Corporate Finance Instructor:Yiwen Fei E-mail:ywfei@sjtu.edu.cn Office: Rm.708,Antai Building Tel 52301256
Corporate Finance Corporate Finance Instructor: Yiwen Fei E-mail: ywfei@sjtu.edu.cn Office: Rm.708, Antai Building Tel : 52301256
Introduction
Introduction Introduction
The Revolution in Corporate Finance Beginning with the work of Merton Miller and Francisco Modigliani in the late 1950s A basic change in the theory of valuation "Accounting model"to "Economic model" 22-2
22-2 The Revolution in Corporate Finance The Revolution in Corporate Finance Beginning with the work of Merton Miller and Francisco Modigliani in the late 1950s A basic change in the theory of valuation “Accounting model ” to “Economic model
The Revolution in Corporate Finance Business School Approach and Economics Department Approach Micro normative and Macro normative "It is not the business of the economist to tell the brewer how to make beer. ■ Some important disagreement: CAPM-Arbitrage price theory DCF-Option price theory 22-3
22-3 The Revolution in Corporate Finance The Revolution in Corporate Finance Business School Approach and Economics Department Approach Micro normative and Macro normative “It is not the business of the economist to tell the brewer how to make beer.” Some important disagreement: CAPM – Arbitrage price theory DCF – Option price theory
Some highpoints of the history Harry Markowits and portfolio selection "Portfolio Selection",Journal of Finance, 1952 --"risk"and "return":Mean-Variance model William Sharp and CAPM "Capital Asset Prices:A Theory of Market Equilibrium under Conditions of Risk, Journal of Finance,in 1964 22-4
22-4 Some highpoints of the history Some highpoints of the history Harry Markowits and portfolio selection “Portfolio Selection”, Journal of Finance, 1952 -- “risk” and “return”: Mean-Variance model William Sharp and CAPM “Capital Asset Prices：A Theory of Market Equilibrium under Conditions of Risk” , Journal of Finance, in 1964
Some highpoints of the history Eugene Fama and The Efficient Markets Hypothesis Random Walks in Stock Market Prices Financial Analysts Journal,1965,1995 Franco Modigliani&Merton Miller and MM Propositions "The Cost of Capital,Corporation Finance, and the Theory of Investment",American Economic Review,1958 22-5
22-5 Some highpoints of the history Some highpoints of the history Eugene Fama and The Efficient Markets Hypothesis “Random Walks in Stock Market Prices ”, Financial Analysts Journal, 1965,1995 Franco Modigliani & Merton Miller and MM Propositions “The Cost of Capital, Corporation Finance, and the Theory of Investment”, American Economic Review ,1958
Some highpoints of the history Black Scholes and Option "The Pricing of Option and Corporate Liabilities",Journal of Political Economy,1973 Michael Jensen William Meckling and Agency Problem "Theory of the Firm:Managerial Behavior, Agency Costs,and Ownership Structure",JFE 1976 22-6
22-6 Some highpoints of the history Some highpoints of the history Black & Scholes and Option “The Pricing of Option and Corporate Liabilities” ,Journal of Political Economy,1973 Michael Jensen & William Meckling and Agency Problem "Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure”, JFE, 1976
Some highpoints of the history Contract Theory A.Alchian,H.Demsetz,B.Holmstrom and O Hart "The Theory of Corporate Finance",Tirole Toulouse MIT).2006 22-7
22-7 Some highpoints of the history Some highpoints of the history Contract Theory A. Alchian ，H. Demsetz ，B. Holmstrom and O. Hart “The Theory of Corporate Finance”, Tirole （ Toulouse & MIT ）, 2006
Corporate Finance Sub discipline of economics -The theory of the firm Requires an understanding of -The banking system -The operation of money -Capital markets 22-8
22-8 Corporate Finance Corporate Finance Sub discipline of economics –The theory of the firm Requires an understanding of The banking system The operation of money Capital markets
Corporate Finance Objective -Wealth maximization Strategy u Acquisition,financing and management of ASSETS 22-9
22-9 Corporate Finance Corporate Finance Objective – Wealth maximization Strategy – Acquisition, financing and management of ASSETS