Bachelor
2021/2022
Corporate Finance
Type:
Elective course (HSE/NES Programme in Economics)
Area of studies:
Economics
Delivered by:
School of Finance
Where:
Faculty of Economic Sciences
When:
3 year, 1, 2 module
Mode of studies:
offline
Open to:
students of one campus
Instructors:
Sergey Stepanov
Language:
English
ECTS credits:
6
Contact hours:
64
Course Syllabus
Abstract
The main objective of the course is to present the modern approach to the financial analysis of a company and to teach the principles and techniques of evaluating the most important corporate decisions. The core of the course is the analysis of investment (capital budgeting) and financing (capital structure) decisions of a firm. We will first discuss the principles and techniques of selecting investment projects. Secondly, we will examine the determinants of the capital structure choices by firms as well as the notion of the optimal capital structure. We will then discuss how to value a company, taking into account its capital structure. We will also analyze how firms decide on their payouts to shareholders and what the optimal payout policy should be. Finally, time permitting, we will cover some special topics, such as initial public offerings, corporate governance, mergers and acquisitions, behavioral corporate finance.
Learning Objectives
- To present the modern approach to the financial analysis of a company
- To teach the principles and techniques of evaluating the most important corporate decisions: investment, capital structure, payout policy.
- To provide understanding of factors/forces that affect firm value
- To develop fundamental valuation skills
Expected Learning Outcomes
- Ability to build valuation models.
- Ability to compute tax advantage of debt, understanding of the trade-off theory of capital structure.
- Comprehension of the effects of agency problems and asymmetric information on capital structure
- Comprehension of various approaches to assess the value of a company, ability to compare these approaches.
- Understanding of firms’ motives to go public, IPO mechanisms, IPO pricing and performance.
- Understanding of the basic principles and concepts of accounting
- Understanding of the concept of real options, knowledge of techniques of real option valuation
- Understanding of the impact of managers’ and investors’ behavioral biases on corporate policies.
- Understanding of the key corporate governance mechanisms and their effect on the cost of external capital and value of companies
- Understanding of the Modigliani-Miller theorem and the effect of leverage on the cost of equity.
- Understanding of the payout policy choices of firms, ability to evaluate payout policies
- Understanding the motives, sources of value creation/destruction, and negotiation aspects of M&A transactions.
Course Contents
- Introduction to corporate finance. Notion of corporation, financial statements and financial ratios
- 2. Fundamentals of capital budgeting
- Advanced capital budgeting: real options
- Capital structure
- Initial public offerings
- Capital budgeting and valuation with leverage
- Payout policy (dividends and stock repurchases)
- Corporate governance
- Mergers and Acquisitions
- Behavioral corporate finance
Assessment Elements
- Problem sets5-6 problem sets to be solved individually.
- Cases3-4 cases to be solved in groups of 3 to 4 people, with subsequent student presentations in class. Cases are real-life situations in which you will have to put yourselves in the shoes of managers taking real-life decisions.
- Midterm testThere will be no re-take for the midterm. If you have to skip the midterm due to a valid documented reason, the final will automatically carry 56% weight. If you skip the midterm for no valid reason, you simply get 0 points for it.
- Final test
Interim Assessment
- 2021/2022 2nd module0.22 * Problem sets + 0.22 * Cases + 0.22 * Midterm test + 0.34 * Final test
Bibliography
Recommended Core Bibliography
- Corporate finance, Berk, J., 2014
Recommended Additional Bibliography
- Baker, M., & Wurgler, J. (2013). Behavioral Corporate Finance: An Updated Survey. Handbook of the Economics of Finance, 357. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.h.eee.finchp.2.a.357.424
- Financial markets and corporate strategy, Hillier, D., 2012
- Financial theory and corporate policy, Copeland, T. E., 2005
- Malmendier, U., 2018. Behavioral corporate finance. In Handbook of Behavioral Economics: Applications and Foundations 1 (Vol. 1, pp. 277-379). North-Holland.