AØKA08095U Corporate Finance Theory
Some of the most central issues in Finance relate to the financing decisions of firms, in particular the relative use of bond and equity financing. Some key aspects of this capital structure decision relate to the tax advantages of debt, costly bankruptcy, risk management and hedging, using the capital structure to control managers, and signaling to the market using the capital structure. We also consider the market for corporate control, with leveraged buyouts as well as mergers and acquisitions.
This course advances the third year course's investigation
into the capital structure. We take for granted that the course
participants have already received a full introduction to the
principles of corporate finance. We choose instead to go deeper
into particular details of some of the arguments. To accomplish
this, we go beyond the textbook and base the course on classic and
new articles from academic Finance journals. The tools and
knowledge obtained in this course are of immediate relevance for
graduates seeking employment in the business and financial
The final exam tests the students' specific and general knowledge of the aforementioned aspects of Corporate Finance theory, emphasizing three abilities:
- The ability to readily explain and discuss key theoretical concepts and results from academic articles, as well as their interpretation,
- The ability to carefully derive and analyze results within an advanced, mathematically specified theoretical model,
- The ability to apply the most relevant theoretical apparatus to analyze a given, new case-based problem.
The plan for the Fall term 2013 is to read the following seven articles. Articles typically take about one week to cover. The coverage is supplemented by in-class discussions of real-world events involving corporate finance issues.
- Albert Banal-Estañol, Marco Ottaviani and Andrew Winton (2011), “Separate or Joint Financing? Coinsurance, Risk Contamination, and Optimal Conglomeration with Bankruptcy Costs,” manuscript, Universitat Pompeu Fabra.
- Heitor Almeida, Murillo Campello and Dirk Hackbarth (2011), “Liquidity Mergers,” Journal of Financial Economics, 102(3), 526–558.
- Paul Povel and Rajdeep Singh (2010): “Stapled Finance,” Journal of Finance 65(3), 927–953.
- Marc Martos-Vila, Matthew Rhodes-Kropf and Jarrad Harford (2012), “Financial vs. Strategic Buyers,” Harvard Business School Working Paper 12-098.
- Onur Bayar and Thomas J. Chemmanur (2011), “IPOs versus Acquisitions and the Valuation Premium Puzzle: A Theory of Exit Choice by Entrepreneurs and Venture Capitalists,” Journal of Financial and Quantitative Analysis 46(6), 1755–1793.
- Alex Edmans and Qi Liu (2011): “Inside Debt,” Review of Finance, 15, 75–102.
- Peter M. DeMarzo, Dmitry Livdan and Alexei Tchistyi (2011), “Risking Other People’s Money: Gambling, Limited Liability, and Optimal Incentives,” Stanford and UC Berkeley mimeo.
- 5 ECTS
- Type of assessment
- Continuous assessmentThe final exam consists of two assignments, graded on a pass/fail basis. The default language is English, but students have the option to answer in Danish.
- All aids allowed
- Marking scale
- passed/not passed
- Censorship form
- No external censorship
- Exam period
- Will be updated before the start of the semester
- Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exams with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment