Summary and review ofCorporate Finance

Reviewed by Diario de un Inversor · UpdatedJune 13, 2026

Our review

First published in 1988, Ross, Westerfield and Jaffe's «Corporate Finance» has become the canonical MBA textbook in business schools worldwide. Its thesis is as ambitious as it is systematic: to build a unified theory of corporate financial decisions anchored in a single governing principle — shareholder value maximisation. The book applies rigorous mathematical treatment to the time value of money, equity and bond valuation, capital budgeting criteria (NPV, IRR, payback), capital structure, dividend policy, mergers and acquisitions, and international finance. The style is dense and demanding: this is not a popular science book but an academic text for readers prepared to work through concepts analytically. Its strength lies in theoretical coherence and the richness of its problem sets, updated each edition with real-world cases. A legitimate critique is that its shareholder-first orientation has been challenged by more recent schools — behavioural finance, stakeholder theory — and the book does not always engage those debates with adequate depth. In its most recent edition it remains the essential starting point for any serious study of corporate finance.

Key takeaways

• Net Present Value (NPV) is the theoretically strongest investment criterion: accept projects that generate positive value, reject those that destroy it.
• Capital structure matters, but the Modigliani-Miller theorem establishes that in perfect markets the financing mix does not alter firm value.
• Dividend policy signals management's perception of financial health — it is not merely a cash distribution mechanism.
• No single valuation metric — NPV, IRR, or multiples — is infallible; analytical quality depends entirely on the quality of the underlying assumptions.

Fact

The first edition of «Corporate Finance» by Ross, Westerfield and Jaffe was published by Richard D. Irwin in 1988 and has gone through more than twelve editions, adopted in MBA programmes at institutions including Harvard Business School, Wharton, and MIT.