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Behavioral Finance Economics 437 – Spring 2009 Professor Burton

Behavioral Finance Economics 437 – Spring 2009 Professor Burton. March 2008 Oct-Nov 2008 April 2009. Public vs Private. Public Generally, must be a corporation Means you raise money from the public

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Behavioral Finance Economics 437 – Spring 2009 Professor Burton

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  1. Behavioral FinanceEconomics 437 – Spring 2009Professor Burton March 2008 Oct-Nov 2008 April 2009 April 14, 2009

  2. Public vs Private • Public • Generally, must be a corporation • Means you raise money from the public • Governed by Securities Act of 1933 and 1934 • Must file regularly with the SEC • 10 Q, 10 K • Governed by Board of Directors elected by shareholders • Private • Partnership , LLC, or corporation (in other words, any structure works) • Cannot publicly solicit funds (can’t raise money from the public) • Limited number of investors • Vast majority of companies in the US are private April 9, 2009

  3. 10-Ks, 10-Qs, and Proxy Statement Filings • Every three months, public companies must file 10-Qs with the SEC • Balance Sheet • Income Statement • Every year, public companies must file 10-Ks with the SEC • Balance Sheet • Income Statement • Every year an annual meeting (must file Proxy Statement) • Elect officers (board of directors, CEO, President) • Pass Shareholder resolutions • Approve stock option plans April 9, 2009

  4. Balance SheetXYZ CorpAs of March 31st, 2009 Assets Liabilities Net Worth (= Assets - Liabilites) April 9, 2009

  5. Income StatementXYZ Corporationfor the three month period ending March 31st, 2009 Revenues: xxxxx.xx Expenses: - yyyyy.yy ________ Net Income zzzzzz.zz Taxes - qqq.qq Net Income After Tax nnnnn.nn April 9, 2009

  6. Difference between Bal Sheet and Inc Statements • Balance sheet designed to show net value of the company • Always a specific moment in time • Income Statement • Connects one Bal Sheet to another • Always a flow over a specific time: starts on a certain date and ends on a certain date • Quarterly…..Annual, most common income statements April 9, 2009

  7. Corporate Governance • We speak here of “public companies.” (Private companies are unlikely to have corporate governance, especially when there is a single owner) • Does the Board of Directors act as a single owner of the company would act? • If not, then there is a failure of corporate governance • Principle – agent problem: shareholders are the principles; management is the agent (board of directors are also agents) April 9, 2009

  8. The End April 9, 2009

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