Previous work examined the long-run profitability of strategies mimicking the trades of company directors in the shares of their own company, as a way of testing for strong-form market efficiency. However, the evidence regarding returns during the month containing the insider trade was...

Although Jensen (1988) argues that high levels of free cash flow and unused borrowing capacity are likely to encourage low-value mergers, the “pecking order” theory offers a different perspective, where managers conserve cash flow to undertake positive NPV investments. We argue that the...

Estimates of the expected return on equities are of central importance for capital budgeting purposes, actuarial calculations (expected wealth) and, in countries with regulated utilities, for setting the allowed rate of return. The starting point for any of these purposes is the simple annual...