This release marks the most significant overhaul the book has undergone in over a decade.
Among the changes is the addition of a new chapter on ‘responsible business’, highlighting a company’s impact on society at large. In addition to a new chapter, this responsibility permeates the book. Of the five principles that run through the book, one has been modified to emphasize how managers must consider “the long-term consequences of all decisions, including their effects on stakeholders such as customers, employees and the environment”.
Substantial revisions have also been made to the chapter on “corporate governance”, on mechanisms to ensure that CEOs run their businesses in the long-term interests of shareholders and stakeholders, and on “market efficiency “, pointing out that real-world stock markets can deviate from the efficient markets hypothesis that has permeated economic thinking for decades.
Professor Edmans said: “Principles of Finance is a classic book that I studied as an undergraduate and everyone had on their shelves when I worked in investment banking. However, the world has changed since then. then and we hope that our substantial revisions will make the book suitable for finance in 2022 and for many years to come.
Changes in the use of pronouns were also introduced, with female pronouns being used for CEOs.
“Language plays a critical role in reinforcing or neutralizing bias – especially in a book that for many is their first experience of finance,” Professor Edmans said.