Faculty of Business: Finance and Economics
Credit points: 6 cp

Subject level: Undergraduate

Result Type: Grade and marks

Handbook description

Through study of the research literature, this subject provides an understanding of the motivation, construction and empirical testing of theories in corporate finance. It covers a selection of classic papers in corporate finance, some current research work, and a significant quantity of Australian empirical work. Research studied is concerned with the major issues involved in a company's investment and financing decisions and the interaction of these activities with the formation of prices in the markets for the company's securities.

Subject objectives/outcomes

On successful completion of this subject, students should be able to:

1. Competently read and present the research literature in corporate finance, and understand its development;
2. Critically appraise competing theories relating to valuation and investment decisions, takeovers, IPOs and capital structure;
3. Understand how agency theory, financial signaling theory, real options theory and behavioural theory apply to the theories in point 2 above;
4. Utilise knowledge of relevant empirical evidence, and assess the quality of that evidence, particularly as it applies in Australia.

Contribution to graduate profile

Corporate finance is a core area of knowledge in finance. This subject provides the study of that core knowledge at a level appropriate to an Honours program. Because the focus of the course is on research literature, it is generically useful to all students in the pursuit of their research. The course is particularly useful for students who select a corporate finance topic for their thesis.

Teaching and learning strategies

Classes will be in three-hour seminar format. In the early weeks of the course there will be some lecture component followed by discussion of assigned readings. As the semester progresses there will be increasing emphasis on the discussion, and much less formal lecturing. Each student will be responsible for leading the seminar discussion in a particular week and also act as a discussant on one other occasion.

Content

• Introduction, asset pricing models and empirical testing
• Efficient markets, asymmetric information, signalling and agency issues
• Capital structure theory and evidence
• Issues in corporate governance
• Initial public offerings (IPOs): Theories and evidence
• IPOs: Aftermarket dynamics
• Corporate Restructuring
• The Investment , financing and payout decisions
• Evidence on market anomalies
• Behavioural finance
• Behavioural aspects of corporate decision making
• Review: Where do we stand in corporate finance and investments.

Assessment

Presentation, initial summary paper and formal paper	30%
Each student will be required to lead the presentation on one of the topics by making a presentation based on the papers for the particular topic. They will be required to provide some initial notes at the time of your presentation and then a formal paper must be submitted within 7 days. In presenting a paper based the research literature, students display achievement of objectives 1 and 4 and an understanding of a particular topic under objectives 2 and 3.
Associate presentation, initial summary paper and formal paper	40%
Each student will also be responsible for also discussing an additional paper at 2 of the sessions (each worth 12%). Again the presenter will be required to distribute some initial notes at the time of their presentation and provide a more detailed paper within 7 days. In presenting a paper based the research literature, students display achievement of objectives 1 and 4 and an understanding of a particular topic under objectives 2 and 3.
Reviewer's report	30%
Students will be given an unpublished research paper and asked to provide a referee's report. This provides assessment relevant to objectives 1 and 4, and of your understanding of a particular topic under objectives 2 and 3.

The assignments will be secured through a combination of updating of assessment tasks across semesters and/or plagiarism detection software.