indirect costs‚ such as lowering stock price‚ higher cost of capital and lost growth opportunities‚ increased probability of bankruptcy‚ higher agency cost and possible wealth transfers from one group of investors to another. Therefore how a manager finances a firm becomes a key concept to a firm. The founderstone of this theory is the Modigliani –Miller theory (MM). MM was developed by two economists‚ Franco Modigliani‚ a professor at Massachusetts Institute of Technology‚ and Merton Miller‚ a professor
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THE JOURNAL OF FINANCE • VOL. LIII‚ NO. 4 • AUGUST 1998 Agency Costs‚ Risk Management‚ and Capital Structure HAYNE E. LELAND* ABSTRACT The joint determination of capital structure and investment risk is examined. Optimal capital structure ref lects both the tax advantages of debt less default costs ~Modigliani and Miller ~1958‚ 1963!!‚ and the agency costs resulting from asset substitution ~Jensen and Meckling ~1976!!. Agency costs restrict leverage and debt maturity and increase yield
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Collapse of Bear Stearns 6 The Offsetting Nature of Relevance and Reliability 7 Fair Value Accounting 9 Information Asymmetry 11 Adverse Selection 11 Moral Hazard 12 Market Efficiency versus Behavioral Finance 13 The Use of Complexity to Hide Risk 14 Disclosure to Shareholders 15 Corporate Governance 16 Executive Compensation 17 Conclusion 18 Appendix 20 References 23 Executive Summary Bear
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The William Wrigley Jr. Company Case Report Ying Suan Lo Julianne Mills Nick Lim Vinson Chen Glen Hamilton Table of Contents 1.0 1.0 Introduction Identifying opportunities for corporate financial restructuring was typical for Blanka Dobrynin‚ a managing partner of the hedge fund Aurora Borealis LLC. In 2002‚ with the then debt free William Wrigley Jr. Company (Wrigley) in her sights‚ she asked her associate Susan Chandler to conduct
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mortgage loans to credit cards brings to mind a question raised by Ismail (2008:1) “ … if finance is everywhere does this mean that we have in some sense become financialized.” This essay sets out to answer Ismail’s question and give a better understanding of the term financialization. Firstly various view points and opinions of the academia‚ economic journalist‚ politicians and analyst in mainstream finance will be reviewed with the aim of examining financialization from their different perspective
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Agency Costs of Free Cash Flow‚ Corporate Finance‚ and Takeovers Michael C. Jensen Harvard Business School MJensen@hbs.edu Abstract The interests and incentives of managers and shareholders conflict over such issues as the optimal size of the firm and the payment of cash to shareholders. These conflicts are especially severe in firms with large free cash flows—more cash than profitable investment opportunities. The theory developed here explains 1) the benefits of debt in reducing agency
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www.ccsenet.org/ijbm International Journal of Business and Management Vol. 6‚ No. 9; September 2011 Effective Working Capital Management in Small and Medium Scale Enterprises (SMEs) Kehinde James Sunday Dept of Accounting and Finance‚ Lagos State University Ojo‚ Nigeria E-mail: pastorkehindebox@yahoo.com Received: November 15‚ 2010 Accepted: August 10‚ 2011 doi:10.5539/ijbm.v6n9p271 Abstract The need to main effective working capital management within Small and Medium Scale Enterprises
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Auzius Kazombo Mwale Department of Accounting & Finance Testing the inefficient management hypothesis: Are United Kingdom mergers and acquisitions disciplinary? This thesis is provided in fulfilment of the requirements of the degree of Doctor of Philosophy at The University of Stirling May 2007 ACKNOWLEDGEMENTS I would like to thank various people to whom I am indebted for assisting me in producing this thesis. I am greatly indebted to Professor Robin Limmack for assisting me with the groundwork
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EVA AND NPV 2 A Comparison of EVA and NPV (discuss the differences and similarity of EVA and NPV; why would companies choose to adopt EVA‚ implementation issues; chronicle the implementation experience of EVA on a real life company). Finance executives are required not only to crunch numbers and generate forecast but to think ‘critically’‚ not just seeing the numbers but understanding their implications. This is what Melon (1994) refers to as conducting a ‘financial assessment’ which
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Mini case p.45 a. Why is corporate finance important to all managers? Corporate finance is important because of the skills that mangers can obtain from it. Some of these skills are selecting the best corporate strategies and projects that add value to business. b. Describe the organizational forms a company might have as it evolves from a start-up to a major corporation. List the advantages and disadvantages of each form. The organizational forms are proprietorships‚ partnerships‚ and corporations
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