The Corporate Financiers: Williams, Modigliani, Miller, Coase, Williamson, Alchian, Demsetz, Jensen, Meckling (Great Minds in Finance)

"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"-- Provided by publisher 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. The Book Begins 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.^ Franco Modigliani And Merton Miller Verified His Intuition Two Decades Later And Showed Why, Under Certain Circumstances, A Firm Can Expand Equally Effectively Through Funding From Either Debt Or Equity. It Then Delves 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. It Then Describes The Further Nuances To These Relationships As Offered By Armen Alchian And Harold Demsetz. The Book Treats 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. 1. Introduction -- Part I: From Art To Science -- 2. A Fly In The Ointment -- 3. The Early Life Of John Burr Williams -- 4. The Times And The Theory -- 5. A New Finance Paradigm -- 6. Legacy And Later Life -- Part Ii: Is A Corporation's Capital Structure Irrelevant? -- 7. The Early Years Of Franco Modigliani -- 8. The Early Years Of Merton Miller -- 9. The Times -- 10. The Great Idea -- 11. Applications -- 12. The Prize -- 13. The Later Years Of Merton Miller -- 14. The Later Years Of Franco Modigliani -- Part Iii: Transactions Costs And The Value Of A Firm -- 15. The Early Life Of Ronald Harold Coase -- 16. The Times And The Theory -- 17. Life And Legacy -- 18. The Early Life Of Oliver Eaton Williamson -- 19. The Times And The Theory -- 20. Applications -- 21. Life And Legacy -- 22. Life And Legacy Of Oliver Williamson -- Part Iv: Alchian And Demsetz -- 23. Alchian And Demsetz -- 24. Harold Demsetz -- 25. The Times -- 26. The Great Idea -- 27. Applications And Extensions -- 28. Harold Demsetz Later In Life -- 29. The Later Years Of Armen Alchian -- Part V: Jensen And Meckling -- 30. The Early Years For Michael Cole Jensen -- 31. The Early Years For William Henry Meckling -- 32. The Times -- 33. The Theory -- 34. Applications And Extensions -- 35. Life And Legacy -- Part Vi: What We Have Learned -- 36. Combined Contributions -- 37. Conclusions. Colin Read. Includes Bibliographical References And Index. This fifth book in the series describes the contribution of nine great minds in finance who explained how to quantify and generate corporate value. It describes the theories governing the creation and measurement of corporate value not in isolation, but rather in the context of the void in understanding which these great minds successfully filled. 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. The book begins 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. Franco Modigliani and Merton Miller verified his intuition two decades later and showed why, under certain circumstances, a firm can expand equally effectively through funding from either debt or equity. It then delves 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. It then describes the further nuances to these relationships as offered by Armen Alchian and Harold Demsetz. The book treats 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 Cover Half-Title Series Title Copyright Contents List of Figures Series Preface Preamble 1 Introduction Section 1: From Art to Science 2 A Fly in the Ointment 3 The Early Life of John Burr Williams 4 The Times 5 The Theory – A New Finance Paradigm 6 Legacy and Later Life Section 2: Is a Corporation’s Capital Structure Irrelevant? 7 The Early Years of Franco Modigliani 8 The Early Years of Merton Miller 9 The Times 10 The Great Idea 11 Applications 12 The Prize 13 The Later Years of Merton Miller 14 The Later Years of Franco Modigliani Section 3: Transactions Costs and the Value of a Firm 15 The Early Life of Ronald Harold Coase 16 The Times and the Theory 17 Life and Legacy 18 The Early Life of Oliver Eaton Williamson 19 The Times and the Theory 20 Applications 21 Life and Legacy of Ronald Coase 22 Life and Legacy of Oliver Williamson Section 4: Alchian and Demsetz 23 Alchian and Demsetz 24 Harold Demsetz 25 The Times 26 The Great Idea 27 Applications and Extensions 29 The Later Years of Armen Alchian Section 5: Jensen and Meckling 30 The Early Years of Michael Cole Jensen 31 The Early Years of William Henry Meckling 32 The Times 33 The Theory 34 Applications and Extensions 35 Life and Legacy Section 6: What We Have Learned 36 Combined Contributions 37 Conclusions Glossary Notes Index