Capital Allocation and the Nature of Ownership Equities

Agency theory rests on a well-defined relationship between shareholders and managers. That relationship is examined and found to be a poorly defined state-contingent contract. The implications of that finding, and the existence of only a weak market for managers, lead to the conclusion that the traditional assumptions about the rights of shareholders no longer apply and that common stock (ordinary share capital) is obsolete.

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Toward a Positive Theory of Corporate Financial Policy

Findlay

Williams

1987

Abacus

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This paper offers an alternative theoretical structure to the neoclassical valuation model that has been the cornerstone of theories of finance for a quarter of a century. It begins by outlining the neoclassical model in simple but surprisingly robust terms. More recent extensions and refinements are then discussed. The alternative model, which does not rely on modern financial economic theory but which is consistent with real world empirical behaviour, is developed next. Finally, a new research agenda for finance is proposed.

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Capital Allocation and the Nature of Ownership Equities

Cited by 7 publications

References 10 publications

Interaction of financial policies and firm goals in management controlled and owner controlled firms

Interaction of financial policies and firm goals in management controlled and owner controlled firms

Is Common Stock Obsolete?

Toward a Positive Theory of Corporate Financial Policy

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