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Finance, Theoretical and Applied

Author

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  • Stewart C. Myers

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142)

Abstract

Like Caesar's Gaul, corporate finance is divided into three parts: theoretical, empirical, and normative. Important advances in any one of these three typically generate good ideas for the other two. I have been fortunate not to specialize in one part only. This review covers the history of capital structure theories, including the trade-off and pecking-order theories, and takes a skeptical view of how those theories have been tested so far. I give roughly equal space to normative, practical applications, including adjusted present value (APV), the valuation of real options, and the application of modern finance to regulation, insurance, the valuation of R&D, and the role of risk capital in financial institutions. Looking back, I realize that the supply of intriguing financial questions is inexhaustible.

Suggested Citation

  • Stewart C. Myers, 2015. "Finance, Theoretical and Applied," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 1-34, December.
    • Handle: RePEc:anr:refeco:v:7:y:2015:p:1-34
    DOI: 10.1146/annurev-financial-111914-042056
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    Citations

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    Cited by:

    1. Laura Broccardo & Luisa Tibiletti & Pertti Vilpas, 2018. "A Scorecard to Detect Financial Leverage Profitability," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(3), pages 244-244, February.
    2. María T. Tascón & Paula Castro & Adrián Ferreras, 2021. "How does a firm's life cycle influence the relationship between carbon performance and financial debt?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 1879-1897, May.
    3. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Capital Structure Theory: Past, Present, Future," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 9-50, Springer.
    4. Kim, Hyonok & Wilcox, James A. & Yasuda, Yukihiro & 安田, 行宏, 2020. "Internal and External Lending by Nonfinancial Businesses," Working Paper Series G-1-23, Hitotsubashi University Center for Financial Research.
    5. Li, Shengfeng & Hoque, Hafiz & Thijssen, Jacco, 2021. "Firm financial behaviour dynamics and interactions: A structural vector autoregression approach," Journal of Corporate Finance, Elsevier, vol. 69(C).
    6. Holderness, Clifford G., 2018. "Equity issuances and agency costs: The telling story of shareholder approval around the world," Journal of Financial Economics, Elsevier, vol. 129(3), pages 415-439.
    7. Shilin Li & Jinqiang Yang & Siqi Zhao, 2022. "Robust leverage dynamics without commitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 74(2), pages 643-679, September.
    8. Lo, Andrew W. & Thakor, Richard T., 2023. "Financial intermediation and the funding of biomedical innovation: A review," Journal of Financial Intermediation, Elsevier, vol. 54(C).

    More about this item

    Keywords

    Autobiography; capital structure; corporate finance; real options; regulation; valuation;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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