Financial theory and corporate policy.

Abstract

In this third edition we seek to build on our experiences and the suggestions of users of the two previous editions. The feedback that we have received from all sources confirms our original judgment that there is a need for a book like Financial Theory and Corporate Policy. Therefore, we will continue to emphasize our original objectives for the book. Primarily, our aim is to provide a bridge to the more theoretical articles and treatises on finance theory. For doctoral students the book provides a framework of conceptual knowledge, enabling the students to understand what the literature on financial theory is trying to do and how it all fits together. For MBAs it provides an in-depth experience with the subject of finance. Our aim here is to equip the MBA for his or her future development as a practicing executive. We seek to prepare the MBA for reading the significant literature of the past, present, and future. This will help the practicing financial executive keep up to date with developments in finance theory, particularly as they affect the financial executive's own thinking processes in making financial decisions. As before, our emphasis is on setting forth clearly and succinctly the most important concepts in finance theory. We have given particular attention to testable propositions and to the literature that has developed empirical tests of important elements of finance theory. In addition, we have emphasized applications so that the nature and uses of finance theory can be better understood.