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In Search of New Foundations

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Author Info
Luigi Zingales
Abstract

In this paper I argue that corporate finance theory, empirical research, practical applications, and policy recommendations are deeply rooted in an underlying theory of the firm. I also argue that while the existing theories have delivered very important and useful insights, they seem to be quite ineffective in helping us cope with the new type of firms that are emerging. I outline the characteristics that a new theory of the firm should satisfy and how such a theory could change the way we do corporate finance, both theoretically and empirically.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7706.

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Date of creation: May 2000
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Handle: RePEc:nbr:nberwo:7706

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G30 - Financial Economics - - Corporate Finance and Governance - - - General

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  2. Raghuram G. Rajan & Luigi Zingales, 2001. "The Firm As A Dedicated Hierarchy: A Theory Of The Origins And Growth Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 805-851, August. [Downloadable!] (restricted)
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  3. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  4. Raghuram G. Rajan & Luigi Zingales, 1999. "The Tyranny of Inequality," CRSP working papers 423, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
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  5. Zingales, Luigi, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1047-73, November. [Downloadable!] (restricted)
  6. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  7. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring. [Downloadable!] (restricted)
  8. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
  9. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
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  11. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, 02. [Downloadable!] (restricted)
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  12. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-62, August. [Downloadable!] (restricted)
  13. Dybvig, Philip H & Zender, Jaime F, 1991. "Capital Structure and Dividend Irrelevance with Asymmetric Information," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 4(1), pages 201-19. [Downloadable!] (restricted)
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  14. Harris, Milton & Raviv, Artur, 1991. " The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March. [Downloadable!] (restricted)
  15. Andrei Shleifer & Lawrence H. Summers, 1989. "Breach of Trust in Hostile Takeovers," NBER Working Papers 2342, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June. [Downloadable!] (restricted)
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  17. Hart, O. & Moore, J., 1989. "Default And Renegotiation: A Dynamic Model Of Debt," Working papers 520, Massachusetts Institute of Technology (MIT), Department of Economics.
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  18. Bolton, Patrick & Scharfstein, David S, 1990. "A Theory of Predation Based on Agency Problems in Financial Contracting," American Economic Review, American Economic Association, vol. 80(1), pages 93-106, March. [Downloadable!] (restricted)
  19. Fama, Eugene F, 1990. "Contract Costs and Financing Decisions," Journal of Business, University of Chicago Press, vol. 63(1), pages S71-91, January. [Downloadable!] (restricted)
  20. Raghuram Rajan & Henri Servaes & Luigi Zingales, . "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 357, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
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  21. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04. [Downloadable!] (restricted)
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  22. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-66, September. [Downloadable!] (restricted)
  23. Klein, Benjamin, 1988. "Vertical Integration as Organizational Ownership: The Fisher Body-General Motors Relationship Revisited," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 199-213, Spring.
  24. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  25. Raghuram G. Rajan & Luigi Zingales, 1998. "Power In A Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 387-432, May. [Downloadable!] (restricted)
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  26. Titman, Sheridan, 1984. "The effect of capital structure on a firm's liquidation decision," Journal of Financial Economics, Elsevier, vol. 13(1), pages 137-151, March. [Downloadable!] (restricted)
  27. Walter Novaes & Luigi Zingales, 1998. "Bureaucracy as a Mechanism to Generate Information," CRSP working papers 477, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
  28. Stein, Jeremy C, 1997. " Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-33, March. [Downloadable!] (restricted)
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  29. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October. [Downloadable!] (restricted)
  30. Sudipto Bhattacharya, 1979. "Imperfect Information, Dividend Policy, and "The Bird in the Hand" Fallacy," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 259-270, Spring. [Downloadable!] (restricted)
  31. Kaplan, Steven N & Ruback, Richard S, 1995. " The Valuation of Cash Flow Forecasts: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 50(4), pages 1059-93, September. [Downloadable!] (restricted)
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  32. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  33. Stewart C. Myers, 2000. "Outside Equity," Journal of Finance, American Finance Association, vol. 55(3), pages 1005-1037, 06. [Downloadable!] (restricted)
  34. Zingales, Luigi, 1998. "Corporate Governance," CEPR Discussion Papers 1806, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  35. Fluck, Zsuzsanna, 1998. "Optimal Financial Contracting: Debt versus Outside Equity," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 11(2), pages 383-418.
  36. Zingales, Luigi, 1994. "The Value of the Voting Right: A Study of the Milan Stock Exchange Experience," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(1), pages 125-48. [Downloadable!] (restricted)
  37. Raghuram G. Rajan & Luigi Zingales, 1998. "The Governance of the New Enterprise," CRSP working papers 487, Center for Research in Security Prices, Graduate School of Business, University of Chicago. [Downloadable!]
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  38. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November. [Downloadable!] (restricted)
  39. Parrino, Robert & Weisbach, Michael S., 1999. "Measuring investment distortions arising from stockholder-bondholder conflicts," Journal of Financial Economics, Elsevier, vol. 53(1), pages 3-42, July. [Downloadable!] (restricted)
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