irifluences ex

n2
, the two theories.is the niImlJer of non-di:versmll.ble The "mll.rket ,model" of the CAPM implies III mll.rket factor, while the APT allows more than one (though the consistent with just one). ' , Several factors may.tum out to explain a larger proportion of mtertem]poral return volatility than asmglefactor, blit this finding alone not constitute evidence'that a multiple-factor theory is better. That conclusion require Ylm empirical! fmding that additional factors aremdeed pe'lrvasivie, diversifiable, and most important, that they are asoociated with aQ!cliti,onla1 premia. Sl;ich interestirilg and are ignored in " Instead, the paper merely reports on the cross-sectional , o f R,'t adjusted for degrees offreedom,S from using 'a single factor and from using multiple factors regressions of the ,

fl

, I"jJ = aj + b1J/!,t + .. , + bkJfk.t ei," J,here' Y'j,t is the total on stock j inpeiiod t, to a's and b's 'are estimated regression 'lunexplained" retlll'l1, The adjusted R2 from stich a , R2 = 1 - [(T- l)/(T - k - 1)][s2(e}/s2(r)],

i in

oex.'
ofR2

where T is the time-sel!ies sample size and s(x) is the semple standil.rd deviation

"

For the CAPM smilie-faCtor m'-ketmodel

R2

1. EU" ......."

...
Q
!'II

'q;

J::
Q

:S
'j;
li0 !'II :I

.. .

III

llt

'" ,

.i '" .
Ii:
:l!
<i

(!

.'(3

J$

!>.

!Ii: .. @"
0

ot
;:;.

I-

a.

,,;

" " " " '"

."

ot

.. .
<i

:'l ,,;

.
ci

'" <i '"

<i

..
,

<i

;;

<>

'"

:: d

" '"

-!' <:

. .."'
<i
d

 VOL. XLlII, NO. ;l JULY 19S8

Finance andC,oI'P.ol.ate
OLIVER E. WILLIAMSON'

trielltmentofcOl'pOl'atefiEiimceandcorporlllte is herein IIr" treated not mainly'iIS alternative finaneil>i rethei: altemative,gov6rK11Ulce structmes, wBrlm, malnl!y out of rules, while . ,00. allows mlllch g!l'e,ater discretion, /!/project;-finsncing approach is that whether a project shoold he fmooood b'y <leht or hy e<IUity depen<le' cl!aracterilities ofthe 1ISSets, 1reilSOllIiDg supporte the to fmanea rOOeployoole 1ISSets, while I'lol'l-Ii'e<leployoo!e asSete,lIte (di!lcretiol'l).Experiences with !easing and leveraged l:myOOts are the ugmnernt:The article also compares and contl'ilSU! the treI'lsI1ction the agenw app,rOllCh,to the srody of

through the lens damental tenet o.,fthit;.SPIU'OSCh is that the. SlIP,ply o.f., a gOodOl. I gOvernance need be examinedsimtlltanoouslY. bei eqmbinedreferenctl.. to

CORPORATE finance

"

differences betWeen these two. !ilhriniting'8S each h$come to work IOn iJ!sl11Il!!'ImiWic)UIl'ly the other.' ' , ofTCE arid AT to, identify the clOre reference!>. " . It wiil facilitate the For the jpUrpoIl!!ll lO{thlilp!'lPll1', I win takeJJgencytheory to dilfinedby !.Ind MeCkling [30, 31j,Fama (HiJ. Fama,arld Jensen (11,}8 . 29].. TransactiQn-coSt iJ!defmed 'by;wmiamoon Crawford, and Alchia!)438], Klem. [3S, 31}, !gein and Lefflel AIcliian [II, and JosIiG'l:vJ33,

A. ,Commoiwlities3
TCE ____ __ ', ., _ setup. They alSo: ad9pt , . zation.' el;idoge:cidusly. \Jonslae!

. and are

Maru,agerial DiScretion. ' -Both TCEand,AT taite exceptioll whereby the firm is reglll."dOOI $ Ii proouction ' ronctiorn Ptization bsen ascribed. Rathe , structure and TconsidelrS.it Ii nexm5 of of contracts has resuIted,2The 'behavioral Sss.1,mllptiO!l!l- otlt' of the (niore generally; the theory the process; "" TCE emrllss,[v
(1)

fim