The Corporate Financiers

The Corporate Financiers is the fifth book in a series of discussions about the great minds in the history and theory of finance. While the series addresses the contributions of scholars in our understanding of modern finance, this volume presents the ways in which a corporation creates value.

More than two centuries ago, Adam Smith explained the concept of division of labor and the efficiencies of specialization as the mechanism in which a firm creates value. However, corporations now find themselves outsourcing some processes to other firms as an alternative way to create value. There must be other economic forces at work than simply the internal efficiencies of a firm. We begin by describing the work of a rather obscure scholar named John Burr Williams who demonstrated in 1938 how the earnings of a firm are capitalized into corporate value through its stock price. We then delve into the inner workings of the modern corporation by describing the contributions of Nobel Memorial Prize winners Ronald Coase and Oliver Williamson. More than any others, these scholars created a renewed appreciation for our understanding of the institutional detail of the modern corporation in reducing costs and increasing efficiency.

While Coase and Williamson provided meaningful descriptions of the advantage of a corporation, they did not offer prescriptions for the avenues the corporation can create more value in an era when new technologies make outsourcing and telecommuting increasingly possible. Michael Jensen and William Meckling describe in greater detail the nature of the implicit contracts a corporation employs, and recommend remedies to various problems that arise when the goals of the corporation are not aligned with the incentives of its agents. We also describe the further nuances to these relationships as offered by Armen Alchian and Harold Demsetz. We treat the lives of these extraordinary individuals who looked at a very familiar problem in a sufficiently novel light to change the way all look at corporations ever since. That is the test of genius.

Auteur

Colin Read is a professor of Economics and Finance, former dean of the School of Business and Economics at SUNY College at Plattsburgh, and a columnist for the Plattsburgh New York Press Republican newspaper. He has a Ph.D. in Economics, J.D. in Law, M.B.A., Master's of Taxation, and has taught environmental and energy economics and finance for 25 years. Colin's recent books include BP and the Macondo Spill: The Complete Story:, The Fear Factor, Global Financial Meltdown: How We Can Avoid the Next Economic Crisis, and a book on international taxation. He has written dozens of papers on market failure, volatility, and housing markets, writes a weekly newspaper column, and appears monthly on a local PBS television show to discuss the regional and national economy. He has worked as a research associate at the Harvard Joint Center for Housing Studies and served the Ministry of Finance in Indonesia under contract from the Harvard Institute for International Development.

Texte du rabat

The Corporate Financiers is the fifth book in a series of discussions about the great minds in the history and theory of finance. While the series addresses the contributions of scholars in our understanding of modern finance, this volume presents the ways in which a corporation creates value.

More than two centuries ago, Adam Smith explained the concept of division of labor and the efficiencies of specialization as the mechanism in which a firm creates value. However, corporations now find themselves outsourcing some processes to other firms as an alternative way to create value. There must be other economic forces at work than simply the internal efficiencies of a firm. We begin by describing the work of a rather obscure scholar named John Burr Williams who demonstrated in 1938 how the earnings of a firm are capitalized into corporate value through its stock price. We then delve into the inner workings of the modern corporation by describing the contributions of Nobel Memorial Prize winners Ronald Coase and Oliver Williamson. More than any others, these scholars created a renewed appreciation for our understanding of the institutional detail of the modern corporation in reducing costs and increasing efficiency.

While Coase and Williamson provided meaningful descriptions of the advantage of a corporation, they did not offer prescriptions for the avenues the corporation can create more value in an era when new technologies make outsourcing and telecommuting increasingly possible. Michael Jensen and William Meckling describe in greater detail the nature of the implicit contracts a corporation employs, and recommend remedies to various problems that arise when the goals of the corporation are not aligned with the incentives of its agents. We also describe the further nuances to these relationships as offered by Armen Alchian and Harold Demsetz. We treat the lives of these extraordinary individuals who looked at a very familiar problem in a sufficiently novel light to change the way all look at corporations ever since. That is the test of genius.

Contenu

1. Introduction PART I: FROM ART TO SCIENCE 2. A Fly in the Ointment 3. The Early Life of John Burr Williams 4. The Times and the Theory 5. A New Finance Paradigm 6. Legacy and Later Life PART II: IS A CORPORATION'S CAPITAL STRUCTURE IRRELEVANT? 7. The Early Years of Franco Modigliani 8. The Early Years of Merton Miller 9. The Times 10. The Great Idea 11. Applications 12. The Prize 13. The Later Years of Merton Miller 14. The Later Years of Franco Modigliani PART III: TRANSACTIONS COSTS AND THE VALUE OF A FIRM 15. The Early Life of Ronald Harold Coase 16. The Times and the Theory 17. Life and Legacy 18. The Early Life of Oliver Eaton Williamson 19. The Times and the Theory 20. Applications 21. Life and Legacy 22. Life and Legacy of Oliver Williamson PART IV: ALCHIAN AND DEMSETZ 23. Alchian and Demsetz 24. Harold Demsetz 25. The Times 26. The Great Idea 27. Applications and Extensions 28. Harold Demsetz Later in Life 29. The Later Years of Armen Alchian PART V: JENSEN AND MECKLING 30. The Early Years for Michael Cole Jensen 31. The Early Years for William Henry Meckling 32. The Times 33. The Theory 34. Applications and Extensions 35. Life and Legacy PART VI: WHAT WE HAVE LEARNED 36. Combined contributions 37. Conclusions