Principles of Corporate Finance, first published in 1980, has long been known as the “bible” of finance.
It was the core finance textbook when Alex read Economics and Management at Oxford University. After graduating, Alex joined Morgan Stanley’s investment banking division, where all new analysts were given a copy and the book sat on the shelves of all the senior bankers. Alex then embarked on a PhD in Financial Economics at the MIT Sloan School of Management, where he used it as a teaching assistant for Professor Stewart Myers, one of the original coauthors. His first academic position was at the Wharton School, University of Pennsylvania, where he taught it as a professor for the first time and won 14 teaching awards in 6 years. After earning tenure, he returned to the UK in 2013 as a Professor of Finance at London Business School and has taught it every year. He was named worldwide Professor of the Year by Poets and Quants in 2021.
After studying, using, and then teaching the book for 24 years, Alex was invited to be the new co-author of the 14th edition, which was published in 2022. This new edition is much more modern in a number of dimensions. Most notably, it stresses how a CEO has a responsibility to wider society (customers, employees, the environment, suppliers, communities, and taxpayers), rather than just generating short-term profit for his shareholders. But it equally emphasises that this responsibility is not “woke”, but good business – a manager that promotes the interest of all stakeholders will typically outperform his peers in the long-term. The new edition recognises that markets are not always efficient, but affected by psychological biases, building on Alex’s work on how the stock market is affected even by World Cup football results and music listening choices. It is truly global, rather than focused just on the US, and highlights ways in which FinTech is changing financial practice.
Did you cringe at the gender-biased language thus far? Well, so did Alex when he read many classic finance books and articles, which use male pronouns for CEOs as if a CEO can only be male. The new edition uses female pronouns for CEOs throughout (and male pronouns for investors). This is not a gimmick, but out of recognition for the role language plays in reinforcing or neutralising biases – particularly in a book which, to many, is their first experience of finance.