Corporate financial decisions and market value. Studies on dividend policy, price volatility, and ownership structure (Q1389386)

The monograph is devoted to several problems in the theory of corporate finance. In the first part the author studies the issue of the information transmissions through dividend payments making use of a standard Kalman filter technique. The aim is to explain the discrepancy between the empirical evidence and the Miller-Modigliani theory claiming (in a simplified framework of perfect markets) that dividends do not change the market value of firms. The idea of the model is that managers dispose more information than shareholders. The second part deals with the excess volatility problem aiming to explain why the stock prices deviate from their fundamental (``theoretical'' values). In the concluding part a model capable of describing the structure of ownership of large business groups is developed. In particular, a mathematical description of the interdependence of value and ownership in a set of firms connected by cross-shareholding is reported. It is shown how the hierarchical form of the business group may generate social inefficiencies in the process of allocation of resources within the firms belonging to the group. In the last chapter the author examines how the activism of a large shareholder (an institutional investor) can limit the power of business groups in an economy characterized by large cross-shareholdings. The book contains a detailed discussion of economic background.