For corporate finance to truly advance we need more genuinely testable models

Abstract

Corporate finance has turned into a field where researchers produce what seem like a constant flow of disconnected papers. Theories are never confirmed or refuted. At best, empirical papers confirm models without a realistic alternative to refute. The problem is that today's models are either static or have firms that never interact directly with other firms. Most industries are oligopolies. For firms in these industries the competition's actions in the product market are likely of paramount importance. If corporate finance is going to progress, we need papers with testable dynamic oligopoly models. Models where firms compete directly with each other.