Download this Paper Open PDF in Browser

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

Saint Louis University Law Journal, Vol. 54, No. 4, pp. 1257-1275, Summer 2010

Northeastern University School of Law Research Paper No. 50-2011

21 Pages Posted: 14 May 2011 Last revised: 22 Feb 2012

James R. Hackney, Jr.

Northeastern University - School of Law

Date Written: Summer 2010

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.

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: https://ssrn.com/abstract=1839432

James R. Hackney, Jr. (Contact Author)

Northeastern University - School of Law ( email )

416 Huntington Avenue
Boston, MA 02115
United States

Paper statistics

Downloads
503
Rank
45,202
Abstract Views
4,236