Corporate Finance
Course Description
Methods of capital budgeting and corporate financial decision-making; valuation techniques, market efficiency, capital structure, dividend policy, cost of capital, portfolio analysis and the Miller-Modiglian principle are incorporated into the analysis; financial analysis under conditions of certainty and uncertainty.
Course Objectives
Students will be enabled to identify the key role played by (asymmetric) information and incentives in general, and by capital, liquidity, value of collateral, and external monitoring specifically for corporate financing and its interdependence with corporate governance.
Students will learn to apply the tools of economic modelling to the key concepts of corporate finance, i.e. the issuance of securities by firms: equity (shares of stock) and debt (bonds, bank loans); payout policies (dividends, share repurchases, retained earnings); and corporate governance and managerial incentives (CEO pay packages, role of stock markets, bankers, venture capitalists, competition and takeovers in the monitoring of firms).
Course Materials
Required:
The course will follow the textbook:
Tirole, Jean, 2006, The Theory of Corporate Finance, Princeton University Press.
Available from bookdepository and amazon
Course Requirements:
Students must have passed Principles of Finance and its co-requisites Principles of Microeconomics and Principles of Macroeconomics before enrolling in this course.
I recommend that students also have passed College Math and Finite Math before enrolling in this course.
Students must read the corresponding chapters of the textbook before each session. Reading the economic and political press will be helpful.
I recommend that you try to solve the end of chapter problems in preparation and review of each class session.
Class meets each Monday at 15:00 till 17:30.
Laptops are banned from use during class sessions. See http://economicscience.net/content/laptop-use/ for the reasons.
Instructor Information:
Prof. Dr. Dennis A. V. Dittrich
dennis.dittrich@touroberlin.de
http://economicscience.net
My office hours are 24 hours a day via email. For meetings in my office appointments can be arranged through the my webpage at: http://economicscience.net/content/book-appointment.
Updated information, links to the literature, additional materials, etc. can be found on my webpage as well.
Grading Guidelines:
| Grading Component | Weight |
|---|---|
| Midterm Exam 1 | 25% |
| Midterm Exam 2 | 25% |
| Final Examination | 40% |
If the final exam is better than one or both of the midterm exams the corresponding midterm exam grade(s) will be replaced by the grade of the final exam.
Workload
A typical 3 credit course requires 150 hours of your time. The table below identifies how I expect those 150 hours will be allocated. While you do not receive direct marks for reading, reading will affect your class participation (your ability to participate in class discussions and activities) and your final exam mark. While some weeks have more readings than others, you should be able to read the required reading in an average of less than 4 hours per week.
| Activity | Time |
|---|---|
| Class Time (3 hours / week) | 45 hours |
| Reading (4 hours / week) | 60 hours |
| Preparation and Review (3 hours / week) | 45 hours |
Topics and Reading Assignments
Session 1 (12.02.)
- Introduction
- Corporate Governance (Ch. 1)
Alex Verkhivker, Jan 23, 2017, When shareholders aren’t watching, managers misbehave, Chicago Booth Review
Session 2 (19.02.)
- Corporate Finance: Stylized Facts (Ch. 2)
Guilford, G, February 1, 2018, US startups don’t want to go public anymore. That’s bad news for Americans.
Session 3 (26.02.)
- Outside Financing Capacity (Ch. 3)
Session 4 (5.03.)
- Determinants of Borrowing Capacity (Ch. 4)
Session 5 (12.03.)
- Midterm Exam 1
Session 6 (19.03.)
- Liquidity and Risk Management, Cash Flow, and Long-Term Finance (Ch. 5)
Session 7 (26.03.)
- Liquidity and Risk Management, Cash Flow, and Long-Term Finance (Ch. 5)
Session 8 (16.04.)
- Corporate Financing under Asymmetric Information (Ch. 6)
Session 9 (23.04.)
- Corporate Financing under Asymmetric Information (Ch. 6) cont’d
- Investors: Entry, Exit, and Speculation (Ch. 8)
Session 10 (30.04.)
- Investors: Entry, Exit, and Speculation (Ch. 8)
Session 11 (07.05.)
- Midterm Exam 2
Session 12 (14.05.)
- Control Rights and Corporate Governance (Ch. 10)
Session 13 (28.05.)
- Takeovers (Ch. 11)
- Review
Session 14 (04.06.)
Takeovers (Ch. 11)ReviewFinal
Session 15 (11.06.)
Final
Topics and reading assignments are subject to changes.
Class time and problem sets
We will discuss selected problems in class.
Additional materials can be found for download in a dropbox folder: here.
If you do not have a Dropbox account yet: Get one for free!