Over the last decade much attention has been focused upon strategic factors influencing corporate financing decisions, especially those relating to informational problems.The results of this research have primarily been suggestive--proposing possible explanations of phenomena, but not providing specific methods for incorporating the strategic factors into quantitative valuation techniques and models.Quantitative models of financial variables have primarily been developed for cases of perfect competition or similar special cases in which the strategic factors are not central.In this paper we provide a model in which the estimation of the value of strategic factors is the objective and for a relationship between prices across time which is at the center of finance theory.This paper develops the use of an auction model to value long-term forward contracts for the purchase of commodities.Recent theoretical and empirical research has emphasized the danger of ex-post opportunistic bargaining as a primary motivation for the use of long-term forward contracts in preference to a dependence upon spot markets.However, this literature has not developed an operational procedure for assessing the value to the firm of using a forward contract to eliminate this ex-post bargaining problem.Traditional arbitrage methods for valuing forward contracts sold on the organized exchanges ignore the bargaining problem, that is.they assume a competitive market in which the strategic factors creating the bargaining problem and motivating the use of long-term contracts are not present.We demonstrate how auction models can be used to assign a value to the strategic advantage of long-term contracts.This value is shown to depend primarily upon the number of potential buyers in the relevant market and the relation between the lower end of the range of reservation prices of these buyers and the fixed costs of installing the capacity to supply the commodity.Problems with assigning a value to the strategic advantage of long-term contracts are discussed and other important strategic features of long-term contracts which need to be valued are identified.RECEJVED1 .

Going public is a complex process with distinct markets for dispersed shares and controlling blocks. It is important to design the sale of new shares with the final ownership structure in mind. An optimal strategy for going public starts with the IPO, which is particularly suited for the sale of dispersed holdings to small and passive investors. The marketing of potentially controlling blocks to active investors should occur subsequently. We develop a framework for evaluating alternative methods of sale and show that discriminating in favor of active investors can raise the market value of the firm for all shareholders.

This article develops a model for evaluating alternative hedging strategies for financially constrained firms. A key advantage of the model is the ability to capture the intertemporal effects of hedging on the firm's financial situation. We characterize the optimal hedge. A wide range of alternative hedging strategies can be specified and the model allows us to determine in each case if the hedging strategy raises or lowers firms value and by how much. We show that hedging firm value, hedging cash flow from operations and hedging sales revenue are not optimal. The article highlights the fact that every hedging strategy comes packaged with a borrowing strategy which requires careful consideration.

We adapt a contingent claims model of the firm to reflect the incentive effects of the capital structure and thereby to measure the agency costs of debt. An underlying model of the firm and the stochastic features of its product market are analyzed and an optimal operating policy is chosen. We identify the change in operating policy created by leverage and value this change. The model determines the value of the firm and its associated liabilities incorporating the agency consequences of debt.

We adapt a contingent claims model of the firm to reflect the incentive effects of the capital structure and thereby to measure the agency costs of debt. An underlying model of the firm and the stochastic features of its product market are analyzed and an optimal operating policy is chosen. We identify the change in operating policy created by leverage and value this change. The model determines the value of the firm and its associated liabilities incorporating the agency consequences of debt.