040090 KU Corporate Finance 2 (MA) (2026S)

OVERVIEW

This course builds on Corporate Finance 1 and develops an advanced understanding of corporate financing decisions. The central premise is that the corporation is a nexus of incomplete contracts between parties with conflicting objectives and asymmetric information. Each module examines a specific conflict and studies the financial contracts, governance mechanisms, and market institutions that partially resolve it. The course integrates formal models, empirical evidence, and practitioner perspectives.

CONTENT

MODULE 1 — Equity Financing

- Adverse selection and the lemons problem in equity markets
- The equity financing lifecycle: angels, venture capital, private equity
- Funding rounds, dilution, and exit strategies
- The IPO process: bookbuilding, underwriting, aftermarket
- IPO Puzzles: underpricing, market timing, IPO costs, long-run underperfomance
- Seasoned equity offerings and the negative price reaction
- Special purpose acquisition companies (SPACs)

MODULE 2 — Debt Financing

- Adverse selection and the lemon problem in debt markets; collateral as a signal
- Bank loans, private placements, and public bonds
- Post-issuance conflicts: asset substitution, debt overhang, payouts, and dilution
- Covenants as commitment devices and control right transfers
- Renegotiation, bank debt, and short-term debt
- Convertible, callable, and puttable bonds

MODULE 3 — Corporate Governance

- Performance pay
- The informativeness principle and relative performance evaluation
- Monitoring, the free-rider problem, and the board of directors
- Board structure, independence, and its limits
- Shareholder activism and proxy contests
- Managerial entrenchment; dual-class shares and pyramids

MODULE 4 — The Market for Corporate Control

- The market for corporate control as a governance mechanism
- The free-rider problem in tender offers
- Private benefits of control, toeholds, and minority expropriation
- Leveraged buyouts and management buyouts
- Antitakeover defenses
- Does the market for corporate control work?

MODULE 5 — Corporate Finance and Industrial Organization

- Competition as a determinant of pledgeable income
- Debt as a commitment to aggressive product market behavior
- Entry deterrence and predation through financial structure
- Product markets and governance incentives