NMAK22006U Microeconomics 3 – Corporate Finance (MikØk3)

Volume 2022/2023
Education

MSc Programme in Mathematics-Economics

Content

This course introduces corporate finance based on game-theoretic analysis. When a firm approaches investors through financial markets and institutions, with the objective to finance its productive activities, one key question is what type of cash flow to pledge: Debt or equity? This capital structure decision involves consideration of the tax advantage of debt, as well as the costs of financial distress. The course pays particular attention to the potential conflicts of interest between managers, shareholders, and creditors, arising from asymmetric information or moral hazard. Models with these ingredients can explain the constraints on finances experienced by firms, and offer insights on the design of efficient financial arrangements accompanied by efficient governance structures.

Learning Outcome

Knowledge:

  • Define the properties of debt and equity in the firm’s capital structure.
  • Account for the standard theoretical models in corporate finance.
  • Discuss current issues in corporate finance.

 

Skills:

  • Set up corporate finance problems as game-theoretic models.
  • Analyze financial constraints due to various conflicts of interest, and derive results on security design, liquidity policy, and risk management.
  • Analyze the pros and cons of different security designs. 

 

Competences:

  • Explain and discuss key concepts in corporate finance, as well as discuss their interpretation.
  • Apply relevant theoretical apparatus to analyze the problems of firms and investors in corporate finance.

See Absalon for a list of course literature. It is the intention to use the following as the main textbook: The Theory of Corporate Finance (Princeton University Press, 2006) by Jean Tirole.

Finance 1 and Microeconomics 2.

Academic qualifications equivalent to a BSc degree is recommended.
The course is based on combined lectures/exercise classes. There will be six hours of classes a week for seven weeks, where each class can contain lecture material or discussion of a problem set.
  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 137
  • Exam
  • 27
  • Total
  • 206
Continuous feedback during the course of the semester

The students will receive feedback when taking part in quizzes and after working on the assigned problem sets. This requires active participation in the exercise classes. The teacher will not mark solutions.

Credit
7,5 ECTS
Type of assessment
Written assignment, 27 hours
Type of assessment details
27-hour take-home assignment.
Aid
All aids allowed
Marking scale
7-point grading scale
Censorship form
No external censorship
One internal examiner.
Re-exam

The same as the ordinary exam.

If ten or fewer students have signed up for re-exam, the type of assessment will be changed to a 30 minute oral exam with 30 minutes of preparation time. All aids are allowed in the preparation time. No aids are allowed during the exam. 

Criteria for exam assesment

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