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- All HBS Web (1,774)
- Faculty Publications (553)
- June 2021
- Technical Note
The Weighted Average Cost of Capital (WACC): Derivation, Intuition, and Applications
By: Benjamin C. Esty and E. Scott Mayfield
Esty, Benjamin C., and E. Scott Mayfield. "The Weighted Average Cost of Capital (WACC): Derivation, Intuition, and Applications." Harvard Business School Technical Note 221-106, June 2021.
- 2012
- Working Paper
The Cost of Friendship
By: Paul A. Gompers, Yuhai Xuan and Vladimir Mukharlyamov
This paper explores two broad questions on collaboration between individuals. First, we investigate what personal characteristics affect people's desire to work together. Second, given the influence of these personal characteristics, we analyze whether this attraction... View Details
Gompers, Paul A., Yuhai Xuan, and Vladimir Mukharlyamov. "The Cost of Friendship." NBER Working Paper Series, No. 18141, June 2012.
- March 2016
- Article
The Cost of Friendship
By: Paul A. Gompers, Vladimir Mukharlyamov and Yuhai Xuan
We investigate how personal characteristics affect people's desire to collaborate and whether this attraction enhances or detracts from performance in venture capital. We find that venture capitalists who share the same ethnic, educational, or career background are... View Details
Gompers, Paul A., Vladimir Mukharlyamov, and Yuhai Xuan. "The Cost of Friendship." Journal of Financial Economics 119, no. 3 (March 2016): 626–644.
- 2014
- Working Paper
The Cost of Friendship
By: Paul A. Gompers, Vladimir Mukharlyamov and Yuhai Xuan
We investigate how personal characteristics affect people's desire to collaborate and whether this attraction enhances or detracts from performance in venture capital. We find that venture capitalists who share the same ethnic, educational, or career background are... View Details
Gompers, Paul A., Vladimir Mukharlyamov, and Yuhai Xuan. "The Cost of Friendship." Working Paper, 2014.
- January 1998
- Article
Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach
By: K. A. Froot and J. Stein
Keywords: Catastrophe Risk; Corporate Finance; Cost Of Capital; Banking And Insurance; Asset Pricing; Hedging; Banking; Decision Choice And Uncertainty; Financial Markets; Insurance; Policy; Risk Management; Natural Disasters; Insurance Industry
Froot, K. A., and J. Stein. "Risk Management, Capital Budgeting and Capital Structure Policy for Financial Institutions: An Integrated Approach." Journal of Financial Economics 47, no. 1 (January 1998): 55–82. (Winner of Journal of Financial Economics. Jensen Prize. First Place For the best paper published in the Journal of Financial Economics in the areas of corporate finance and organizations. Revised from NBER Working Paper No. 5403, January 1996 and HBS Working Paper 96-030, December 1995.)
- September 2017
- Article
The Real Effects of Capital Controls: Firm-Level Evidence from a Policy Experiment
By: Laura Alfaro, Anusha Chari and Fabio Kanczuk
Emerging-market governments adopted capital control taxes to manage the massive surge in foreign capital inflows in the aftermath of the global financial crisis. Theory suggests that the imposition of capital controls can drive up the cost of capital and curb... View Details
Keywords: Capital Controls; Discriminatory Taxation; International Investment Barriers; Exports; Debt; Cost of Capital; Taxation; Investment; Borrowing and Debt; Equity; Brazil
Alfaro, Laura, Anusha Chari, and Fabio Kanczuk. "The Real Effects of Capital Controls: Firm-Level Evidence from a Policy Experiment." Journal of International Economics 108 (September 2017): 191–210. (Also see NBER Working Paper 20726.
See comment in Brookings Series: The Hutchins Roundup.
See also, feature in NBER Digest March 2015 issue. )
- 2009
- Working Paper
Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930
By: Andre C. Martinez Fritscher and Aldo Musacchio
There is a large amount of literature that aims to explain what determines country risk (defined as the difference between the yield of a sovereign's bonds and the risk-free rate). In this paper, we contribute to the discussion by arguing that an important explanatory... View Details
- 16 Aug 2012
- Working Paper Summaries
The Cost of Friendship
- April 2010
- Article
Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930
By: Andre C. Martinez Fritscher and Aldo Musacchio
There is a large literature looking at the determinants of country risk (defined as the difference between the yield of a sovereign's bonds and the risk-free rate). In this paper, we contribute to the discussion by arguing that an important explanatory factor is the... View Details
Keywords: Bonds; Performance Capacity; Taxation; Revenue; Governance; Geographic Location; Trade; Price; Cost of Capital; Risk and Uncertainty; Public Administration Industry; Brazil
Martinez Fritscher, Andre C., and Aldo Musacchio. "Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930." Financial History Review 17, no. 1 (April 2010). (Winner of the Gerry Feldman Young Scholar Prize for the best paper of (a) young scholar(s) of the European Association of Banking and Financial History, 2010-2011.)
- 2009
- Working Paper
Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930
By: Andre C. Martinez Fritscher and Aldo Musacchio
There is a large amount of literature that aims to explain what determines country risk (defined as the difference between the yield of a sovereign's bonds and the risk free rate). In this paper, we contribute to the discussion by arguing that an important explanatory... View Details
Keywords: Trade; Cost of Capital; Revenue; Sovereign Finance; Goods and Commodities; Taxation; Business History; Risk and Uncertainty; Brazil
Martinez Fritscher, Andre C., and Aldo Musacchio. "Endowments, Fiscal Federalism, and the Cost of Capital for States: Evidence from Brazil, 1891-1930." Harvard Business School Working Paper, No. 10-027, October 2009. (Revised December 2009.)
- May 2023
- Article
Political Ideology and International Capital Allocation
By: Elisabeth Kempf, Mancy Luo, Larissa Schäfer and Margarita Tsoutsoura
Does investors' political ideology shape international capital allocation? We provide evidence from two settings—syndicated corporate loans and equity mutual funds—to show ideological alignment with foreign governments affects the cross-border capital allocation by... View Details
Keywords: Capital Flows; Syndicated Loans; Mutual Funds; Partisanship; Polarization; Elections; Political Ideology; Banks and Banking; Institutional Investing; Behavioral Finance; Decision Choices and Conditions
Kempf, Elisabeth, Mancy Luo, Larissa Schäfer, and Margarita Tsoutsoura. "Political Ideology and International Capital Allocation." Journal of Financial Economics 148, no. 2 (May 2023): 150–173.
- 2019
- Chapter
Return on Invested Capital (ROIC)
Return on invested capital (ROIC) is a financial measure of the profitability of a firm or business unit. If it is greater than the business's cost of capital, then reinvestment of earnings increases shareholder VALUE. The ROIC also determines a maximum self-sustaining... View Details
Keywords: Capital Efficiency; Dupont Analysis; Financial Metrics; Schumpeterian Competition; Sustainable Growth; Competitive Advantage; Financial Strategy; Resource Allocation; Valuation; Value Creation
Baldwin, Carliss Y. "Return on Invested Capital (ROIC)." In The Palgrave Encyclopedia of Strategic Management. Continuously updated edition, edited by Mie Augier and David J. Teece. Palgrave Macmillan, 2017. Electronic. (Pre-published, October 2013.)
- March 1988 (Revised June 1993)
- Background Note
Leveraged Betas and the Cost of Equity
The objective is to delineate on methodology for measuring the risk associated with financial leverage and estimating its impact on the cost of equity capital. View Details
Asquith, K. Paul. "Leveraged Betas and the Cost of Equity." Harvard Business School Background Note 288-036, March 1988. (Revised June 1993.)
- Summer 1998
- Article
A New Approach to Capital Budgeting for Financial Institutions
By: K. A. Froot and J. Stein
Keywords: Catastrophe Risk; Corporate Finance; Cost Of Capital; Banking And Insurance; Asset Pricing; Hedging; Banking; Decision Choice And Uncertainty; Financial Markets; Insurance; Policy; Risk Management; Natural Disasters; Insurance Industry
Froot, K. A., and J. Stein. "A New Approach to Capital Budgeting for Financial Institutions." Bank of America Journal of Applied Corporate Finance 11, no. 2 (Summer 1998): 59–69.
- March 1996 (Revised April 2006)
- Case
Global Equity Markets: The Case of Royal Dutch and Shell
By: Kenneth A. Froot and Andre F. Perold
Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more... View Details
Keywords: International Equity Markets; International Cost Of Capital; Cross-border Valuation; International Finance; Equity; Cost of Capital; Valuation; Cash Flow
Froot, Kenneth A., and Andre F. Perold. "Global Equity Markets: The Case of Royal Dutch and Shell." Harvard Business School Case 296-077, March 1996. (Revised April 2006.)
- Article
Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach
By: Akash Chattopadhyay, Matthew R. Lyle and Charles C.Y. Wang
This study provides the first large-scale study of the performance of expected-return proxies (ERPs) internationally. Analyst-forecast-based ICCs are sparsely populated and not robustly associated with future returns. Earnings-model-forecast-based ICCs are... View Details
Keywords: Expected Returns; Discount Rates; Fundamental Valuation; Implied Cost Of Capital; International Equity Markets; Present Value; Investment Return; Equity; Markets; Global Range
Chattopadhyay, Akash, Matthew R. Lyle, and Charles C.Y. Wang. "Expected Stock Returns Worldwide: A Log-Linear Present-Value Approach." Accounting Review 97, no. 2 (March 2022): 107–133.
- July 2021
- Article
Multinationality and Capital Structure Dynamics: A Corporate Governance Explanation
By: Daniel Gyimah, Nana Abena Kwansa, Anthony K. Kyiu and Anywhere Sikochi
This paper examines the impact of corporate governance on capital structure dynamics. Using ordinary least squares regressions on 17,496 firm-year observations for 2,294 U.S. multinational companies (MNCs) over the period 1990–2018, we find that MNCs with strong... View Details
Keywords: Multinationality; Speed Of Adjustment; Corporate Governance; Multinational Firms and Management; Capital Structure
Gyimah, Daniel, Nana Abena Kwansa, Anthony K. Kyiu, and Anywhere Sikochi. "Multinationality and Capital Structure Dynamics: A Corporate Governance Explanation." Art. 101758. International Review of Financial Analysis 76 (July 2021).
- 2008
- Working Paper
Cost of External Finance and Selection into Entrepreneurship
By: Ramana Nanda
This paper examines the extent to which the positive relationship between personal wealth and entry into entrepreneurship is due to financing constraints. I exploit a tax reform and use unique micro-data from Denmark to study how exogenous changes in the cost of... View Details
Keywords: Business Startups; Entrepreneurship; Cost; Financing and Loans; Personal Finance; Human Capital; Wealth; Denmark
Nanda, Ramana. "Cost of External Finance and Selection into Entrepreneurship." Harvard Business School Working Paper, No. 08-047, January 2008.