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Course |
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| Advanced Corporate Finance – Fall 2018 | ||
Faculty |
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| Assistant Professor Ramona Westermann | ||
Course Coordinator |
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| Assistant Professor Ramona Westermann | ||
Prerequisites |
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| Participants are assumed to have a broad knowledge of basic Corporate Finance corresponding to the textbooks Principles of Corporate Finance (Brealey, Myers, and Allen) or Corporate Finance (Berk and de Marzo). Furthermore, participants should have some familiarity with derivatives, portfolio theory, utility functions, basic statistics and probability theory, optimization problems, and vectors and matrices. | ||
Aim |
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| To provide participants with a firm, rigorous, and state-of-the-art knowledge and understanding of corporate finance theory and empirics. The course covers fundamental concepts, relations, and models, and it also outlines most recent developments. Both static and dynamic models are discussed, as well as topics in empirical corporate finance. The course also discusses research dissemination including various types of presentations and the publication process. | ||
Course content |
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| The course covers, among other topics, capital structure, corporate liquidity management and payout policy, corporate investment decisions, and agency conflicts and executive compensation. In addition, the course discusses recent developments in corporate finance, including asset pricing implications of corporate finance theories as well as corporate finance and the macroeconomy. | ||
Teaching style |
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Lectures and exercises. The lectures will mainly be based on research papers. In some cases, it may be convenient to consult a textbook such as Berk and deMarzo (2014). The exercises contain the following elements: • Two major problem sets (individual assignments) to hand in: – Problem set 1: Solving, programming, and analyzing a model previously discussed in the lecture, but with a minor extension – Problem set 2: Replicating the main results of an empirical paper Solutions are discussed in exercise sessions. • Additional problem sets to be solved before the exercise session. Solutions are presented and discussed by students. • A referee report. A list of papers for referee reports will be distributed by mid/end September. • Student presentations of core papers. Allow 30 minutes plus questions and discussion. Each student has to present once. • “Conference-style” discussions of papers. Can be done in pairs or as individual work. Each student has to participate in one discussion. A list of papers for discussions will be distributed by mid/end September. Students have to pass the written assignments, the presentation, and the discussion before they are allowed to take the final exam. |
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Lecture plan |
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Tentative content and schedule: Lectures 1-3: Capital structure (Introduction, costs and benefits of corporate debt, signaling models, empirical insights) Lectures 4-5: Payout policy and liquidity management (Introduction, theory and evidence of dividends, empirical patterns of dividends and repurchases, empirical evidence of corporate liquidity management, modeling liquidity management) Lectures 6-7: Investment (Empirical evidence, real option theory and applications, q-theory of investment, investment under competition) Lecture 8: Agency conflicts and executive compensation (Introduction, manager-shareholder agency conflicts, executive compensation, more recent developments) Lecture 9: Asset pricing implications of corporate finance Lecture 10: Debt structure (tentative) Lecture 11: Corporate finance and macroeconomic conditions (Theory and evidence) |
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Learning objectives |
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| The students should obtain a solid knowledge of the key concepts, methods, theories, and empirical evidence in classical and contemporary corporate finance research. They should demonstrate capability to apply this knowledge in their research projects, including organizing corporate finance data, developing and analyzing minor extensions of mainstream corporate finance models, and writing up and presenting results. They should be able to understand and assess new corporate finance research papers and position such papers in the general corporate finance literature. | ||
Exam |
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| The course ends with a final oral exam. The student draws a paper from the curriculum. The student then has 20 minutes to prepare an oral presentation of the paper on the white/black-board. The examination lasts 20 minutes including the time the examiner needs to determine the grade and communicate it to the student. The examination begins with the student giving the prepared presentation in front of the examiner for 10-15 minutes, possibly interrupted by clarifying questions by the examiner. Towards the end of the exam, the examiner will normally have supplementary questions related to other papers from the curriculum. | ||
Other |
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Start date |
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| 04/09/2018 | ||
End date |
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| 20/11/2018 | ||
Level |
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| PhD | ||
ECTS |
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| 7.5 | ||
Language |
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| English | ||
Course Literature |
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Course articles may include (changes might apply): Capital structure: Andrade, G. and S. N. Kaplan (1998): “How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed,” Journal of Finance, 53, 1443–1493. Graham, J. R. (2000): “How big are the tax benefits of debt?” Journal of Finance, 55, 1901–1955. Shyam-Sunder, L. and S. C. Myers (1999): “Testing static tradeoff against pecking order models of capital structure,” Journal of Financial Economics, 51, 219–244. Strebulaev, I. A. (2007): “Do tests of capital structure theory mean what they say?” Journal of Finance, 62, 1747–1787. Payout policy and liquidity management: Allen, F., A. E. Bernardo, and I. Welch (2000): “A theory of dividends based on tax clienteles,” Journal of Finance, 55, 2499–2536. Baker, M. and J. Wurgler (2004): “A catering theory of dividends,” Journal of Finance, 59, 1125–1165. Floyd, E., N. Li, and D. J. Skinner (2015):“Payout policy through the financial crisis: The growth of repurchases and the resilience of dividends,” The Journal of Finance, 44, 19–40. Gryglewicz, S. (2011): “A theory of corporate financial decisions with liquidity and solvency concerns,” Journal of Financial Economics, 99, 365–384. Lins, K. V., H. Servaes, and P. Tufano (2010): “What drives corporate liquidity? An international survey of cash holdings and lines of credit,” Journal of Financial Economics, 98, 160–176. Opler, T., L. Pinkowitz, R. M. Stulz, and R. Williamson (1999): “The determinants and implications of corporate cash holdings,” Journal of Financial Economics, 52, 3–46. Investment: Billett, M. T., T.-H. D. King, and D. C. Mauer (2007): “Growth opportunities and the choice of leverage, debt maturity, and covenants,” Journal of Finance, 62, 697–730. Grenadier, S. R. (2002): “Option exercise games: An application to the equilibrium invest- ment strategies of firms,” Review of Financial Studies, 15, 691–721. Hackbarth, D. and D. C. Mauer (2012): “Optimal priority structure, capital structure, and investment,” Review of Financial Studies, 25, 747–796. Lemmon, M. and M. R. Roberts (2010): “The response of corporate financing and invest- ment to changes in the supply of credit,” Journal of Financial and Quantitative Analysis, 45, 555–587. Agency conflicts and executive compensation: John, T. A. and K. John (1993): “Top-management compensation and capital structure,” Journal of Finance, 48, 949–974. Stulz, R. M. (1990): “Managerial discretion and optimal financing policies,” Journal of Fi- nancial Economics, 26, 3–27. Yermack, D. (2006): “Flights of fancy: Corporate jets, CEO perquisites, and inferior share- holder returns,” Journal of Financial Economics, 80, 211–242. Asset pricing implications of corporate finance: Carlson, M. D., A. J. Fisher, and R. Giammarino (2004): “Corporate investment and asset price dynamics: Implications for the cross-section of returns,” Journal of Finance, 59, 2577–2603. Corporate finance and macroeconomic conditions: *Halling, M., J. Yu, and J. Zechner (2016): “Leverage dynamics over the business cycle,” Journal of Financial Economics, 122, 21–41. |
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Fee |
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| DKK 9,750 | ||
Minimum number of participants |
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| 5 | ||
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Maximum number of participants |
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| 12 | ||
Location |
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Copenhagen Business School Solbjerg Plads 3 2000 Frederiksberg 9-13 Room D4.20 weeks: 36, 37 Room D5.32 weeks: 38, 39, 40, 41, 41 (Friday-rescheduled time: 1-5 pm), 45, 44, 46, 47 |
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Contact information |
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PhD Support Bente S. Ramovic bsr.research@cbs.dk tel: +45 3815 3138 |
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Registration deadline |
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| 08/08/2018 | ||
| Please note that the registration is binding after the registration deadline. | ||