More than thirty leading scholars and finance practitioners discuss the theory and practice of using enterprise-risk management (ERM) to increase corporate values. ERM is the corporate-wide effort to manage the right-hand side of the balance sheet--a firm's total liability structure-in ways that enable management to make the most of the firm's assets. While typically working to stabilize cash flows, the primary aim of a well-designed risk management program is not to smooth corporate earnings, but to limit the possibility that surprise outcomes can threaten a company's ability to fund its major investments and carry out its strategic plan. Contributors summarize the development and use of risk management products and their practical applications. Case studies involve Merck, British Petroleum, the American airline industry, and United Grain Growers, and the conclusion addresses a variety of topics that include the pricing and use of certain derivative securities, hybrid debt, and catastrophe bonds. Contributors: Tom Aabo (Aarhus School of Business); Alberic Braas and Charles N. Bralver (Oliver, Wyman & Company); Keith C. Brown (University of Texas at Austin); David A.Carter (Oklahoma State University); Christopher L. Culp (University of Chicago); Neil A. Doherty (University of Pennsylvania); John R. S. Fraser (Hyrdo One, Inc.); Kenneth R. French (University of Chicago); Gerald D. Gay (Georgia State University); Jeremy Gold (Jeremy Gold Pensions); Scott E. Harrington (University of South Carolina); J. B. Heaton (Bartlit Beck Herman Palenchar & Scott LLP); Joel Houston (University of Florida); Nick Hudson (Stern Stewart & Co.); Christopher James (University of Florida); A. John Kearney and Judy C. Lewent (Merck & Co., Inc.); Robert C. Merton and Lisa K. Meulbroek (Harvard Business School); Merton H. Miller (University of Chicago); Jouahn Nam (Pace University); Andrea M. P. Neves (CP Risk Management LLC); Brian W. Nocco (Nationwide Insurance); Andre F. Perold (Harvard Business School); S. Waite Rawls III (Continental Bank); Kenneth J. Risko (Willis Risk Solutions); Angelika Schochlin (University of St. Gallen); Betty J. Simkins (Oklahoma State University); Donald J. Smith (Boston University); Clifford W. Smith Jr. (University of Rochester); Charles W. Smithson (Continental Bank); Rene M. Stulz (Ohio State University); D.S All the articles that comprise this book were first published in the Journal of Applied Corporate Finance. Morgan Stanley's ownership of the journal is a reflection of its commitment to identifying outstanding academic research and promoting its application in the practicing corporate and investment communities.

Why did the “stagflation” of the 1970s—the improbable combination of high unemployment and runaway inflation—prove so painful and protracted? What explains the U.S. stock market’s remarkable forty-year run of 12 percent average annual returns since then? Why is Japan still mired in a decades-long recession—and the Chinese economy in a tailspin? And what accounts for the resilience of U.S. stock and labor markets in the wake of the COVID-19 pandemic and in the face of the Fed’s record interest rate hikes?Donald H. Chew, Jr., argues that answers to these questions lie in the principles and methods of “modern corporate finance.” Ideas formulated and tested by finance scholars—notably, an efficient stock market in which prices reflect the long-run values of public companies and a “market for corporate control” that exerts continuous pressure on management—informed and spurred the investor-driven capitalism that has created the world’s most productive and valuable companies. Drawing on his career-long relationships with leading academics and practitioners, Chew profiles key figures in the development of modern corporate finance while emphasizing their counterintuitive lessons for shareholders, companies, and countries. Corporate efficiency and value creation, he contends, are the fundamental source of the social wealth essential to addressing challenges such as poverty and climate change. Lively and provocative, this book makes corporate finance approachable—and even admirable—for readers interested in how the success and failure of companies affect their lives.

More than thirty leading scholars and finance practitioners discuss the theory and practice of using enterprise-risk management (ERM) to increase corporate values. ERM is the corporate-wide effort to manage the right-hand side of the balance sheet--a firm's total liability structure-in ways that enable management to make the most of the firm's assets. While typically working to stabilize cash flows, the primary aim of a well-designed risk management program is not to smooth corporate earnings, but to limit the possibility that surprise outcomes can threaten a company's ability to fund its major investments and carry out its strategic plan. Contributors summarize the development and use of risk management products and their practical applications. Case studies involve Merck, British Petroleum, the American airline industry, and United Grain Growers, and the conclusion addresses a variety of topics that include the pricing and use of certain derivative securities, hybrid debt, and catastrophe bonds. Contributors: Tom Aabo (Aarhus School of Business); Alberic Braas and Charles N. Bralver (Oliver, Wyman & Company); Keith C. Brown (University of Texas at Austin); David A.Carter (Oklahoma State University); Christopher L. Culp (University of Chicago); Neil A. Doherty (University of Pennsylvania); John R. S. Fraser (Hyrdo One, Inc.); Kenneth R. French (University of Chicago); Gerald D. Gay (Georgia State University); Jeremy Gold (Jeremy Gold Pensions); Scott E. Harrington (University of South Carolina); J. B. Heaton (Bartlit Beck Herman Palenchar & Scott LLP); Joel Houston (University of Florida); Nick Hudson (Stern Stewart & Co.); Christopher James (University of Florida); A. John Kearney and Judy C. Lewent (Merck & Co., Inc.); Robert C. Merton and Lisa K. Meulbroek (Harvard Business School); Merton H. Miller (University of Chicago); Jouahn Nam (Pace University); Andrea M. P. Neves (CP Risk Management LLC); Brian W. Nocco (Nationwide Insurance); Andre F. Perold (Harvard Business School); S. Waite Rawls III (Continental Bank); Kenneth J. Risko (Willis Risk Solutions); Angelika Schochlin (University of St. Gallen); Betty J. Simkins (Oklahoma State University); Donald J. Smith (Boston University); Clifford W. Smith Jr. (University of Rochester); Charles W. Smithson (Continental Bank); Rene M. Stulz (Ohio State University); D.S All the articles that comprise this book were first published in the Journal of Applied Corporate Finance. Morgan Stanley's ownership of the journal is a reflection of its commitment to identifying outstanding academic research and promoting its application in the practicing corporate and investment communities.

Why did the “stagflation” of the 1970s—the improbable combination of high unemployment and runaway inflation—prove so painful and protracted? What explains the U.S. stock market’s remarkable forty-year run of 12 percent average annual returns since then? Why is Japan still mired in a decades-long recession—and the Chinese economy in a tailspin? And what accounts for the resilience of U.S. stock and labor markets in the wake of the COVID-19 pandemic and in the face of the Fed’s record interest rate hikes?Donald H. Chew, Jr., argues that answers to these questions lie in the principles and methods of “modern corporate finance.” Ideas formulated and tested by finance scholars—notably, an efficient stock market in which prices reflect the long-run values of public companies and a “market for corporate control” that exerts continuous pressure on management—informed and spurred the investor-driven capitalism that has created the world’s most productive and valuable companies. Drawing on his career-long relationships with leading academics and practitioners, Chew profiles key figures in the development of modern corporate finance while emphasizing their counterintuitive lessons for shareholders, companies, and countries. Corporate efficiency and value creation, he contends, are the fundamental source of the social wealth essential to addressing challenges such as poverty and climate change. Lively and provocative, this book makes corporate finance approachable—and even admirable—for readers interested in how the success and failure of companies affect their lives.