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Note
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Reference no. 9-294-107
Published by: Harvard Business Publishing
Originally published in: 1994
Version: 28 February 2001
Length: 6 pages

Abstract

Conventional finance theory demonstrates that, under simplistic assumptions, firms cannot add to shareholder value through the use of risk management activities. Modern finance theory recently has begun to carefully consider and examine those circumstances under which firms can add to shareholder value. This note briefly reviews the major ideas prevalent in both conventional and modern finance literature regarding the potential benefits of risk management.

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Abstract

Conventional finance theory demonstrates that, under simplistic assumptions, firms cannot add to shareholder value through the use of risk management activities. Modern finance theory recently has begun to carefully consider and examine those circumstances under which firms can add to shareholder value. This note briefly reviews the major ideas prevalent in both conventional and modern finance literature regarding the potential benefits of risk management.

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