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- Title
A Mean-Variance Synthesis of Corporate Financial Theory: A Note.
- Authors
NARAYANASWAMY, C. R.
- Abstract
This article presents the author's comments on a common misinterpretation of a research result that concerns the relationship between operating leverage and the operating risk of the firm in the context of the capital assets pricing model. The author presents several mathematical equations that define what the operating risk of the firm is along with what the value of the firm is. The author notes that, despite the conclusions reached in the research he is addressing, the operating risk of the firm is inversely related to operating leverage.
- Subjects
BUSINESS enterprises; OPERATING leverage; CAPITAL assets pricing model; FINANCIAL leverage; FINANCIAL management; CASH management; RISK; CORPORATE finance; ECONOMIC models; EQUATIONS; MATHEMATICAL models; ECONOMIC statistics; ECONOMICS
- Publication
Journal of Finance (Wiley-Blackwell), 1988, Vol 43, Issue 2, p529
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1988.tb03953.x