Alex Edmans, Professor of Finance at London Business School, is co-author of the 14th edition of the seminal textbook, widely regarded as the ‘bible’ of finance, Principles of Corporate Finance.
The release marks the most substantial revision the book has undergone in more than a decade.
Among the changes is the addition of a new chapter on ‘responsible business’, stressing a company’s impact on wider society. In addition to a new chapter, this responsibility pervades the book. Out of the five principles that run through the book, one has been changed to emphasise how managers must consider “the long-term consequences of all decisions, including their effects on stakeholders such as customers, employees, and the environment.”
Substantial revisions have also been made to the chapter on ‘corporate governance’, on the mechanisms to ensure that CEOs run their companies for the long-term interests of shareholders and stakeholders, and ‘market efficiency’, highlighting that real-world stock markets may deviate from the Efficient Markets Hypothesis that have pervaded economic thinking for decades.
Professor Edmans said: “Principles of Finance is a classic book that I studied as an undergrad and everyone had on their shelves when I worked in investment banking. However, the world has changed since then and we hope that our substantial revisions make the book fit-for-purpose for finance in 2022 and many years to come.”
Changes to the use of pronouns have also been introduced, with female pronouns being used for CEOs.
“Language plays a critical role in reinforcing or neutralizing biases – particularly in a book which, to many, is their first experience of finance,” Professor Edmans said.