040090 KU Corporate Finance 2 (MA) (2018S)

Corporate Finance II aims to provide students with a deeper understanding of the theoretical models underlying most of the research on corporate finance and financial intermediation. It will start with a brief overview of contract theory and the economics of asymmetric information and then goes on to study the seminal models and papers in corporate finance applying these principles. The course content will be the following:

I) Economics of asymmetric information: the lemons problem, screening, signalling, moral hazard.
II) Capital structure, Modigliani-Miller irrelevance propositions, signalling and the pecking order theory (Myers and Majluf, 1984).
III) Mergers and acquisitions and the free-riding problem (Grossman and Hart, 1980)
IV) Firm financing, moral hazard and pledgeable income (Holmström and Tirole, 1997)

If time allows, other papers will also be covered (Diamond and Dybvig, Diamond and Rajan, Rajan 1992)

There will be both lectures and tutorials. At tutorials, problem sets will be discussed and the solutions will be presented by the students.