Medieval strictures against usury were a long time dying, and the dynamic society of the English Renaissance could not afford to wait. Inflation, the growth of commerce, and the increasing splendor of the royal court created a strong demand for cash, especially among the landed gentry. Professor Shipley describes how one of the greatest of the moneylenders legalized the interest rates he charged, secured his loans against default, and (with limited success) maintained his reputation for respectability while engaged in a dubious occupation. Thomas Sutton and his like filled the gap that old church doctrine made in the social fabric of sixteenth-century England and smoothed the way for their successors who, after the ethical revolution of the seventeenth century, would he legitimized as private bankers.

The purpose of this paper is to examine empirically the dividend, investment, and financing decisions of French firms. A basic premise of the study is that increased perspective in business finance can be gained through better understanding of the financial behavior of companies outside one's domestic economy. While the literature of finance and economics includes many significant empirical studies based on dividend, investment, and financing data on American firms, the body of evidence on continental European firms is still relatively small, owing in large part to the difficulties encountered in gathering meaningful financial data on individual firms. In order to examine for the first time the relationship of dividend and investment decisions in France, using well-known models of financial bahavior, we were able to obtain annual data on a sample of French companies over a seven-year period. Our intent is to add to the understanding of the robustness of these models by demonstrating their empirical validity in Europe and to report several differences from previous empirical findings for American firms.

In a recent issue of this journal, Linke and Kim [1], hereafter denoted as L-K, have shown that for finite-time horizons in excess of one period and if, over the same period, the firm's ratio of debt to equity is held constant, the firm's overall required rate of return could be expressed as a weighted average cost of capital. In their proofs L-K distinguish between firms engaging in no financing over the relevant horizon (the nonfinancing case), and those in which such financing is permitted to take place. In the latter case, their procedure is to derive proofs for new debt and equity financing cases separately. In all cases their proofs are correct. However, we wish to draw attention to an implied restriction which must hold in order for their proofs in the financing cases to be valid. Our objective is to set forth a proof which allows both new debt and equity financing simultaneously, and most importantly, which is also free of the implied restriction.

There is broad consensus that three types of risk confront the potential bond purchaser: the risk of default (possible interest and/or principal loss), the risk of interest rate changes (possible principal loss or gain if the bonds are sold before maturity), and price level risk (loss of purchasing power). The analysis in this paper is directed toward the first of these risks, the risk of default. By assuming that investors require interest rate adjustments on debt subject to default sufficient to give them an expected present value equal to the present value associated with the investment of their funds in default-free securities, we examine the process that determines the risk-adjusted equilibrium interest rate and the factors affecting that rate. We also examine the implications of the model for the cost of debt and a firm's debt capacity.

Portfolio analysis has generally been restricted to problems in, at most, two dimensions, expected return and risk, the latter usually measured by standard deviation. In two papers Jean [2, 4] has attempted to extend the analysis to three and many dimensions by deriving risk premiums as functions of higher order moments. This paper corrects several errors in his work and derives a normative, individual pricing model for risky securities analogous to the capital market line within the framework of a perfect market.