How LBOs, Share Buybacks & Private Equity Revolutionized Corporate America: Don Chew’s Case for Transformation - EP270

Donald Chew discusses the evolution of corporate finance, emphasizing the shift from old-fashioned corporate finance, which focused on steady earnings growth, to modern corporate finance, which aims for high returns on capital. He highlights the decline of conglomerates in the 1970s and the rise of private equity. Despite criticism, Chew argues that modern corporate finance has been a success story, citing the doubling of U.S. public company market capitalization in the 1980s and the significant correlation of R&D and selling, general and administrative expenses (SG&A) expenses with corporate value. He also addresses the financial crisis, arguing it was due to mispriced mortgages and government policies, not market inefficiencies. Donald Chew is the founding editor of the Journal of Applied Corporate Finance, and joins show host Gene Tunny to discuss his latest book, The Making of Modern Corporate Finance, published by Columbia University Press.