The Corporate Financiers

1. Front Matter

   Pages i-xiii

   PDF

2. Introduction

   1. Introduction

      • Colin Read

      Pages 1-6

3. From Art to Science

   1. Front Matter

      Pages 7-7

      PDF

   2. A Fly in the Ointment

      • Colin Read

      Pages 9-12

   3. The Early Life of John Burr Williams

      • Colin Read

      Pages 13-23

   4. The Times

      • Colin Read

      Pages 24-30

   5. The Theory — A New Finance Paradigm

      • Colin Read

      Pages 31-36

   6. Legacy and Later Life

      • Colin Read

      Pages 37-42

4. Is a Corporation’s Capital Structure Irrelevant?

   1. Front Matter

      Pages 43-43

      PDF

   2. The Early Years of Franco Modigliani

      • Colin Read

      Pages 45-52

   3. The Early Years of Merton Miller

      • Colin Read

      Pages 53-60

   4. The Times

      • Colin Read

      Pages 61-63

   5. The Great Idea

      • Colin Read

      Pages 64-70

   6. Applications

      • Colin Read

      Pages 71-72

   7. The Prize

      • Colin Read

      Pages 73-74

   8. The Later Years of Merton Miller

      • Colin Read

      Pages 75-77

   9. The Later Years of Franco Modigliani

      • Colin Read

      Pages 78-80

5. Transactions Costs and the Value of a Firm

   1. Front Matter

      Pages 81-81

      PDF

   2. The Early Life of Ronald Harold Coase

      • Colin Read

      Pages 85-91

   3. The Times and the Theory

      • Colin Read

      Pages 92-98

The Corporate Financiers is the fifth book in a series of discussions about the great minds in the history and theory of finance. While the series addresses the contributions of scholars in our understanding of modern finance, this volume presents the ways in which a corporation creates value.

More than two centuries ago, Adam Smith explained the concept of division of labor and the efficiencies of specialization as the mechanism in which a firm creates value. However, corporations now find themselves outsourcing some processes to other firms as an alternative way to create value. There must be other economic forces at work than simply the internal efficiencies of a firm. We begin by describing the work of a rather obscure scholar named John Burr Williams who demonstrated in 1938 how the earnings of a firm are capitalized into corporate value through its stock price. We then delve into the inner workings of the modern corporation by describing the contributions of Nobel Memorial Prize winners Ronald Coase and Oliver Williamson. More than any others, these scholars created a renewed appreciation for our understanding of the institutional detail of the modern corporation in reducing costs and increasing efficiency.

While Coase and Williamson provided meaningful descriptions of the advantage of a corporation, they did not offer prescriptions for the avenues the corporation can create more value in an era when new technologies make outsourcing and telecommuting increasingly possible. Michael Jensen and William Meckling describe in greater detail the nature of the implicit contracts a corporation employs, and recommend remedies to various problems that arise when the goals of the corporation are not aligned with the incentives of its agents. We also describe the further nuances to these relationships as offered by Armen Alchian and Harold Demsetz. We treat the lives of these extraordinary individuals who looked at a very familiar problem in a sufficiently novel light to change the way all look at corporations ever since. That is the test of genius.

• capital
• finance
• science and technology
• success

• SUNY College, Plattsburgh, USA

  Colin Read

Colin Read is a professor of Economics and Finance, former dean of the School of Business and Economics at SUNY College at Plattsburgh, and a columnist for the Plattsburgh New York Press Republican newspaper. He has a Ph.D. in Economics, J.D. in Law, M.B.A., Master's of Taxation, and has taught environmental and energy economics and finance for 25 years. Colin’s recent books include “BP and the Macondo Spill: The Complete Story:, “The Fear Factor”, “Global Financial Meltdown: How We Can Avoid the Next Economic Crisis”, and a book on international taxation. He has written dozens of papers on market failure, volatility, and housing markets, writes a weekly newspaper column, and appears monthly on a local PBS television show to discuss the regional and national economy. He has worked as a research associate at the Harvard Joint Center for Housing Studies and served the Ministry of Finance in Indonesia under contract from the Harvard Institute for International Development.

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