Corporate finance on firm foundations

These two textbooks are designed to teach introductory or intermediate-level corporate finance to undergraduate and MBA students. They are up to date in content, format, and design, with a United Kingdom/European perspective.

Both texts are clearly written and use a logical approach, format and pedagogy. Both feature end-of-chapter exercises with selected answers, a glossary and tables. In developing the material, theoretical issues are given adequate treatment, alongside the findings of empirical research. In common with most good textbooks, the authors address a number of different constituencies in that the contents are sufficiently broad and adaptable to be used in a range of courses and in different ways. They include examples and illustrations of practice and transactions, though Glen Arnold's is better here as it draws heavily on articles from The Financial Times and the Investors Chronicle to give a real-world emphasis.

There has been a growing emphasis by academics and practitioners on the way financial decisions should enhance corporate value. Corporate Financial Management rightly devotes one of the six parts to a discussion of corporate value and how corporate finance is integrated into corporate strategy. This includes the new corporate metrics such as total shareholder return, market-value added and economic profit.

Assuming we want a text with a UK/Europe perspective, which is better? For coverage and level of difficulty there is not much in it, although Corporate Finance Europe has a more extended treatment of areas such as capital structure and option pricing. Corporate Financial Management provides a strongly integrated text with a clear value-based approach to underpin its ideas within a UK and international perspective. On the other hand, Corporate Finance Europe is a "Europeanised" version of an existing American textbook. The intention has been to provide a text that caters to the European dimension and a useful chapter looks at firms in the UK, France, Germany and the Netherlands and a largely redundant one at European Monetary Union. The net result is less than perfect: most of the examples, the studies cited, and the approach retain their US origins.

The production of Corporate Financial Management is excellent, with a clear and distinctive layout. The other book is let down by a layout that pushes the text into the binding and graphics that are of poor quality, hard to decipher, and - in at least one case - wrongly drawn.

Peter Moles is lecturer in finance, Management School, University of Edinburgh.