In the preface to the first European edition of “Financial Markets and Corporate Strategy”, I finished off by writing the following:

“I’m fully expecting things to change again over the next couple of years, as the world’s economies adapt to the new reality of a harsher economic environment.”

It has been three long years since I wrote those words, and I don’t think anyone truly realised the extent to which the financial markets and global economy would change in this time. Western economies have been under immense strain as governments strived to recover their finances after the global banking crisis of 2008. China and India have become global economic powerhouses and the engine of the global recovery. Sovereign debt worries and the unsustainability of many countries’ public spending have led to major cracks in the stability of the western economic framework.

All of these tumultuous events have resulted in new dynamics in the financial markets and corporate strategy. The power of banking institutions has waned and other, newer, forms of financing have become more popular. Private equity and securitisation is no longer the vibrant industry it once was and hedge funds have become much more heavily regulated. State and foreign shareholders are now common in the ownership structure of many large firms, and with new shareholders and investors, come new ways of management thinking.

Much of the book has been rewritten to reflect the many changes that have taken place in the financial markets over the past three years. In particular, I’ve included much more on corporate governance and the regulatory environment and this flavours a lot of the revised text. The chapters on financing, equity and debt markets have also been overhauled to bring them up to date with the new economic paradigm in which corporations operate.

The old statement that ‘nothing is as practical as a good theory’ underlines a lot of the book’s ethos and whereas the corporate environment has changed significantly, the insights gained from theoretical models remain. I’ve endeavoured to develop the theory where possible from newly-published research. I’ve also updated most chapters with new research published in the top journals since 2008. This was a major undertaking and, through necessity, I have had to omit some valuable papers. I would like to apologise in advance if some important work has been left out and I am more than happy to correspond with researchers on the future direction of the text.

We are living in very interesting times and, unlike the Chinese proverb (or curse!), corporate managers should view the current global economic changes as an opportunity to grow their firm and create new value for investors. The pace of technological change is such that the corporate world is evolving at an incredible rate. It is thus hoped that the overview of financial markets provided in this book, together with its synthesis of current research and theory, will help managers to not only adapt but to thrive and prosper in this new economic reality.

David Hillier, August 2011