notices - See details
Notices
BC
Brad Case, Ph.D., CFA, CAIA (not verified)
25th September 2014 | 9:32pm

Thanks, Savio. Yes, I'm an enormous fan of capital market discipline in its many forms. One of the most important is distributing cash to investors--either as dividends or in the form of share repurchases--so as to get it away from people who might otherwise waste it. Another form of capital market discipline is attentive, independent, conscientious directors. Another is a robust community of equity analysts. Another is activist shareholders. Another is the threat of a takeover by private equity buyout funds. Another (perhaps surprisingly, to some) is corporate debt, because any corporate borrowing--whether through a public bond offering or through a private placement--subjects the company to the scrutiny of another set of lenders, and perhaps debt analysts as well. What I hate to see is a lack of capital market discipline: investors should expect to be taken advantage of if they simply "trust" managers to be looking out for them.