25924 Advanced Corporate Finance

Subject level: Undergraduate

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

Assessment item 1: Presentation, initial summary paper and formal paper

Assessment item 2: Associate presentation, initial summary paper and formal paper

Assessment item 3: Reviewer's report