Real options are valuable sources of flexibility that are either inherent in, or can be built into, corporate assets. The value of such options are generally not captured by the standard discounted cash flow (DCF) approach, but can be estimated using a variant of financial option pricing...

In these extracts from the world's bestselling graduate textbook, the authors offer a number of suggestions for practitioners, including: - When valuing a company or an investment project, managers should start whenever possible with the asset's market price as the best initial estimate and then...

This paper explores the necessary conditions for outside equity financing when insiders, that is managers or entrepreneurs, are self-interested and cash flows are not verifiable. Two control mechanisms are contrasted: a partnership,' in which outside investors can commit assets for a specified...

This paper develops a signaling model in which accounting information improves real investment decisions. Pure cash flow reporting is shown to lead to underinvestment when managers have superior information but are acting in shareholders' interests. Accounting by prespecified, "objective" rules...

This paper contrasts the "static tradeoff" and "pecking order" theories of capital structure choice by corporations. In the static tradeoff theory, optimal capital structure is reached when the tax advantage to borrowing is balanced, at the margin, by costs of financial distress. In the pecking...

We use a large sample of non-US banks to examine the propagation of the 2007-2009 crisis. Using both stock market and structural variables we test whether the relative incidence of the crisis was better explained by crisis models or by the VaR-type analysis of the Basel system. Consistent with...

We test the effect of sentiment on returns using a sample of upstream oil stocks where we have a good proxy for fundamental value. For this sample, the influence of sentiment is highly time-varying, appearing only after the post-2000 increased interest in oil-related assets. Contrary to the...