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LEARNING OBJECTIVES:
The primary objective of the course is that the student learns recent corporate finance and governance theory and evidence based on original research papers.
A secondary objective is that the student learns to read original research papers, which are often technical difficult, with full benefit.
The goals are that the student - after having followed the course in Corporate Finance and Governance - can
• describe the "story" of the original research paper with great precision in 5-10 minutes. Explain the details in the arguments and identify the decisive drivers behind the results
• apply the results of the original research paper on specific cases - typically taken from the Danish newspapers business sections (the "pink" pages)
• reflect on which results within a subject area that are relatively indisputable respectively relatively disputable.
COURSE DESCRIPTION:
The primary purpose of the course is to introduce and discuss new corporate finance and governance theory and evidence. The students will learn to master the details of the models and to apply the models to real world (Danish) cases.
A secondary purpose of the course is to teach the students to read original research papers.
COURSE SUBJECT AREAS:
I. Corporate Finance
On the Impossibility of Informationaly Efficient Markets (literature: 1)
Initial Public Offerings (literature: 2-4)
Raising Debt Capital (literature: 5-7)
Raising Equity Capital (literature: 8)
Payout Policy (literature: 9-14)
II. Corporate Governance
Overview (literature: 15-17)
Investor Protection and Ownership Concentration (literature: 18-20)
Boards (literature: 21-24)
A selected Topic (Private Equity, Small Business/Families, Performance Pay, Codes of Conduct and New Governance Rules). This year: Corporate Governance in Danish Banks.
REQUIRED COURSES:
3376: BA/Financial Markets and Corporate Strategy (mandatory)
4388: Derivatives and risk management (recommended).
LECTURER:
Johannes Raaballe.
TEACHING METHOD:
Lectures and discussions.
LITERATURE:
A collection of papers which can be bought in January 2009.
1. On the Impossibility of Informationaly Efficient Markets. Sandford I. Grossman
and Joseph E. Stiglitz. Financial Markets and Incomplete Information. Bhattacharya
and Constantinedes (Editors). 1989. Rowman Littlefield Publishers.
2. Initial Public Offerings. Jay R. Ritter. Contemporary Finance Digest, Vol. 2, No. 1. 1998.
3. Leverage, Liquidity and Long-Run IPO Returns. B. Espen Eckbo and Øyvind
Norli. WP February. 2000.
4. Why New Issues are Underpriced. Kevin Rock. Financial Markets and Incomplete
Information. Journal of Financial Economics 15 (1986).
5. Credit Rationing in Markets with Imperfect Information. Joseph Stiglitz & Andrew Weiss. American Economic Review. 71:1981, page 393-410.
6. Bank Loans, page 196-197 in Games and Information. Eric Rasmussen. Basil Blackwell 1990.
7. Credit and the Age of the Firm: The Diamond model, page 288-290 in Games and Information. Eric Rasmussen. Basil Blackwell 1990
8. Corporate Financing and Investment Decisions when Firms have Information
that Investor do not have. S.C. Myers og N.S. Majluf. Journal of Financial
Economics 13 (1984).
9. The Dividend Puzzle. Fisher Black. The Modern Theory of Corporate Finance. McGraw-Hill 1990.
10. Two Agency-Cost Explanations of Dividends. Frank H. Easterbrook. The Modern Theory of Corporate Finance. McGraw-Hill 1990.
11. Udbytteannonceringseffekten i Danmark. Esben Kolind Laustrup og Johannes Raaballe. Nationaløkonomisk Tidsskrift, oktober 2006, nr. 2 (for Danish students).
11b. A similar paper for foreign students.
12. Dividend Determinants in Denmark. Jakob Stig Hedensted og Johannes Raaballe.
13. Taxable cash dividends - A money-burning signal. Johannes Raaballe and
Ken Bechmann. European Journal of Finance, Vol. 16, No 1, 2010
14. A paper about share repurchases.
15. Chapter 1 in The Theory of Corporate Finance. Tirole. Princeton University Press, 2006.
16. Corporate Governance. Tirole. Econometrica, Vol. 69, No.1, 2001.
17. Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership
Structure. Michael C. Jensen and William H. Meckling. Journal of Financial Economics 3, 1976.
18. Corporate Ownership Around the World. La Porta, F. Lopez-De-Silanes, and A. Schleifer. The Journal of Finance, Vol. LIV, No. 2, 1999.
19. Controlling Shareholders and Corporate Governance: Complicating the Comparative Taxonomy. Ronald Gilson, ecgi 49/2005.
20. Ownership Dynamics and Asset Pricing with a Large Shareholder. Peter M DeMarzo and Branko Urosevic. Journal of Political Economy, Vol. 114, No. 4, 2006.
21. Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature. Benjamin E. Hermalin and Michael S. Weissbach. NBER 8161, 2001.
22. Endogenously Chosen Boards of Directors and Their Monitoring of the CEO. Benjamin E. Hermalin and Michael S. Weissbach. The American Economic Review, Vol. 88 no. 1. 1998.
23. A Theory of Friendly Boards. Renee B. Adams and Daniel Ferreira. European Corporate Governance Institute, ecgi 100/2005.
24. Are Busy Boards Effective Monitors, Eliezer M. Fich, Bennett S. and Anil Shivdasani, ecgi 55/2004.
25a. Papers on Corporate Governance in Danish Banks (for Danish students)
25b. Similar papers for foreign students.
In total approximately 800 pages.
FORM OF ASSESSMENT:
Oral final examination. Preparation: 20 minutes. Examination: 20 minutes
EXAMINATION AIDS ALLOWED: All - except any means of electronic communication equipment including PCs.
