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by Devendra Kodwani, Martin Upton, Janette Rutterford
Financial Strategy, Second Edition
Cover Page
Preface
Title Page
Copyright
Contents
Introduction
NOTE
Section 1: Trends in Finance Theory
Section Overview
NOTE
Chapter 1: The World was their Oyster: International Diversification Pre-World War I
DEFINING RISK AND RETURN
MANAGING RISK
INTERNATIONAL INVESTMENT
EARLY DIVERSIFICATION STRATEGIES
“SCIENTIFIC” APPROACH TO DIVERSIFICATION
DIVERSIFICATION IN PRACTICE
CONCLUSION
NOTES
REFERENCES
CASE STUDY 1: Global Evidence on the Equity Risk Premium
THE NEED FOR A LONG-RUN PERSPECTIVE
PRIOR ESTIMATES OF THE RISK PREMIUM
NEW EVIDENCE
VARIATION IN RISK PREMIUMS OVER TIME
FROM THE PAST TO THE FUTURE
REVISITING HISTORY
EXPECTED RISK PREMIUMS
CONCLUSION
NOTES
Chapter 2: Behavioral Finance
1. INTRODUCTION
2. COGNITIVE BIASES
3. THE LIMITS TO ARBITRAGE
4. APPLICATIONS OF BEHAVIORAL FINANCE
5. CONCLUSIONS
NOTES
REFERENCES
CASE STUDY 2: Do Fundamentals – or Emotions – Drive the Stock Market?
WHEN MARKETS DEVIATE
MOMENTUM AND OTHER MATTERS
PERSISTENT MISPRICING IN CARVE-OUTS AND DUAL-LISTED COMPANIES
MARKETS AND FUNDAMENTALS: THE BUBBLE OF THE 1990S
FOCUS ON INTRINSIC VALUE
NOTES
Section 2: Adding Value Through Investment
SECTION OVERVIEW
NOTES
Chapter 3: Why Bad Projects Are So Hard to Kill
FAITH THAT WOULDN'T BE SHATTERED
A BELIEF IN CRYSTALS
THE SEDUCTIVE APPEAL OF COLLECTIVE BELIEF
AVOIDING THE DANGERS OF BLIND FAITH
IT COULDN'T HAPPEN HERE
Chapter 4: Realizing the Potential of Real Options
NEW INSIGHTS AND A NEW VOCABULARY
THE SEARCH FOR KILLER APS
REAL OPTIONS IN THE CROSSHAIRS
BRIDGING THE GAP BETWEEN THEORY AND PRACTICE
GOING FORWARD
NOTES
CASE STUDY 3: Real Options
BEST PRACTICE IN MANAGING REAL OPTIONS
HOW BP MAXIMIZES THE VALUE OF ITS OILFIELDS
POWER MASTER-STROKE BY POWERGEN
NOTES
Chapter 5: Mergers, MNEs and Innovation
1. INTRODUCTION
2. RESEARCH ON MERGER PERFORMANCE
3. MICRO-MERGER SNAFUS: THE UNDERESTIMATED PROBLEM OF INTEGRATING TECHNOLOGIES
4. THE CONUNDRUM: PERFORMANCE SO POOR, DEALS SO MANY
5. THE NEED FOR AN EXPANDED RESEARCH AGENDA TO INCLUDE DEAL-MAKERS AND THE IMPACT OF MERGERS ON INNOVATION
6. SUMMARY AND CONCLUSION
REFERENCES
CASE STUDY 4: Why Most Cross-Border Deals End in Tears
REFERENCES
Section 3: Adding Value through Financing
SECTION OVERVIEW
NOTES
Chapter 6: The Capital Structure Puzzle
THE THEORIES 1
THE EVIDENCE
TOWARD A UNIFIED THEORY OF CORPORATE FINANCIAL POLICY
NOTES
Chapter 7: Disappearing Dividends
TIME TRENDS IN CASH DIVIDENDS
CHARACTERISTICS OF DIVIDEND PAYERS
THE PROPENSITY TO PAY DIVIDENDS
SHARE REPURCHASES
CONCLUSIONS
NOTES
Chapter 8: The Value of Share Buybacks
EPS MAY BE UP, BUT INTRINSIC VALUE REMAINS FLAT
TAXES SHIELD VALUE FROM LEVERAGE
SENDING SIGNALS
NOTES
CASE STUDY 5: Capital Ideas
CASE STUDY 6: Death of the Dividend?
AIMS, OBJECTIVES AND THEORETICAL SETTING
METHODOLOGY
RESULTS: DIMINISHING DIVIDEND SIGNALLING POWER
RESULTS: GREATER RELIANCE ON BUYBACK SCHEMES
RESULTS: THE CASE OF INTEL
RESULTS: GREATER PRESSURE FROM SHAREHOLDERS TO CONDUCT BUYBACKS
CAVEATS
CASE STUDY 7: Sciona: A Venture Capital Case Study
SCIONA
THE FUNDING HISTORY
THE VENTURE CAPITAL COMPANIES
SCIONA'S OBSERVATIONS OF THE VENTURE CAPITAL EXPERIENCE
Chapter 9: Initial Public Offerings
1. INTRODUCTION
2. VALUING IPOs
3. NEW ISSUES UNDERPRICING
4. “HOT ISSUE” MARKETS
5. LONG-RUN PERFORMANCE
6. GOING PUBLIC AS A STAGE IN THE LIFE CYCLE OF A FIRM'S EXTERNAL FINANCING
7. CONTRACTUAL FORMS AND THE GOING PUBLIC PROCESS
8. SUMMARY
SUGGESTED READING
CASE STUDY 8: Google Press Cuttings
(A) ARE YOU ABOUT TO GET GOOGLED?
(B) IGNORE WALL ST'S WHINING – GOOGLE'S IPO WORKED
(C) GOOGLE'S EARNINGS MORE THAN DOUBLE 1ST QUARTERLY RESULTS AS PUBLIC FIRM STRONG
(D) HOW HIGH CAN GOOGLE FLY?
(E) BOWLING FOR GOOGLE
(F) GOOGLE'S RISING SHARE PRICE IS COLD COMFORT FOR INVESTORS
Section 4: Adding Value through Risk Management
SECTION OVERVIEW
Chapter 10: Operating Exposure
EXCHANGE RATE ENVIRONMENT
UNDERSTANDING OPERATING EXPOSURE
MEASURING OPERATING EXPOSURE
NOTES
Chapter 11: Currency Exchange Trading and Rogue Trader John Rusnak
INTRODUCTION
CURRENCY MARKETS
EXCHANGE CONTRACTS
SPOT EXCHANGE
FORWARD EXCHANGE
CURRENCY FUTURES AND SWAP TRANSACTIONS
OPTIONS
CURRENCY HEDGING
TRADING STRATEGY OF JOHN RUSNAK
BOGUS OPTIONS
FALSIFIED DOCUMENTS
PRIME BROKERAGE ACCOUNTS
VALUE AT RISK CALCULATIONS
SALE OF OPTIONS
LOSSES REVEALED
THE LUDWIG REPORT
TECHNOLOGY
ACCOUNTING PRACTICES
CONCLUSION
NOTES
REFERENCES
Chapter 12: Value at Risk
WHAT IS VAR?
VAR AND CORPORATE RISK MANAGEMENT OBJECTIVES
VAR AND THE GREAT DERIVATIVES DISASTERS
ALTERNATIVES TO VAR
CONCLUSION
NOTES
APPENDIX: CALCULATING VAR
NOTES
Chapter 13: Learning to Live with Fixed Rate Mortgages
BACKGROUND
THE MORTGAGE WORLD BEFORE FIXED RATES
THE EMERGENCE OF FIXED RATE MORTGAGES
RISK MANAGEMENT ISSUES
CONCLUSIONS
THE FUTURE
REFERENCES
Chapter 14: Credit Derivatives
TYPES OF CREDIT DERIVATIVES
MARKET SIZE AND MAJOR PARTICIPANTS
HOW CREDIT DERIVATIVES ARE USED
NOTES
REFERENCES
CASE STUDY 9: Journey to Junk
CASE STUDY 10: Who Rates the Raters?
STEP BY STEP
WE'RE NOT WATCHDOGS
UNDER-RATED?
A NATURAL OLIGOPOLY
NOTE
Section 5: Measuring Performance
SECTION OVERVIEW
NOTES
Chapter 15: What can be Expected from Accounting Standards?
1. TARGETING THE USER
2. THE TYRANNY OF NET INCOME AND RATIOS
3. THE CULTURAL DEBATE ON VOLATILITY
CASE STUDY 11: Queens Moat Houses plc
PRIOR YEAR ADJUSTMENTS AND RECLASSIFICATIONS
CASE STUDY 12: Learn by Numbers
Chapter 16: A Star to Sail By?
ALPHABET SOUP
CASH IS FACT, PROFIT IS OPINION
VALUE FOR MONEY?
Chapter 17: EVA Implementation, Market Over-Reaction and the Theory of Low-Hanging Fruit
LITERATURE REVIEW
SAMPLE SELECTION
RESEARCH METHODOLOGY
RESULTS
SENSITIVITY
SUMMARY
NOTES
REFERENCES
Chapter 18: Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part I
THE BALANCED SCORECARD EMERGES
INTANGIBLE ASSETS: VALUATION VS. VALUE CREATION
THE BALANCED SCORECARD SUPPLEMENTS CONVENTIONAL FINANCIAL REPORTING
STRATEGY MAPS
STAKEHOLDER AND KEY PERFORMANCE INDICATOR SCORECARDS
APPLYING THE BSC TO NONPROFITS AND GOVERNMENT ORGANIZATIONS
BEYOND MEASUREMENT TO MANAGEMENT
NOTES
REFERENCES
Chapter 19: Performance Indicators
CONCEPT
PREPARATION
IMPLEMENTATION
USE
CONCLUSION
NOTE
Section 6: Governance and Ethics
SECTION OVERVIEW
Chapter 20: It's Time to Rebalance the Scorecard
THE CORRECTIVE ACTIONS TAKEN SO FAR
SOME CAUSES OF SUCH BEHAVIORS
WHAT GETS MEASURED GETS DONE – ENTER THE BALANCED SCORECARD
REBALANCING THE SCORECARD
THE REBALANCING ACT
WHAT ARE CORPORATIONS CURRENTLY DOING TO INCLUDE SOCIAL RESPONSIBILITY ISSUES ON THEIR SCORECARD?
IMPLICATIONS AND CONCLUSIONS
NOTES
Chapter 21: Stakeholder Capitalism
NOTE
CASE STUDY 13: The State of Denial We're In
TEN YEARS ON, WILL HUTTON IS STANDING BY HIS BESTSELLING CRITIQUE OF BRITISH CAPITALISM
MODEL MISBEHAVIOUR
Chapter 22: Controversy Incorporated
CONTENTIOUS ATTRACTIONS
EARNING THE RIGHT TO OPERATE PROFITABLY
NOTES
CASE STUDY 14: An Interview with Microsoft's CFO
NOTES
CASE STUDY 15: Corporate Governance Failures: To What Extent is Parmalat a Particularly Italian Case?
INTRODUCTION
OWNERSHIP AND CONTROL STRUCTURES: PARMALAT VS ITALY
THE MONITORING STRUCTURE: WHEN THE MONITORED CONTROLS THE MONITORS
A REVIEW OF PARMALAT'S COMPLIANCE WITH THE ITALIAN CODE OF BEST PRACTICE
CONCLUDING REMARKS
NOTES
REFERENCES
CASE STUDY 16: Companies Still Failing to Fill the Funding Gap
Index
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