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IS AMERICAN CORPORATE GOVERNANCE FATALLY FLAWED?

IS AMERICAN CORPORATE GOVERNANCE FATALLY FLAWED? Footnotes 1 . The calculations to follow are adapted from the finite growth model presented in Merton H. Miller and Franco Modigliani , “ Dividend Policy, Growth and the Valuation of Shares ,” Journal of Business , Vol. 24 , No. 4 ( October 1961 ), pp. 411 – 433 . I have taken the value of rbo (the risk‐adjusted cost of capital) as 10 percent (what else?) and the value of & (the investment‐to‐earnings ratio) as 1.0. A firm with a market‐to‐book ratio of 1.0 corresponds to a “no growth‐premium firm” with average internal rate of return ( rho‐star ) just equal to the cost of capital. 2 . For an account of how MOF systematically uses its regulatory powers to sustain the Japanese brokerage industry cartel and to support the level of stock prices, see my articles, “ The Economics and Politics of Index Arbitrage in the U.S. and Japan ,” Pacific-Basin Finance Journal , Vol. 1 , No. 1 ( May 1993 ), pp. 3 – 11 ; and “Japanese‐American Trade Relations in the Financial Services Industry,” Working Paper, Graduate School of Business, University of Chicago (September 1993). 3 . See Merton Miller and Myron http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Corporate Finance Wiley

IS AMERICAN CORPORATE GOVERNANCE FATALLY FLAWED?

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References (2)

Publisher
Wiley
Copyright
Copyright © 1994 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1078-1196
eISSN
1745-6622
DOI
10.1111/j.1745-6622.1994.tb00246.x
Publisher site
See Article on Publisher Site

Abstract

Footnotes 1 . The calculations to follow are adapted from the finite growth model presented in Merton H. Miller and Franco Modigliani , “ Dividend Policy, Growth and the Valuation of Shares ,” Journal of Business , Vol. 24 , No. 4 ( October 1961 ), pp. 411 – 433 . I have taken the value of rbo (the risk‐adjusted cost of capital) as 10 percent (what else?) and the value of & (the investment‐to‐earnings ratio) as 1.0. A firm with a market‐to‐book ratio of 1.0 corresponds to a “no growth‐premium firm” with average internal rate of return ( rho‐star ) just equal to the cost of capital. 2 . For an account of how MOF systematically uses its regulatory powers to sustain the Japanese brokerage industry cartel and to support the level of stock prices, see my articles, “ The Economics and Politics of Index Arbitrage in the U.S. and Japan ,” Pacific-Basin Finance Journal , Vol. 1 , No. 1 ( May 1993 ), pp. 3 – 11 ; and “Japanese‐American Trade Relations in the Financial Services Industry,” Working Paper, Graduate School of Business, University of Chicago (September 1993). 3 . See Merton Miller and Myron

Journal

Journal of Applied Corporate FinanceWiley

Published: Jan 1, 1994

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