Corporate Strategy And Financial Theory

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Corporate Strategy And Financial Theory

Author Info

Jan Vlachý

Abstract

The dramatically growing disproportion between the value of corporate assets and market valuation has resulted in a well-researched schism between strategic management and financial theory. Options theory provides a potent tool to resolve this issue. We propose a model which is consistent with both the Resource- and Contractual-Based Theories of the Firm and which demonstrates that corporate strategy can be perceived as a portfolio of embedded and real options. We further argue that embedded options typically serve as hedging instruments for real options which enhances their value and should be a major consideration when assessing the structure and form of contracts. Special emphasis is granted to human capital and the contractual arrangements through which firms purchase its product. Human capital is the key resource for the processes of real-options discovery and strategy-setting, both of which constitute the essential part of a modern firm's value.

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Publisher Info
Article provided by University of Economics, Prague in its journal Politická ekonomie.

Volume (Year): 2009 (2009)
Issue (Month): 2 ()
Pages: 147-162
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Handle: RePEc:prg:jnlpol:v:2009:y:2009:i:2:id:678:p:147-162

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G30 - Financial Economics - - Corporate Finance and Governance - - - General
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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This page was last updated on 2009-12-2.

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