1 book, 7% off 2 books, 10% off 3+ books

Handbook of the Economics of Finance

Summary

Table of Contents

Supplemental Materials

FREE SHIPPING

Rent More, Save More! Use code: BBRENTAL

5% off 1 book, 7% off 2 books, 10% off 3+ books

Handbook of the Economics of Finance

Summary

Table of Contents

Supplemental Materials

Digital License