There is a plethora of Finance textbooks available for those wishing to gain a rigorous understanding of the concepts and principles of Finance.
However, many of these books are either too complex, boring, or simplistic to be a good basis for development of in-depth understanding and application.
When I started my Finance career way back in the very early 1990s, I came at the topic from a Mathematics perspective because that was the basis of my undergraduate degree. It’s probable, then, that my selection of books will be influenced by this preference. Apologies if that is the case.
It’s also important to state that I haven’t purposely gone out to review books for this post and so I may have missed a few that should be here. If that is the case, please get in touch with recommendations and I’ll update the list accordingly.
There are three textbooks that I think are worthwhile for the Finance specialist. All cover the same topics, with some variation at the edges. The ones below are the best starting point for anyone wishing to start a finance career.
Warning: As you will see, the first book is my own. I feel like apologising for this, but I really do think it covers the topics very well for an international reader. I hope this doesn’t put you off reading this article as I’ve been unbiased in all of my reviews.
- Corporate Finance (Hillier, Ross, Westerfield, Jaffe, Jordan)
The focus is very strongly on European and International Corporate Finance and based on the most up to date academic research. It also covers Corporate Governance (in detail) and Islamic Finance (in passing), which is in demand in many parts of the world. I use it for most of my Corporate Finance teaching (unless I am using my other books).
2. Principles of Corporate Finance (Brealey and Myers)
A wonderful book and one of those from which I learned Corporate Finance. It is exceptionally well-written with strengths in capital structure theories and application. The big issue is that this edition is too focussed on the US corporate environment, which isn’t great when trying to understand corporate environments elsewhere.
3. Corporate Finance (Berk and De Marzo)
The best thing about this book is its central theme of the Law of One Price that permeates the full text. It’s an excellent way to bring the theory together and the authors do this very well. My biggest gripe is that the international edition does very little to vary the US text and so I find it of less use in teaching students in the international context.
Once the reader has understood the main theories of finance from the list above, they will be ready to study specialist areas in more detail. In the list below, I present what I feel is the best in class for each of the areas.
Warning: I haven’t read every book on Finance and so I may have missed a fantastic text. If you feel that this is the case, please get in touch and I’ll check out any that you feel should be on this list.
1. International Corporate Governance (Goergen)
Corporate Governance is one of my favourite research areas and I feel out of all the books out there, International Corporate Governance has the best breadth of research, theory and practice. The book isn’t as long as other textbooks in the area but it is the most solid and rigorous.
1. Investments and Portfolio Management (Bodie, Kane and Marcus)
Without doubt, the best in class. I use this to teach Investments and Portfolio Theory at university and it is by far the most accessible and insightful text in this area. It is also good for those wanting to study for the Chartered Financial Analyst (CFA) course.
Advanced Finance Books:
These books are for those planning to study at PhD level or above. I use them not only for doctoral training but also as a basis for my own academic research. I do not recommend these for those who have no prior Finance knowledge.
- Financial Markets and Corporate Strategy (Hillier, Grinblatt and Titman)
Another of my books. The main strength of this book is that it combines strategy with finance, which is a major gap in the literature. It is fairly mathematical but not overly so. I would also say , though, that the book is getting a bit long in the tooth as it was published in 2011 and so some of the earlier chapters on the financial markets are slightly out of date. The theory hasn’t changed though!
2. Financial Theory and Corporate Policy (Copeland, Weston and Shastri)
I love this book and it was the core of the higher level of textbooks that I read when I was studying Finance as a PhD student. It explains the main Finance concepts exceptional well and goes into the theory in an accessible way. My mathematical and theoretical understanding of Finance was helped in so many ways by this book. The good thing is that it a new edition came out last year, so the material is up to date.
3. The Theory of Corporate Finance (Tirole)
This is a very solid theoretical text on Corporate Finance. Although it was published in 2010, it hasn’t lost anything of its currency and definitely should be read if you want to understand the mathematical theory of corporate finance. I promise it isn’t an easy read but well worth it.
4. The Theory of Financial Decision-Making (Ingersoll)
This book nearly killed my career in Finance and it is probably one of the toughest finance books that I have read. During my PhD at Strathclyde, we had to read this cover to cover and I just barely kept up. However, I did get through the book and I’m so glad I did so. It’s a shame that it is now out of print but if you can get a copy anywhere, I’d definitely recommend you do so (even if it is just to show off to other finance aficionados!).
4. Foundations for Financial Economics (Huang and Litzenberger)
The second book of my PhD reading and only slightly less difficult than Ingersoll. It’s a shame that these books are now out of print as they are so important for PhD students to understand how finance really works.