Question

1. Discuss the importance of game theory in corporate finance. Provide 3 examples in corporate finance.

2. Describe the pecking order theory of capital structure

3. Describe the similarities between corporate social responsibility, socially responsible investing, impact investing and thematic investing

- in your own words please!

Answer 1

Ans 1) Game theory is very important in corporate finance to make a rational decisions. Corporate finance has many conflicting decsions to make sure we are taking optimal rational decision game theory helps on this.

Examples of game theory in corporate finance:

A) Wether one should enter in new market or launch a new product.

B) Which compnay to acquire or perform merger with mainly in M&A.

C) What should be the optimal capital strucutre.

Ans 2) Pecking order theroy: It prioritises the source of financing which start with internal financing, then debt and finally equity as a last resort.

Ans 3) These all kind of investing have a similarity that the person is care about the kind of compnay in which he/she is investing is doing good business and have a positive impact on the manking and well being of human and society at large.