2 The Nature of Corporate Finance Law 2.1 Introduction (original) (raw)

This volume will focus on the most abstract principles of corporate finance law. This chapter will explain the definition of corporate finance law presented in the preface. The nature of corporate finance law can be explained on the premiss that the law of corporate finance is regarded as an autonomous discipline. The law of corporate finance has a distinctive character which is based on the unique nature of the tasks it undertakes. 2.2 Key Objectives of Corporate Finance Law For the firm, the law of corporate finance has one distinct objective separating it from other areas of law. The law of corporate finance should help the firm to make decisions regarding its finances in a rational way. 1 While corporate finance provides a framework that helps to make sense of the behaviour of all firms from an economic perspective, the law of corporate finance can help to make sense of the behaviour of all firms from a legal perspective. Perspective of the firm. In the law of corporate finance, the starting point should be the firm. The choice of the perspective of the firm helps to better explain corporate reality. This does not prevent investors from benefiting from corporate finance law in the same way as firms do. First, firms invest in all kinds of things themselves and can often act in the capacity of investors. Second, an investor-even a private person can be regarded as a " firm " when making investment decisions. All investors can thus use the information provided by corporate finance law when making their own investment decisions. The same can be said of funding and exit decisions. Context. The law of corporate finance is applied in the context of investments, funding, exit, and certain existential questions. All firms from small businesses to large multinational companies weigh up alternative investments and alternative ways to obtain funding. The firm will also study different exit alternatives either in 1 The rational choice theory is the prevailing theory of decision-making in microeconom-ics and much of the other social sciences that have been influenced by economics.