PAM_334_Fall_2008_Lecture_5

PAM_334_Fall_2008_Lecture_5 - PAM3340 Lecture5 Agenda...

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PAM 3340 Lecture 5 Agenda: Some terms Benefits of corporate form Limited liability
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Terms:  A fully diversified portfolio Capital market or stock price efficiency Full pricing of corporate governance  structures Stock prices as signals Equity versus debt
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Benefits of Corporate Form:  Least-Cost Risk-Bearing Investor-owners provide the firm with  capital and provide  risk-bearing services The firm offers investors an expected  return (but no guarantees) What price does the investor “charge”  the firm for risk-bearing services?
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Benefits of Corporate Form:  Least-Cost Risk-Bearing Tradability and divisibility  of ownership  allows owners to  diversify  (LL  encourages diversification) Full diversification encourages owners  to charge the  least possible amount  for  risk-bearing services
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Benefits of Corporate Form:  Scale and Complexity  Transferable residual claims have  numerous benefits:
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This document was uploaded on 10/26/2011 for the course PAM 3340 at Cornell.

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PAM_334_Fall_2008_Lecture_5 - PAM3340 Lecture5 Agenda...

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