25558 Issues in Corporate Finance
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Subject handbook information prior to 2015 is available in the Archives.
Credit points: 6 cp
Subject level:
Undergraduate
Result type: Grade and marksRequisite(s): 25557 Corporate Finance: Theory and Practice AND (25622 Quantitative Business Analysis OR (35151 Introduction to Statistics AND 35102 Introduction to Analysis and Multivariable Calculus))
These requisites may not apply to students in certain courses.
There are course requisites for this subject. See access conditions.
Description
Modern corporate finance is concerned with the interactions between a number of agents involved in the life of a firm, including managers, shareholders, lenders, regulators, competitors, and customers. These agents have different incentives, and different sources of information. As a result, their relationships are beset with problems of information asymmetry, adverse selection, and moral hazard. How do these problems affect the ability of firms to raise capital? How do they affect the firm's capital structure? How should contracts be structured, in order to alleviate these problems? These are some of the issues in corporate finance.
Subject objectives
| 1. | Describe the critical concepts studied in this subject, and explain their impact on corporate finance |
|---|---|
| 2. | Describe and analyse theoretical models for the interactions of managers, shareholders, and lenders |
| 3. | Formulate empirically testable hypotheses arising from these models, and compare them with empirical results in the corporate finance literature |
| 4. | Provide a coherent and persuasive written exposition of a given theoretical model and the associated empirical results |
Contribution to the development of graduate attributes
This subject builds on foundational knowledge in finance, and introduces students to advanced topics in corporate finance. Students will learn how to develop and analyze theoretical models for decision-making in the context of a firm. They will also learn how to formulate and test the empirical predictions made by such models. Finally, they will see how to present the results of this process logically and persuasively.
Teaching and learning strategies
The subject will be taught using a combination of lectures and tutorials. The lectures will be devoted to the development of theoretical principles, and the solution of example problems, while the tutorials will provide students with an opportunity to develop their own problem-solving skills. This is a hands-on subject, with an emphasis on problem solving, and students are expected to work on the tutorial problems independently.
Content
- Borrowing capacity and credit rationing
- Liquidity and corporate risk management
- Corporate financing under asymmetric information
- Product markets and earnings manipulation
- Takeovers
- Consumer liquidity demand
- Credit rationing and economic activity
- Mergers and acquisitions, and equilibrium asset values
- Liquidity shortages and liquidity asset pricing
Assessment
Assessment task 1: Weekly Quiz (Individual)
| Objective(s): | This addresses subject learning objective(s): 1, 2 and 3 |
|---|---|
| Weight: | 20% |
Assessment task 2: Assessment (Individual)
| Objective(s): | This addresses subject learning objective(s): 2, 3 and 4 |
|---|---|
| Weight: | 30% |
Assessment task 3: Final Examination (Individual)
| Objective(s): | This addresses subject learning objective(s): 1, 2, 3 and 4 |
|---|---|
| Weight: | 50% |
Minimum requirements
To pass this subject an overall grade of 50% or more is required.
Required texts
David Hillier, Mark Grinblatt, and Sheridan Titman, Financial Markets and Corporate Strategy (2nd European edition), McGraw-Hill, 2012
Recommended texts
- Jonathan Berk and Peter DeMarzo, Corporate Finance (3rd edition), Pearson, 2014
- Richard A. Brealey, Stewart C. Myers, and Franklin Allen, Principles of Corporate Finance (11th edition), McGraw-Hill, 2013
