Mark Grinblatt | Sheridan Titman
1 A finance textbook full of errors and holes
I am a postgraduate student in finance and this book is on my reading list for corporate finance. I must say that I am not very pleased with this book. First, it seems to skip around from chapter to chapter with no real logical organizational structure. Second, it is full of typos and mistakes -- some that are quite dangerous for a proper understanding of the material. Third, it does not develop fully the statistically techniques in Chapter 4 that it builds on in later chapters. This is a major problem in my opinion. What saves this book from the lowest rating is that it does discuss empirical studies and journal articles, and it does not do an entirely awful job about the more qualitative subjects like adverse selection and capitalization policy.
For what it's worth, I received my undergraduate degree at Wharton and am now at the London School of Economics. Instead of this book, I recommend Brealey and Myer's Principles of Corporate Finance. This is what I used as an undergraduate and is what seems to be the de facto textbook in the top undergraduate and MBA programs.
N.
2 A Wonderful Approach to Corporate Finance
After reading the reviews for this book, I feel obligated to write a review, although I will admit a bias since one of the co-authors was a favorite professor of mine in college.
I will admit this book does not take the standard approach to learning corporate finance. The authors discuss a wide variety of common topics, ranging from market models, option valuation, capital structure concepts and decisions, to more specialized topics such as corporate governance and financial risk management.
What is unique about this book, though, is that the authors encourage students to think about problems more broadly than one often sees in introductory texts and courses. For example, the authors encourage the use of decision trees (i.e. binomial models) to value a wide range of assets, not just stocks. If one can value a stock option using a binomial tree, why not use the same framework to value a plot of undeveloped real estate, an untapped mine, or any other "real option" owned by a company?
Another reason this text is excellent is because the authors include a vast survey of recent financial and economic literature relevant for the financial decision-maker. Highly developed markets depend on the signaling of information between investors and management, creditors and debtors, customers and suppliers, and so forth; understanding the implications of these interactions and their subsequent effects is of primary importance to decision-makers.
For example, the "pecking order" theory of capital structure is one of the most well-known concepts in finance, but nonetheless often misunderstood (if you want proof of this, why did investors respond so enthusiastically to every IPO in the late 1990's?). Instead of glossing over an explanation of the theory, the book thorougly explains it and provides problems where the reader can actually work through a simplified model that really reinforces the concept.
While this book served as a good introduction to a wide scope of problems in finance, it was most useful because it helped me to apply economic tools not just to solve but to understand financial problems. The use of decision trees in the simplified, binomial model setting helped me to understand option/project valuation and risk-netural valuation, the linchpin of no-arbitrage pricing. It also has perhaps the most thorough, lucid explanation of Arbitrage Pricing Theory (APT) I've seen anywhere- for a practitioner trying to understand factor models, this chapter alone makes the book worth it.
I understand that this is a very difficult book and that the problems are beyond what one may expect in a MBA-level course. Nonetheless, finance is an increasingly competitive field whose employers are starting to demand more analytical skills and intiution from recent graduates. In response to the reviewer who said this text is not suitable for CFA preparation, I do agree with that sentiment. First, the CFA program is designed for self-study that any motivated and capable professional can handle, while Grinblatt/Titman is clearly appropriate for a rigorous MBA-level sequence in corporate finance. Second, the CFA exam emphasizes asset valuation and portfolio management, while this book stresses financial decision-making from a manager's standpoint.
While I normally don't like reviews that justify their opinions by offering credentials, I also work on Wall Street and I find the concepts taught in this book to be quite relevant in handling real-world problems.
3 Good basic overview of finance intersecting corp strategy
I bought this book as a recommended supplemental text for a course in Corporate Finance in the MBA program at the U of Michigan Business School. I am very glad to have this book on my shelf of financial books and have benefited from it more than once.
I can recommend it to you strongly by praising it for these reasons:
1) It puts practical flesh on the financial model bones you learned in your first course on finance. There are very good discussions of the basic and well-known fundamental theories and models, but the authors also share with us what tends to happen in the real world. And isn't that what each of us need to add to our theoretical thinking?
2) Each chapter has effective summarizing Key Concepts and Key Terms with plenty of problems to work through and a list of References and Additional Readings that enable the reader to dive deeper into the topic of the chapter just read.
3) The book is helpfully organized into six Parts that provide the framework for the discussion. Parts 1-3 are a review of "Financial Markets and Instruments", "Valuing Financial Assets", and "Valuing Real Assets". This foundation gives the student a good grounding in order to see how these principles are used in the work of managing the capital structure of a corporation. Parts 4-6 discuss the "Corporate Financial Structure", "Incentives, Information and Corporate Control", and "Risk Management". These last three sections are the real meat of the book and where a great deal of its value to the business student lies.
4) Each of the Parts has an effective and brief introduction that sets the tone for what is to be studied. Even better, at the end of each the six Parts there are two very helpful summary sections: "Practical Insights" and "Executive Perspective".
This is a specialized topic. But it is an important topic. This is a very good book that can help a serious student get grounded in some very important principals necessary to managing the financial issues facing every corporation. I recommend it.
4 Missed the mark! Poor coverage of contemporary issues...
This text is just below par for MBA / CFA or professional use. The quality of research is very poor. I almost bought this book recently but changed my mind instead for Brigham's "Intermediate Financial Management".
Compared to other finance texts I've used before such Reilly's "Investment Analysis & Portfolio Mgt." or Chew's "New Corporate Finance", Grinblatt's text is way way behind and offers nothing new and of value to my research & professional everyday use....
DON'T BUY this lousy book!
5 This book is TOTALLY USELESS
I work as a stockbroker & currently study for an MBA at one of the business schools in New York. I was looking for an additional text on Finance to supplement my required reading list. I came across this book at a local bookstore last week & was quite impressed with the title...
As I flipped through, I found nothing interesting and of benefit for my MBA... How could this kind of low-rate work ever make it to the shelf?
What a piece of JUNK!
6 Don't buy this book - WHAT A RIP-OFF!
There's nothing unique about this text - all the topics & discussions have been well covered in other basic textbooks on Corporate Finance, Mergers etc....
The discussions lack depth. The whole concept of Corporate Strategy has been miscontrued by the authors.... The link between this and Financial Markets is very ambiguous & blur!
FYI I'm a businessman & hold an MBA in Finance from an international university.
7 Shallow coverage & no link to "corporate strategy"
After having bought the first edition and read numerous other Finance & Strategy texts (in addition to having graduated with an MBA in Finance), I think it's fair to say this Grinblatt book is rather superficial in its coverage of technical matters e.g. options, financial engineering etc. and poor in its treatment of real life contemporary issues e.g. M & A, bankruptcy etc. Plus I still can't see what it has got to do with Corporate Strategy. Something is still missing here....
Most of the write-up are kind of basic (i.e nothing oustanding) explanation of issues, concepts or techniques in Finance, which you can easily find in other texts with much simpler names. The title of this book is catchy but MISLEADING. Priced at $120, this is really a rip-off. I just don't understand how other commentors could give a 5-star for this "shoddy" piece of work. Reference manual for corporate boardrooms and Wall Street? Come on! You guys must be joking! No offence but is this what they'd call "cutting edge"?
Compared to classics like Copeland's "Financial Theory & Corporate Policy" or slightly less-advanced Brigham's "Intermediate Financial Management", this Grinblatt book really falls short of the standard and needs a lot of catching up to do. Hopefully, the authors will take serious note of this in their upcoming edition. Unless of course, they still want their book to be just another "appetizer" for business undergraduates....
In short, NOT worth buying. And NEVER JUDGE A BOOK BY ITS COVER or in this case its rather appealing TITLE!
8 The Worst Book in Finance
This is the worst book i have come across in my life.
It is extremely complicated to understand and there is a not a single solution to the end of chapter problems.
A total waste of money.
9 Misses Off Balance Sheet
Given the spectacular corporate finance shenanigans of Enron, Worldcom, American Tissue, and others, it is inconceivable this book doesn't cover off-balance sheet products in the detail they deserve.
10 An integrated approach to corporate finance and strategy
The most valuable part of this book is in its ability to integrate financial decision making with strategy. This is rare especially for a book this good.
Another valuable point is that its approach of balancing theories and practicality. If student finds it a little confusing or non-conclusive on many issues, it is precisely so in reality.
A book this good is more than a gift.
11 Fair at explaining, poor at teaching
Although some of the chapters shine as well written, many are overly wordy. Nonetheless, the topics are explained in an orderly way. Maybe I am taking too much for granted in my textbooks; however, in every other way, I find this book poor. For those who learn by doing, I think you will agree. The formulas included in the text generally do not have their variables defined and often appear on separate pages from the text explaining them. Graphs, too, leave the reader flipping through pages (sometimes chapters). Also, following the example problems in the text can take tons of time when a few more simple lines of explanation (and better layout) would make the whole process more efficient for the reader. Finally, my biggest frustration with the book is the problems at the end of each chapter. I enjoy working through problems, and these could be fun if there were some guide to help the reader--a simple numeric answer like "10.2: -2" at the end to let the reader know if he is on the right track. Also, a workbook with separate problems explained would be heaven. The authors do explain the concepts, and, beyond that, leave the student little room for further learning with this book.
12 Good comprehensive text for corporate finance.
I used parts of this book in finance courses at the University of Connecticut and found it to be clear, concise, and quite readable. The numerical examples were useful, if occasionally a bit disjointed. I would recommend the book as a good MBA level text.
13 Outstanding!
I took a course from Professor Grinblatt at UCLA that used this text. Professor Grinblatt was an outstanding teacher and the use of this text was very effective. This text achieves the difficult objective of explaining concepts in a digestible manner without sacrificing rigor. It also incorporates the latest thinking in both finacial markets and corporate finance. I highly recommend it for anyone looking for a comprehensive finance reference.
