Finance readings for higher learning

Benel D. Lagua l July 21, 2023 l Business World

Teaching finance courses in both the undergraduate and graduate levels, I feel obliged to recommend US textbooks as the basic reference texts. Admittedly, these textbooks contain the most advanced concepts in the field. We want to educate a generation of the youth who will be prepared to meet the challenges of financial management, not just domestically, but in the international sphere as well.

This is not to deny the presence of prolific Filipinos who have dabbled in writing on the subject. The country is not short of talent and brains on the topic.  A survey of finance and investment books written by Filipino authors will however show that the bulk is in the personal finance field.

Financial literary continues to be a problem in our country. In S&P Global Ratings’ study, the Philippines ranked in the bottom 30 out of 144 countries surveyed, scoring only 25% in terms of financial literacy. Writers would naturally focus on topics explaining the basics: how to save money, how to manage investments, and specifically, how to handle debt. There is a huge market for these materials that help address the financial literacy challenge.

Thus, books out there have titles designed to pique the interest of those who think they may need help. Here’s a sampling: 8 Secrets of the Truly RichThink Rich PinoyNo Nonsense Personal Finance, Creating Wealth and Managing FinanceHow to Become a Happy Retiree, and so on.  As these examples show, most books are of the self-help variety to teach the reader on how to use their money wisely. If there is a gap, it is in the discussion of more basic and fundamental stuff for the serious university student in finance.

Realistically, it may not be that easy to write a Philippine finance textbook. One good exception is a 2010 text by Dr. Cesar G. Saldaña, Principles of Managerial Finance. Dr. Saldaña integrates mainstream finance theories and decision making into the Philippine financial environment. His cases on Philippine companies that are well known, and at times, controversial, are relatable to the Filipino learner. The book contains some of the best publicly available finance cases in our country. On a personal note, this writer had a chance to attend sessions by Dr. Saldaña for the Institute of Corporate Directors, and his seminars are instructive and engaging.

Hopefully, there will be other clones of Dr. Saldaña even as the market may be limited. In today’s digital environment, even licensed and copyrighted foreign textbooks get easily accessed through shadow sources. I remember requiring a textbook in a course a few years back and referring my students to the official publisher. There were few actual purchases. I inquired informally and learned my resourceful students found a digital source from somewhere. The economics of writing a finance textbook for higher educational courses represents a challenge and may not be promising for now.

This author, having the privilege of writing business columns, have dedicated a few columns discussing the intersection between theory and practices of some important finance concepts. I found these pieces good additional readings for some of my classes to complement the traditional textbook recommendations. Someday, I hope to compile in one book those columns with timeless learning value.

A major textbook used by prestigious graduate schools in the US is Principles of Corporate Finance by Brealey, Myers and Allen. Its last chapter is “What We Do and Do Not Know About Finance.” They list the seven most important ideas and 10 unsolved problems. The authors have formulated what they call the BMA Third Law. “There is no model that encompasses all the complexities encountered in financial planning and decision making…Therefore, in any field there will always be 10 problems that can be addressed but that have no formal solution.”

The BMA proposition shows there will always be areas that are ripe for productive research.  The world of finance is continually evolving. The best textbooks available are constantly being revised. A textbook I used in my university days was only in its second edition then — now it is already it its thirteenth edition. The constant revisions underscore the continuing developments in the field and the need to process information, provide updates and newer cases.

Finally, there is a need to be more discerning. Social media has not only given birth to fake news. There are also several instant experts peddling theories and concepts with unsubstantiated premises. As they say, a little knowledge is a dangerous thing. The serious student of finance should be more circumspect in the choice of materials to read.

*** Benel Dela Paz Lagua was previously EVP and Chief Development Officer at the Development Bank of the Philippines.  He is an active FINEX member and an advocate of risk-based lending for SMEs.  Today, he is an independent director in progressive banks and in some NGOs. The views expressed herein are his own and does not necessarily reflect the opinion of his office as well as FINEX.

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