Finance
Ideas matter.
Businesses start as ideas. Ideas transform them. And more often than not, what they sell are ideas—bundled into a brand, organized to create a better way of life, or collated to create a new way to communicate. Search our website to see how some of our ideas might transform your business or browse our roster of thought leaders.
What's a Director to Do? / by Joseph B. Fuller, Michael C. Jensen
The recent wave of corporate scandals provides continuing evidence that boards have failed to fulfill their role as corporate watchmen. Destroyed companies, ruined reputations and in some cases jail sentences have created an environment in which substantial changes in the role of the board may occur. In this article, the authors offer specific suggestions aimed at changing the way the board works. → more
Alice Does Accounting / by Joseph B. Fuller
New accounting regulations call for more than mere compliance, they require clarity as well, says Monitor's Joe Fuller. → more
End the Mythmaking and Return to True Analysis / by Joseph B. Fuller, Michael C. Jensen
For too long analysts and managers have colluded to create a kind of fiction about a company's intrinsic value. In this article Monitor's CEO and former HBS professor, Michael Jensen, argue that we will all be better off when the myth-making ends.→ more
Dare to Keep Your Stock Price Low / by Joseph B. Fuller, Michael C. Jensen
An overvalued stock sets in motion a variety of organizational behaviors that often end up damaging the firm. It does not have to be this way. Ending the 'expectations game' requires that CEOs reclaim the initiative in terms of setting expectations and forecasts. To begin, CEOs must say no to the 'earnings guidance' game and reverse recent practices in which analysts took the lead in driving industry forecasts, and companies complied. Managers must make their organizations more transparent to investors, so that stocks can trade at close to their intrinsic value. Doing so means CEOs and CFOs must inform the market when they believe the market expectations cannot be met and that the stock is, therefore, overvalued. → more
Copeland on Capital Efficiency / by Thomas E. Copeland
When executives want to boost profitability, their first target is often head count. But there are even greater opportunities for finding value by bringing increased discipline to the capital budgeting process for small items. Here's a framework for doing just that. → more
Speed of Issuance and the Adequacy of Disclosure in the 144A High-Yields Debt Market / by George W. Fenn→ more
The Worldwide 'Invisible Debt' of Investment / by Lord John Moore
The issue isn't only how to reform present pay-as-you-go-systems, now burdening governments with an 'invisible debt' as their costs swell...it's also whether to tinker with the present system, or move to a privatized funded one. → more
Managing FX Risk / by Thomas E. Copeland, Maggie Copeland
Minimizing the probability of business disruption is presented as an objective for FX hedging programs. Within this context firms hedge when the benefits, defined as the reduction in the expected costs of business disruption, exceed the expected costs. This policy is value maximizing for the firm. Minimization of the variance of the hedged operating cash flows, the usual approach, is an insufficient condition for minimizing the probability of business disruption within a predetermined period of time. → more
Intertemporal Mixed Bundling and Buying Frenzies / by Rafi Mohammed
By initially selling goods only in bundles and subsequently selling unsold units individually, a multiproduct seller can create a buying frenzy in which his profit is higher than it would be if he sold all units individually at their market clearing prices. In this frenzy, high-valuation customers buy a bundle because they expect quantity rationing when units are sold individually. Their purchases reduce the quantity to be sold individually, causing the shortages that result in rationing. The bundle's price exceeds the sum of the individual prices, a fact observed in markets for rock concert tickets. → more
Control Tomorrow's Costs through Today's Designs / by Bruce W. Chew, Robin Cooper
by Bruce W. Chew, Robin Cooper
For target costing to succeed, targets must not only be valid, people must also see them as valid. They cannot be the outcome of a 'political' process. The market analysis that yields the target prices, the financial analysis that generates the target costs, and the disaggregation procedures that allocate costs among components and subassemblies-all must be trusted. The target-costing process must, therefore, be highly transparent. → more