The aim of the article is to present the method of establishing equity shares in weight average cost of capital (WACC), in which the value of loan capital results from the fixed assumptions accepted in the financial plan (for example a schedule of loan repayment) and own equity is evaluated by...

Recent academic work and policy analysis give insight into the governance problems exposed by the financial crisis and suggest possible solutions. We begin this paper by explaining why governance of banks differs from governance of nonfinancial firms. We then look at four areas of governance:...

We identify the tension created by the dual demands of financial institutions to be value-maximizing entities that also serve the public interest. We highlight the importance of information in addressing the public's desire for banks to be safe yet innovative. Regulators can choose several...

Surveys of corporate risk management document that selective hedging, where managers incorporate their market views into firms’ hedging programs, is widespread in the U.S. and other countries. Stulz (1996) argues that selective hedging could enhance the value of firms that possess an...

We show that managerial overconfidence, which has been found to influence a number of corporate financial decisions, also affects corporate risk management. We find that managers increase their speculative activities using derivatives following speculative gains, while they do not reduce their...

The majority of academic economists share the view that a corporation should serve the exclusive interests of its shareholders (shareholder value maximization). This view is fi rmly grounded on the extension, by Arrow (1953) and Debreu (1959) of the two welfare theorems to production economies...

In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and...

In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and...

This report is the first known stocktaking of its kind to provide a regional overview of state-owned enterprise (SOE) governance reforms and challenges across the Southern African Development Community (SADC) region. Part One summarises the challenges and governance practices related to...

This paper studies the effect on company performance of appointing non-executive directors that are also executive directors in other firms. The analysis is based on a new panel dataset of UK companies over 2002-2008. Our findings suggest a positive relationship between the presence of these...