Journal Article
Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure
TLDR
In this paper, the authors integrate elements from the theory of agency, property rights and finance to develop a theory of the ownership structure of the firm and define the concept of agency costs, show its relationship to the separation and control issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why and investigate the Pareto optimality of their existence.Abstract:
This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the ‘separation and control’ issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem. The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. — Adam Smith (1776)read more
Citations
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How Do Family Ownership, Control, and Management Affect Firm Value?
TL;DR: In this article, the authors used proxy data on all Fortune 500 firms during 1994-2000 and found that family ownership creates value only when the founder serves as the CEO of the family firm or as its Chairman with a hired CEO.
Journal ArticleDOI
Understanding Earnings Quality: A Review of the Proxies, Their Determinants and Their Consequences
TL;DR: This paper pointed out that the "quality" of earnings is a function of the firm's fundamental performance and suggested that the contribution of a firms fundamental performance to its earnings quality is suggested as one area for future work.
Journal ArticleDOI
Revisiting the Relation Between Environmental Performance and Environmental Disclosure: An Empirical Analysis
TL;DR: In this article, the relationship between corporate environmental performance and environmental disclosure was investigated by testing economics-based theories of voluntary disclosure using a more rigorous research design, and they found a positive association between environmental performance with the extent of discretionary environmental disclosures.
Posted Content
Managing Resources: Linking Unique Resources, Management and Wealth Creation in Family Firms
TL;DR: In this paper, the authors developed a resource management process model composed of three components that can lead to a competitive advantage: the resource inventory (evaluating, adding, and shedding), resource bundling, and resource leveraging.
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Market Timing and Capital Structure
TL;DR: In this article, the authors show that current capital structure is strongly related to past market values and that the resulting effects on capital structure are very persistent, and suggest the theory that capital structure was the cumulative outcome of past attempts to time the equity market.
References
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Journal ArticleDOI
The Pricing of Options and Corporate Liabilities
Fischer Black,Myron S. Scholes +1 more
TL;DR: In this paper, a theoretical valuation formula for options is derived, based on the assumption that options are correctly priced in the market and it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks.
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The Nature of the Firm
TL;DR: In this paper, it is shown that a definition of a firm may be obtained which is not only realistic in that it corresponds to what is meant by a firm in the real world, but is tractable by two of the most powerful instruments of economic analysis developed by Marshall, the idea of the margin and that of substitution.
Journal ArticleDOI
Efficient capital markets: a review of theory and empirical work*
TL;DR: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 as mentioned in this paper
Journal ArticleDOI
Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Book
The theory of the growth of the firm
TL;DR: In this article, the authors studied the role of large and small firms in a growing economy and found that large firms are more likely to acquire and merge smaller firms in order to increase their size.