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Implicit Contract Research, And Corporate Financial Policy

Posted on:2006-10-31Degree:DoctorType:Dissertation
Country:ChinaCandidate:H W ChengFull Text:PDF
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Whether customer's benefit has an influence on the choice offinancial policy, the mainstream finance does not have a clear answer.Corporate value is the nuclear concept of corporate finance and the objectof financial management is to maximize corporate value. Therefore,corporate value is the logical start about the study of Finance. Corporatevalue is the discount of cash flow that essentially reflects the transactionrelationship between stakeholders including stockholder, creditor,employee and customer. The transaction between corporate and customerhas an influence on corporate value by cash flow. Thus, customer caninfluence financial policy. However, the mainstream finance ignores themand only highlights the benefit of stockholder and creditor. Why is it?Because the analysis model of stockholder and creditor thinks thatcustomer has no other claims on corporate besides explicit claims afterthe transaction and so has no influence on financial policy. The logicimplicitly considers that revenue can satisfy the claim of creditor andstockholder. It holds that customer cannot influence financial policy andfinancial policy is chosen without considering the long-term transactionbetween customer and corporate. However, the equation "Revenue-Expense=Profit" explains thesource of the benefit of stockholder and creditor, that is customer. If thereare no transaction between corporate and customer, corporate cannotsatisfy the claim of stockholder and creditor. Consequently questions areput forward to be discussed in this dissertation based on the relationshipbetween customer and corporate. Whether do implicit contracts exist between corporate and customerbesides explicit contracts? What are the conditions for implicit contractsto be enforced? How do implicit contracts influence the choice offinancial policy? Whether is financial policy subject to implicit contracts?Modern financial theory almost denies the existence of implicit contractsand these questions have not been systematically researched. But implicitcontracts do exist objectively and we must study the relationship betweenimplicit contracts and financial policy. There are some important studies about implicit contracts andfinancial policy. The main clues of these studies are how to signal theenforcement of implicit contracts by the choice of financial policy. One iscapital structure and dividend policy derived from the theory of Cornelland Shapiro(1987). Another is specific investments originated from thetheory of Klein, Crawford and Alchian(1978). However, there are somelimitations. Firstly, these researches implied the premise of the existenceof implicit contracts and did not explain the enforcement condition ofimplicit contracts. The choice of sample in empirical test did notdistinguish the attribute of goods. Secondly, whether is it reasonable tomeasure implicit contracts from NOC (Net Orgnational Capital), spilloverto corporate focus? Corporate focus explains the sales proportion of oneproduct divided by total sales. But the proportion is uncertainly relative toimplicit contracts. Finally, these researches mainly analyze the signalmechanism and it is ignored that how corporate can enhance theenforcement ability of implicit contracts by the choice of financial policy. This dissertation systematically researches the relationship betweenimplicit contracts and financial policy with the application of theories andmethods in Finance, Sociology, Law, Marketing, Econometrics and GameTheory. The purpose of this dissertation is to explain the relationshipbetween implicit contracts and financial policy. It will be helpful todecrease the contractual cost and enhance the contractual ability ifcorporate chooses a reasonable financial policy, which will construct aninimitable relationship to customer. Thus, corporate value will grow in asustainable way. The logical start of this dissertation is whether customer's benefithas an influence on the choice of financial policy and the framework isset up with introduction of implicit contracts. It studies the relationshipb...
Keywords/Search Tags:Implicit Contract, Implicit Liability, Specific Investment, Capital Structure, Dividend Policy
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