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Fundamentals: Financing and Risk

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Value Creation for Owners and Directors

Abstract

Owners must understand how fundamentals of risk and financing affect the selection and success of strategies. In our discussion of a company’s need for financing, we follow the risk-return paradigm of modern finance. However, deviating from the classical Modigliani-Miller treatment, we show how equity financing through IPOs enables and influences strategies. Three types of risk are discussed in this book: volatility, black swan, and obsolescence. Two of these risks, volatility and black swan, are investigated in this chapter. The third risk, obsolescence, is dealt with in Chap. 7.

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Notes

  1. 1.

    José Santos (2013), M.EOS: How General Management Matters, INSEAD Working Paper 2013/75/ST.

  2. 2.

    https://www.pbs.org/wgbh/pages/frontline/the-spill/bp-troubled-past/.

  3. 3.

    https://www.csb.gov/macondo-blowout-and-explosion/.

  4. 4.

    https://www.nytimes.com/2010/05/09/business/09bp.html.

  5. 5.

    https://economictimes.indiatimes.com/industry/cons-products/tobacco/govt-should-raise-stake-in-itc-to-prevent-hostile-takeover-by-bat-sjm/articleshow/66256643.cms?from=mdr.

  6. 6.

    https://techcrunch.com/2017/08/08/a-look-back-in-ipo-microsoft-the-software-success/.

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Correspondence to Massimo Massa .

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Massa, M., Taraporevala, K., Van der Heyden, L. (2023). Fundamentals: Financing and Risk. In: Value Creation for Owners and Directors. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-19726-0_6

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