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- Title
A Finance Perspective on Entrepreneurship Research.
- Authors
Brophy, David J.; Shulman, Joel M.
- Abstract
This article highlights the relevance of finance theory and methodology to entrepreneurship research. Since the 1950s, much has been learned about financial markets, their institutions, processes, and practices. Under the heading modern finance, scholars have developed, through observation and analysis, a set of beliefs (finance theory) that constitutes a framework for understanding the financial aspects of economic activity. Reference to this body of theory, which addresses such topics as net present value, market efficiency, portfolio management, capital asset pricing, option pricing, and agency costs, sharpens the ability of entrepreneurs, managers, and investors to estimate how their actions might affect future cash flows, risk levels, and the creation of corporate value and personal wealth in entrepreneurial ventures. The two categories for the major elements of modern finance theory are valuation and capital structure. The valuation process is an integral part of the investment decision--the allocation and management of capital. Entrepreneurs face capital structure decisions regarding the timing and scheduling of cash flows and funds procurement. Academic research in finance over the past two decades has produced several important theoretical models and methodologies and has tested the effects on publicly traded companies using a few well-established and reliable computer databases.
- Subjects
ENTREPRENEURSHIP; FINANCE; VALUATION; CAPITAL structure; BUSINESS
- Publication
Entrepreneurship: Theory & Practice, 1992, Vol 16, Issue 3, p61
- ISSN
1042-2587
- Publication type
Article
- DOI
10.1177/104225879201600304