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The Ownership of the Firm, Corporate Finance, and Derivatives

Some Critical Thinking

  • Book
  • © 2015

Overview

Authors:
  1. Kuo-Ping Chang

    1. National Tsing Hua University, Hsinchu City, Taiwan

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  • Clarifies several ambiguous arguments and claims in finance and the theory of the firm
  • Serves as a bridge between derivatives, corporate finance and the theory of the firm
  • Uses anecdotes and numerical examples to explain some unconventional concepts
  • Includes supplementary material: sn.pub/extras

Part of the book series: SpringerBriefs in Finance (BRIEFSFINANCE)

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Table of contents (6 chapters)

  1. Front Matter

    Pages i-xii
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  2. The Ownership of the Firm

    • Kuo-Ping Chang
    Pages 1-9

  3. Maximizing Profits and Maximizing Resource Providers’ Wealth

    • Kuo-Ping Chang
    Pages 11-15

  4. A Reconsideration of the Modigliani-Miller Propositions

    • Kuo-Ping Chang
    Pages 17-22

  5. Derivatives and the Theory of the Firm

    • Kuo-Ping Chang
    Pages 23-37

  6. Arbitrage and Valuation of Different Contracts

    • Kuo-Ping Chang
    Pages 39-65

  7. Misinterpretations of Residual Claim in Finance and Corporate Law

    • Kuo-Ping Chang
    Pages 67-74

  8. Back Matter

    Pages 75-76
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Keywords

About this book

This book clarifies several ambiguous arguments and claims in finance and the theory of the firm. It also serves as a bridge between derivatives, corporate finance and the theory of the firm. In addition to mathematical derivations and theories, the book also uses anecdotes and numerical examples to explain some unconventional concepts. The main arguments of the book are: (1) the ownership of the firm is not a valid concept, and firms’ objectives are determined by entrepreneurs who can innovate to earn excess profits; (2) the Modigliani-Miller capital structure irrelevancy proposition is a restatement of the Coase theorem, and changes in the firm’s debt-equity ratio will not affect equity-holders’ wealth (welfare), and equity-holders’ preferences toward risk (or variance) are irrelevant; (3) all firms' resources are options, and every asset is both a European call and a put option for any other asset; and (4) that a first or residual claim between debt and equity is non-existent while the first claim among fixed-income assets can actually affect the market values of these assets.

Authors and Affiliations

  • National Tsing Hua University, Hsinchu City, Taiwan

    Kuo-Ping Chang

About the author

Dr. Chang is Honourable Emeritus Professor, Department of Quantitative Finance at National Tsing Hua University, Taipei, Taiwan. He received his PhD degree in Economics & Finance from University of Pennsylvania, USA. Dr. Chang has been teaching microeconomics, mathematical economics, and mathematical finance in both economics and finance departments for many years. He has published various papers in leading journals of management science, economics and finance regarding productivity/efficiency analysis, regulatory economics, and quantitative finance.

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