The conventional approach to corporate finance based on the principal agent model takes the single firm as its unit of analysis. We take a different tack in this paper. We will address the issue of how corporate financial decisions are arrived at as the result of the interaction among firms, and thus how corporate financial decisions and industrial structure are determined jointly.
When considering the composition of corporate balance sheets, our focus on the interactions among firms would be more than justified. In cross country empirical studies of corporate balance sheets, the assets and liabilities that reflect the interactions among firms (as suppliers and customers) constitute a very significant portion of a company’s balance sheet. Rajan and Zingales (1995, p. 1428) report that accounts receivable (money owed to the firm by others) constitute 18% of total assets for U.S. firms, and the figures are higher for Germany (27%), France (29%), Japan (23%), and the United Kingdom (22%).
This paper considers the model problem of recovering an input vector f ? R n from corrupted measurements y = Af +e. Here, A is an m by n matrix (we will assume throughout the paper that m > n), and e is an arbitrary and unknown vector of errors. The problem we consider is whether it is possible to recover f exactly from the data y. And if so, how?
The past five years have witnessed a dramatic increase in managed futures products whose managers (commodity trading advisors) trade primarily in futures and options markets and which are available to the retail public as well as hedge funds whose managers invest in both cash and futures markets simultaneously and which are structured primarily for pool investment and not for public sale. Despite this growth, funds invested in managed futures and hedge fund products are estimated to be less than 1% of the over 3 trillion dollar mutual fund industry.
