Abstract

http://ssrn.com/abstract=1839432
 


 



The Enlightenment and Financial Crisis of 2008: An Intellectual History of Corporate Finance Theory


James R. Hackney, Jr.


Northeastern University - School of Law

Summer 2010

Saint Louis University Law Journal, Vol. 54, No. 4, pp. 1257-1275, Summer 2010
Northeastern University School of Law Research Paper No. 50-2011

Abstract:     
This article examines the financial crisis of 2008 and connections to corporate finance theory. The financial products and deregulation that led to the crisis were informed by corporate finance theories. These theories include diversification, the capital asset pricing model, and options theory. The theories have a scientific basis but can get deployed (in the form of financial product presentation or policy justification) in ways that deviate from the scientific articulation. The article provides an intellectual history of mainstream corporate finance theory and argues that it, despite the consequences of its misuse, is a valuable scientific achievement and even arguments for its correction (most notably by behavioral finance theorists) do not detract from its value. The debate within corporate finance is used to illustrate the virtues of Enlightenment principles.

Number of Pages in PDF File: 21

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Date posted: May 14, 2011 ; Last revised: February 22, 2012

Suggested Citation

Hackney, Jr., James R., The Enlightenment and Financial Crisis of 2008: An Intellectual History of Corporate Finance Theory (Summer 2010). Saint Louis University Law Journal, Vol. 54, No. 4, pp. 1257-1275, Summer 2010; Northeastern University School of Law Research Paper No. 50-2011. Available at SSRN: http://ssrn.com/abstract=1839432

Contact Information

James R. Hackney, Jr. (Contact Author)
Northeastern University - School of Law ( email )
400 Huntington Ave.
Boston, MA 02115
United States
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