The Theory and Practice of CorporateFinance: Evidence from the Field

ArXiv ID: ssrn-220251 “View on arXiv”

Authors: Unknown

Abstract

We survey 392 CFOs about the cost of capital, capital budgeting, and capital structure. Large firms rely heavily on net present value techniques and the capital

Keywords: capital budgeting, net present value, cost of capital, capital structure, Corporate Finance

Complexity vs Empirical Score

• Math Complexity: 3.0/10
• Empirical Rigor: 7.5/10
• Quadrant: Street Traders
• Why: The paper is a large-scale survey of CFOs with detailed statistical analysis of firm characteristics (size, leverage, etc.), showing strong empirical rigor, but relies on descriptive statistics and regressions without complex mathematical derivations or advanced modeling.

  flowchart TD
    Start["Research Goal: <br>How do firms make capital structure & budgeting decisions?"] --> Methodology["Methodology: <br>Survey of 392 CFOs"]
    Methodology --> Inputs["Data/Inputs: <br>Firm characteristics & financial policies"]
    Inputs --> Process["Computational Process: <br>Analysis of NPV usage & cost of capital calculations"]
    Process --> Outcomes["Key Findings: <br>1. Large firms rely heavily on NPV<br>2. WACC is primary hurdle rate<br>3. Capital structure targets exist but rarely enforced"]