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Unit information: Advanced Corporate Finance in 2016/17

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Unit name Advanced Corporate Finance
Unit code ECONM2032
Credit points 15
Level of study M/7
Teaching block(s) Teaching Block 2 (weeks 13 - 24)
Unit director Dr. Korczak
Open unit status Not open
Pre-requisites

None

Co-requisites

None

School/department School of Accounting and Finance
Faculty Faculty of Social Sciences and Law

Description

This unit aims to build on students' prior knowledge of basic issues in corporate finance to treat some recent, advanced research in certain corporate finance topics. These topics will include; models of firms' capital structure decisions based on agency problems; explaining corporate dividend policy using asymmetric information arguments; theory and empirical work surrounding IPOs and SEOs; models of merger and takeover activity; incomplete contracts and firms financing decisions. Given the nature of the topics treated, this unit would be suitable for students considering a career in practical corporate finance or considering further academic work in this area.

Aims:

The unit aims to provide a treatment of a selection of advanced theoretical and applied topics in corporate finance, extending and integrating information from foundation units in Corporate Finance and Financial Statements, Microeconomics and Asset Pricing. The unit is designed to expose the students to the current research in the field. Emphasis is put on critical reading, interpretation of empirical tests in light of theories and understanding of econometric techniques in applied corporate finance research.

Intended learning outcomes

Having successfully completed this unit students should be able to:

  • Describe the limitations of the simple Modigliani-Miller approach to corporate finance.
  • Describe and set out models that demonstrate the importance of agency issues and asymmetric information in the determination of optimal corporate capital structure.
  • Discuss the empirical work surrounding the performance of IPOs and SEOs and the theory developed to explain this evidence.
  • Discuss different corporate governance mechanisms and their role in reducing agency conflicts.
  • Provide a treatment of models aimed at explaining merger and takeover activity
  • Critically read and interpret current applied corporate finance research papers, discuss the underlying theories and assess the empirical methodology
  • Design and perform a basic empirical test related to a chosen topic covered in the unit

Teaching details

20 contact hours split between lectures and classes (typically 15 hours lectures, 5 hours classes).

Assessment Details

Two-hour examination in the Summer term (75%).

Assignment involving data analysis (25%)

Summative assessment consists of a two-hour examination in the summer term (75%) and an assignment involving data analysis (25%). The exam consists of a mix of questions aimed at evaluating students' knowledge and understanding of theories and concepts and ability to apply the knowledge to interpret empirical evidence in the field (ILOs 1-6). The assignment is aimed at evaluating students ability to perform a short empirical study based on the theories covered in class. It involves data download and analysis and critical interpretation of the results (ILOs 6-7).

Formative assessment will be undertaken through tutorials, where students will receive verbal and, occasionally, written feedback on their work. In addition to comments on their individual work, a 'model answer' will also be provided.

Reading and References

  • D. Hillier, M. Grinblatt and S. Titman (2008), Financial Markets and Corporate Strategy, European Edition, McGraw-Hill
  • Selected readings from finance academic journals

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