Developments in Finance Theory

* Developments in finance theory in recent years have been so substantial that another assessment of our progress and prospects should be useful. I do not know whether anyone else benefits from the exercise, but I find it helpful periodically to try to think through a conceptual framework for approaching financial decisions. When I now review my Scope and Methodology book [108], I find that much seems obsolete, but that much also continues to be relevant. The New Themes [107] have continued to evolve along the lines then projected. Financial Theory and Corporate Policy [21] represents a synthesis of important developments, related empirical tests, and their implications for financial decision-making. This paper aims to be complementary to Hakansson [46], whose survey emphasizes issues of financial economics. My review will seek to: 1) summarize important themes and their relationships, 2) indicate their larger context in finance theory, 3) analyze the methodology of the related empirical