This provocative book provides insight into a finance industry that is run for the benefit of banks and service providers who rely on Beatles-era theories and regulation which are totally unsuited to the modern world. The author has a near-unique perspective based on over 30 years of working – literally around the globe – for corporates, fund managers and as finance academic. In his last role his research has focused on investment decisions, and during 2012 he interviewed 34 fund managers in Istanbul, London, New York and Melbourne. He blends rich understanding of finance theory and practice to unravel the investment industry’s structure and show how banks and other finance institutions privilege themselves at investors’ expense.
The book highlights that finance industry self-regulation is weak. Risks from inexpertise, theft, bad data and other sources are high. Regulation of the industry appears to be ineffectual with the setting of such a high bar that it is virtually impossible to successfully prosecute even the most blatant and egregious offenders.
The book closes with the simple suggestion that corporations’ regulations be altered to introduce the strict liability offence of being a director or officer of a large bank that becomes bankrupt. This follows the strategy of legislation that has been effective in cleaning up the environment, making workplaces safer and reducing crime by punishing those responsible for an offence.
Table of Contents
1. Introduction 2. Chronic Failure of Finance Theory to Survive Contact with the Real World 3. Finance Industry's Inability to Manage Walls of Money 4. Risk! What Risk Can There Possibily Be? 5. Crooks, Scams and Biases 6. How Does Finance Really Work? 7. The Mixed Record of Finance Regulation 8. Is There a Better Basis for Corporations' Financial Regulation? 9. Conclusion
Les Coleman is a Senior Lecturer in Finance at the University of Melbourne. His main research interest is financial decision making by firms and funds, and he has published two research monographs (by Gower and Springer), four book chapters and nearly 30 journal articles. Les trained originally as an engineer, and spent over 20 years in senior management positions with Anglo American and ExxonMobil Corporations in Australia and overseas.
More recently Les completed a PhD in Management at the University of Melbourne where his thesis was published as Why Managers and Companies Take Risks (Springer, 2006).
Outside the University, Les has part time appointments with two investment managers. He has been a trustee of two superannuation funds, and a director of ten companies involved in finance, retail and distribution. He has written and spoken widely on finance and investment strategies, and for four years was a weekly columnist with The Australian newspaper.
"Despite its lurid title, this is a serious book. Drawing on decades as a financial practitioner, Coleman (Univ. of Melbourne, Australia) offers a blunt analysis of modern finance. Although his depiction of theory divorced from practice is familiar, Coleman's portrayal of applied finance and suggestions for reform are notable. His interviews with financial fund officials and comprehensible interpretations of arcane financial instruments provide some feel for the inner workings of the financial sector, which collapsed so spectacularly in 2008. Coleman argues that executives causing the death of a company, like individuals causing the death of a person, should be prosecuted. Bankrupting a company that is "too big to fail" should never leave its CEO "too big to jail." Summing Up: Recommended. Lower-division undergraduates and above." — R. S. Hewett, Drake University, in CHOICE , March 2015