This course presents major theoretical concepts of modern corporate finance and initiates the students to the state-of-the-art thinking in the field. We will analyze the ideas behind these theories and their rationale, and discuss how these concepts can be applied to corporate finance issues in practice. The course will also acquaint students with the methodology used in corporate finance, in order to enable them to follow advances in corporate finance research on their own.
In the first part of the course, we will discuss basic concepts and theoretical explanations of corporate financial policy. After a brief review, we will get familiar with the main concepts and tools determining capital structure: asymmetric information, incentives, and conflicts between managers and investors. We will introduce the major modern capital structure theories, such as debt overhang, the pecking order model, financial signalling, and the role of cash. We will study how agency conflicts are intertwined with financial policy and look at the implications for incentives, and as well as risk-shifting and strategic effects of capital structure decisions. We will briefly look at empirical evidence and payout policy. In the final sessions of the course, we present and discuss models of takeovers and mergers. We analyze their role in the working of the market for corporate control, and how they contribute to our understanding of M&A transactions.
Corporate Finance and Financial Theories. This includes cost of capital, capital structure, equity issuance and valuation, capital budgeting, portfolio theory, the capital asset pricing model and the arbitrage pricing theory, all of which have become an integrated part of the decision-making in investments. Empirical Evidence in the Equity and Equity Options Markets. This includes patterns in cross-sections of stock returns, the time-series behaviour of stock returns time-varying expected returns. Introduction to Fixed-Income and Derivative Instruments. This includes bonds and options.
Syllabus Introduction to Finance Theory Portfolio Theory Efficient Portfolios Factor Models Capital Asset Pricing Model (CAPM) Arbitrage Pricing Theory (APT) Market Efficiency Fixed Income Securities Options and Futures Introduction to Corporate Finance Capital Budgeting Cost of Capital Capital Structure Equity Issuance and IPO Valuation