Universität Wien FIND
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040094 KU Corporate Finance 1 (MA) (2018W)

4.00 ECTS (2.00 SWS), SPL 4 - Wirtschaftswissenschaften
Continuous assessment of course work

Details

max. 50 participants
Language: English

Lecturers

Classes (iCal) - next class is marked with N

Tuesday 20.11. 11:30 - 14:45 Hörsaal 17 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 27.11. 11:30 - 14:45 Hörsaal 17 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 11.12. 11:30 - 14:45 Hörsaal 17 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 08.01. 11:30 - 14:45 Hörsaal 16 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 15.01. 11:30 - 14:45 Hörsaal 16 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 22.01. 11:30 - 14:45 Hörsaal 16 Oskar-Morgenstern-Platz 1 2.Stock
Tuesday 29.01. 11:30 - 14:45 Hörsaal 17 Oskar-Morgenstern-Platz 1 2.Stock

Information

Aims, contents and method of the course

The Corporate Finance I course is an introductory course that forms the first part of a two-course sequence covering topics in Corporate Finance. The aim of the course is to provide a broad conceptual and practical platform for analysing issues in Corporate Finance.

The course objective is to develop a framework to think about financial decisions firms regularly undertake. We will go back and forth between developing theories and confronting them with specific real-life examples. We start by analysing the firm’s financing decision in perfect markets. We outline the role of taxes in financing and project valuation. Incorporating the notion of financial distress and bankruptcy we draw on the Static Trade-off Theory of Capital Structure. We analyse the role of information in shaping the financing of corporations and discuss the resulting pecking order of financing. We then focus on the potential conflicts of interest between shareholders and debt holders and between shareholders and management, and their implications for the firm’s capital structure decision. We conclude this part by discussing dynamic considerations the firm might have to make when setting its capital structure.

Second, we focus on the firm’s payout policy: we look at the question of when and how the firm is able to distribute excess cash to shareholders. We show, that, as with capital structure, a firm can create value by its payout policy only in the presence of market imperfections such as taxes, agency costs, transaction costs or asymmetric information between management and investors. We also discuss cash-management by corporations and the usefulness of credit lines for them.

As a third topic, the course discusses corporate restructuring policies including mergers and acquisitions (M&As).

Upon completing this course students should be able to:
• Discuss the financing decisions of corporations.
• Understand the importance of asymmetric information and signalling in capital markets and financial decisions.
• Critically discuss the question of the dividend policy a firm should follow.
• Understand the feasibility and trade-offs employed in the different forms of restructuring for financially distressed firms.

The course “Corporate Finance I” consists of 7 three hour sessions. Sessions consist of lectures, exercise-solving and one case study, and will involve class discussion.

Case Studies. The case method is one of the most effective pedagogical tools to sharpen your analytical and decision-making skills, as it requires you to be an active participant in financial decisions. The discussion constitutes an opportunity to defend your position and learn from others, by listening to their comments and criticisms. Classrooms are our training environments to prepare you for business challenges.

You are encouraged to meet in groups of three or four to discuss and analyze the case. Students usually find that such group meetings complement the class discussion well. Regarding the case, each group will submit a three-page memorandum of analysis and recommendations covering the case study questions as well as accompanying tables when necessary. The tables should be well organized and labeled. Be sure to provide a clear discussion on how you arrived at your conclusions. In addition, groups are required to prepare a power point presentation, including the main points of the analysis.

The deadline for submission for the case memorandum and the powerpoint presentation is the beginning of the lecture on 22 January. Each group is supposed to submit one memorandum (in printed form) and one set of powerpoint slides by email. Each document should indicate both the name and student number of each group member, on the first page.

Assessment and permitted materials

This is an interactive course, where your active participation is required. Attendance is compulsory.

Laptop/tablets policy. You are not supposed to use your laptop/tablets during case discussions. You have to be 100% focused in the discussions. You may use your laptops/tablets on the lectures/discussion sessions ONLY for academic purposes, emailing, facebooking, tweeting, chatting, skyping, internet surfing, etc. should NOT be done during classes. Engaging yourself in such actvities would penalize strongly your grade on class participation.
A learning area will be available in the Intranet (Moodle). There, you would find instructions for the sessions, communications, bibliography, etc. Please look at it a couple of times a week. Slides of the sessions will also be posted here, always BEFORE the class.

Minimum requirements and assessment criteria

30% Mid-term Exam (8 January)

10% Case Study (Deadline for submission: 22 January)

60% Final Exam (29 January)

Minimum requirement for a positive grade: at least 50% for the Mid-term and Final Exams (separately) as well as for the Case Study part.

Examination topics

Reading list

The main reading material for the course is contained in:

- “Corporate Finance”, 3th Edition by P.DeMarzo and J.Berk, Pearson Global Edition. (2013).
- “The New Corporate Finance. Where Theory Meets Practice”, 3rd Edition by D.Chew, McGraw-Hill Irwin (CHEW).
Supplementary Readings by Topic:
I: Capital Structure Theories and Payout (Parts I-II)
Chew, D. (2001)The new corporate finance
Where theory meets practice 3th ed.
McGraw-Hill Irwin

Ch 12: ‘The Modigliani-Miller Propositions after Thirty Years’
Journal of Applied Corporate Finance, Vol. 6.Num.1
Graham, J. & Harvey, C. (2002) “How do CFOs make capital budgeting and capital structure decisions?” Journal of Applied Corporate Finance, 15(1): pp.8-23
Opler, T.C., Saron, M. & Titman, S. (1997) “Designing capital structure to create shareholder value.” Journal of Applied Corporate Finance, 10(1): pp.21-34
Smith, C.W. (1986) “Raising capital: theory and evidence.” Midland Corporate Finance Journal, 4: pp.6-22
OR
In: Chew, D.H. (eds.) (2001) New corporate finance: where theory meets practice. 3rd ed. Boston, Mass.: Irwin McGraw-Hill, pp.277-293
Barclay, M.J. & Smith, C.W. (1996) “On financial architecture: leverage, maturity, and priority.” In: Chew, D.H. (eds.) (2001) New corporate finance: where theory meets practice. 3rd ed. Boston, Mass.: Irwin McGraw-Hill, pp.210-223
Ghosh, C. & Woolridge, J.R. (1988) “An analysis of shareholder reaction to dividend cuts and omissions.” Journal of Financial Research, 11(4): pp.281-294
II: Selected Topics

Financial Distress and Restructuring

Franks, Nyborg and Torous, “A Comparison of US, UK and German Insolvency Codes,” Financial Management,Volume 25, No 3.

Stuart C. Gilson (1991), “Managing Default: Some Evidence on How Firms Choose Between Workouts and Chapter 11”, Journal of Applied Corporate Finance Volume 4, Issue 2.

Lawrence A. Weiss (1991), “The Bankruptcy Code and Violations of Absolute Priority”, Journal of Applied Corporate Finance, Volume 4, Issue 2.

Association in the course directory

Last modified: We 13.03.2019 10:47