Journal of Management and Organizations Strategy
Volume 2, Numéro 2, Pages 7-12
2020-12-27
Financial Management And Corporate Finance.
Authors : Samia Bedoui .
Abstract
This paper explores key pillars in financial management and corporate finance, focusing on capital structure theories, investment valuation methods, and financial risk management practices. The discussion begins with the Modigliani and Miller (MM) theorem, which originally posited that under perfect market conditions, a firm’s value is unaffected by its financing choices. Later revisions acknowledged the tax advantages of debt, sparking alternative theories such as the trade-off theory and the pecking order theory. These extensions incorporate real-world elements like taxation, information asymmetry, and agency conflicts. Empirical and theoretical contributions from French scholars are also highlighted, showing how local institutional contexts shape capital structure decisions. In evaluating investment decisions, the paper compares Net Present Value (NPV) and Internal Rate of Return (IRR) as dominant valuation tools. NPV, which discounts future cash flows to assess value creation, is widely regarded as the superior method due to its consistency and alignment with shareholder wealth maximization. Though IRR remains popular for its intuitive appeal, it is prone to problems in cases of non-standard cash flows or mutually exclusive projects. Real options analysis is introduced as a complementary technique that accounts for managerial flexibility under uncertainty. The paper then examines the essential role of financial risk management in modern corporations. It categorizes financial risks into market, credit, liquidity, and operational types. Key tools such as Value-at-Risk (VaR), stress testing, and scenario analysis are discussed, alongside risk mitigation strategies like hedging, diversification, and capital reserves. The evolution of Enterprise Risk Management (ERM) is emphasized, particularly its importance in aligning risk practices with strategic goals. Regulatory frameworks, including Basel III, and their influence on risk governance are also considered. In the French context, integrated risk and management control systems are shown to play a pivotal role in promoting both compliance and performance. In summary, this paper illustrates that effective corporate finance involves dynamic interplay among capital structure optimization, sound investment appraisal, and proactive risk governance, all tailored to institutional and market realities.
Keywords
Financial Management Corporate Finance Enterprise Risk Management management control systems
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