Financial Decision-Makers and a Rising Stock
Market
From the Friday, October 4 issue of The Wall Street Journal: Synopsized
on page A1 and given full treatment on page C1 are articles on the current
level of the DJIA (5932.75) and its "march toward 6,000." Corpfin
students invariably find discussions of the stock market interesting (particularly
if you open it up and allow them to ask general questions). When you steer
things back to corporate finance, you might wish to ask them to consider
the following open-ended question:
What are the benefit(s) of a rising market to corporate decision-makers?
Possible answers include: lower cost of capital, easier access to capital
markets, personal gain for those whose compensation package contains executive
options, etc. And from each of those topics, it's usually pretty simple
to jump into a lecture on agency problems, cost of capital, market efficiency,
or raising capital!
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