Capital Allocation and Value Creation: A Market-Based Framework for Executives (1st ed. 2023.)

By adopting a practical, market-oriented approach to capital allocation, this book sheds light on the complex issue of cash flow deployment and the creation of shareholder value. In order to run a company efficiently, it is not sufficient to simply be a competent businessperson. One must also possess the skills of a knowledgeable investor. The management must determine where to invest capital given the diverse range of investment options available, such as mergers and acquisitions (M&A), dividends, share repurchase programs, and organic growth opportunities.

This book provides a useful analytical framework for corporate executives to consider when allocating capital, along with empirical findings from peer group studies and company case studies.

The book helps answer the following questions:

·         What are the primary factors that drive your company's shareholder value? Are they aligned with the strategy the company is pursuing?

·         What are the key dynamics and trade-offs between return on investments (ROIC), growth, and earnings quality?           

·         What are the current market expectations embedded in the stock price?

·         Given the capital allocation priorities, what does an "optimal" capital structure look like?

·         How do you set, and in turn communicate, the capital allocation and funding priorities?