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The Lessons of Michael C. Jensen
From the 1950s to the middle of the 1970s, a few scholars built the foundations for a new field of scholarship, the field of financial economics. Michael C. Jensen, who died last April, is one of these scholars. He has the distinction of having written the most highly cited paper in financial economics. This paper […]
René M. Stulz is the Everett D. Reese Chair of Banking and Monetary Economics at the Fisher College of Business at The Ohio State University. This post is based on his recent paper.
From the 1950s to the middle of the 1970s, a few scholars built the foundations for a new field of scholarship, the field of financial economics. Michael C. Jensen, who died last April, is one of these scholars. He has the distinction of having written the most highly cited paper in financial economics. This paper has been hugely influential not only in financial economics, but in other business fields, in economics, and in corporate law. His most important lesson for corporate finance is that the productivity of firms depends directly on corporate finance, so that corporate financial policy is not a side-show but a critical factor in the success of corporations.
In my paper titled “The Lessons of Michael C. Jensen,” I assess how Jensen impacted the field of financial economics and academia more broadly, as well as the world outside academia. Jensen was controversial throughout his career. The New York Times published an article following his death that highlighted both his accomplishments and the controversy that followed him. The article was titled “Michael C. Jensen, 84, who helped reshape modern capitalism, dies.” The title captures his enormous influence, but then the article blames him for the “greed-is-good era.”
