AØKK08202U Corporate Finance Theory (F)

Volume 2015/2016
Education

Elective at MSc in Economics
The course is part of the Financial line symbolized by "F"
MSc programme in mathematics-economics

Content

Some of the central issues in Finance relate to the financing decisions of firms, in particular the relative use of debt and equity financing. Key aspects of this capital-structure decision include the tax advantages of debt, costly bankruptcy, risk management and hedging, signaling to the market, and conflicts of interest between managers, shareholders, and creditors. We also consider the market for corporate control, with leveraged buyouts as well as mergers and acquisitions.

Learning Outcome

Corporate Finance Theory builds on the third-year course's investigation into firm capital structure. We take for granted that course participants have already received a full introduction to the principles of corporate finance. We now go deeper into the particular details of some of these 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 industries.
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.

 

In order to pass the course, the student must show satisfactory performance in all three areas.

The plan for Fall 2015 is to read approximately nine recently-published academic articles and working papers in the field of corporate finance. After an introductory lecture, we will devote approximately one week (two lectures) to each article, supplemented by in-class discussions of related real-world issues in corporate finance.

The preliminary reading list is as follows (subject to change). Links to these papers will be posted on the course homepage.

  1. Admati, DeMarzo, Hellwig, and Pfleiderer (2014). “The leverage ratchet effect.” Mimeo.
  2. Edmans and Mann (2014). “Financing Through Asset Sales.” ECGI – Finance Working Paper No.344/2013.
  3. Malenko and Malenko (2014). "A theory of LBO activity based on repeated debt-equity conflicts." Mimeo
  4. Banal-Estañol, Ottaviani, and Winton (2013). "The Flip Side of Financial Synergies: Coinsurance Versus Risk Contamination." Review of Financial Studies
  5. Almeida, Campello and Hackbarth (2011), “Liquidity Mergers,” Journal of Financial Economics, 102(3), 526–558.
  6. Povel and Singh (2010): “Stapled Finance,” Journal of Finance 65(3), 927–953.
  7. Bayar and 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.
  8. DeMarzo, Livdan and Tchistyi (2014), “Risking Other People’s Money: Gambling, Limited Liability, and Optimal Incentives,” Stanford Business School Working PaperNo.3149.
  9. Fahn, Merlo, and Wamser (2014), “The Commitment Role of Equity Financing,” CESifo Working Paper Series 4841.
Students will benefit from having passed the course "Corporate Finance and Incentives", or an equivalent elaborate introduction to Finance. Students should have a good understanding of the topics covered in Part 5 (Capital Structure) of the textbook “Corporate Finance” by Jonathan Berk and Peter DeMarzo, or in another book of a similar level.
The teaching activities will consist of lectures where students are expected to actively participate. This will include discussing questions in groups, submitting short answers and voting on multiple choice questions using the Socrative online system, and at times coming to the board. All lectures will be given in English.

Schedule:

The course consists of 2 hours of classes (lectures) every week and 2x2 hours every second week for 14 weeks.

For enrolled students please find more information of courses, schedule, rules etc at
https:/​/​intranet.ku.dk/​economics_ma/​courses/​Pages/​default.aspx

Timetable and classroom:
For time and classroom please press the link under "Se skema" (See schedule) at the right side of this page (15E means 2015 Efterår (Autumn))
  • Category
  • Hours
  • Exam
  • 30
  • Lectures
  • 42
  • Preparation
  • 134
  • Total
  • 206
Credit
7,5 ECTS
Type of assessment
Written assignment
The evaluation of the course is two assignments and is graded on a pass/fail basis.The frist assignment is during the course and the second is after the course has finished. Both assignments must be submitted in English.
Aid
All aids allowed
Marking scale
passed/not passed
Censorship form
No external censorship
Exam period

The deadline for the first assignment will be informed during the course.

The deadline for the second assignment is 8. of January 2016 at 10.00 AM 


For enrolled students more information about examination, exam/re-sit, rules etc. is available at the student intranet for Examination (English) and student intranet for Examination (KA-Danish).

Re-exam

Same as the ordinary exam. But if only a few students have registered for the re-exam, the exam might change to an oral exam. This means that the examination date also will change.

 

Criteria for exam assesment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.