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Regular version of the site

Corporate Finance

2019/2020
Academic Year
ENG
Instruction in English
3
ECTS credits
Delivered at:
School of Finance
Course type:
Elective course
When:
3 year, 3 module

Instructors

Course Syllabus

Abstract

The course develops theoretical framework for understanding and analysing major financial problems of a corporation operating in market environment. The course covers capital budgeting issues, capital structure theory, payout policy, risk management discussions and M&A motives. The course is based on lectures, classes, groupwork and self-study.
Learning Objectives

Learning Objectives

  • Understand and apply principles of modern financial analysis
  • Be able to discuss different stakeholders’ goals as a source of agency conflicts
  • Understand and apply capital budgeting techniques when making investment decisions
  • Be able to discuss the logic of capital structure decisions and understand how market imperfections influence capital structure decisions
Course Contents

Course Contents

  • Capital structure choice and corporate value
    Modigliani and Miller theorem (MM) on capital structure, perfect capital market assumptions and basic MM irrelevance propositions. Weighted average cost of capital (WACC): a portfolio approach to determine the overall opportunity cost of capital. Competing definitions of WACC. Cost of debt, cost of equity and WACC under pure MM. Shareholder reaction to changes in capital structure. MM propositions with corporate income taxes. Income tax shield as motivation to take debt. Motivation of WACC behavior. The effect of personal taxes on capital structure. Miller equilibrium model. Tradeoff theory as a model of optimal capital structure: tax shield vs financial distress costs. Firm value vs WACC under tradeoff theory. The pecking order of financing theory. The information conveyed by capital structure decisions. A debtholder – equityholder conflict: debt overhang problem, asset substitution problem, debt covenants and monitoring opportunities as means to agency costs. An equityholder – manager conflict: overinvestment problem, deficient management efforts, aligning the conflicting interests with capital structure. Minimizing the total cost of two agency conflicts with capital structure choice.
  • Interrelation of financing and investment decisions
    Adjustments to capital budgeting techniques when evaluating a project under certain financing plan. Adjusted present value (APV), weighted average cost of capital (WACC) approach and free cash flow to equity (FCFE): three classical approaches to account for side effects.
  • Payout policy and corporate value
    Types of dividends: cash dividend, stock dividend, share repurchase. Payout policy as a financing problem. The Modigliani-Miller payout irrelevance theorem. Neither dividend size nor means of delivery matters under MM. The effect of investor taxes: a preference for capital gains compared to cash distributions. The dividend puzzle. Static clientele theory. Lintner’s stylized empirical facts. Signaling role of dividends. Payout decisions as means to align the interests of managers and shareholders.
  • M&A and restructuring
    Types of M&A. Reasons to acquire: economies of scale, vertical integration, financing side motivation. Hubris hypothesis by Roll. Empirical evidence of inefficient M&As. Value creation via restructuring. Divestitures and bankruptcy as types of corporate restructuring. The sources for synergy in restructuring.
  • Group project presentations
Assessment Elements

Assessment Elements

  • non-blocking Class participation
  • non-blocking Quiz
  • non-blocking Group Project
  • non-blocking Mid-Term Test
  • non-blocking Final Exam
    Экзамен проводится в письменной форме (решение задач, ответы на теоретические вопросы) с использованием асинхронного прокторинга. Экзамен проводится на платформе Экзамус (https://hse.student.examus.net). К экзамену необходимо подключиться за 15 минут до начала. На платформе Экзамус доступно тестирование системы. Компьютер студента должен удовлетворять следующим требованиям: https://elearning.hse.ru/data/2020/05/07/1544135594/Технические%20требования%20к%20ПК%20студента.pdf Для участия в экзамене студент обязан: заранее зайти на платформу прокторинга, провести тест системы, включить камеру и микрофон, подтвердить личность. Во время экзамена студентам запрещено: общаться (в социальных сетях, с людьми в комнате), списывать. Во время экзамена студентам разрешено пользоваться обычным калькулятором (без режима программирования). Кратковременным нарушением связи во время экзамена считается прерывание связи до 10 минут. Долговременным нарушением связи во время экзамена считается прерывание связи 10 минут и более. При долговременном нарушении связи студент не может продолжить участие в экзамене. Процедура пересдачи аналогична процедуре сдачи.
Interim Assessment

Interim Assessment

  • Interim assessment (3 module)
    0.05 * Class participation + 0.5 * Final Exam + 0.15 * Group Project + 0.25 * Mid-Term Test + 0.05 * Quiz
Bibliography

Bibliography

Recommended Core Bibliography

  • Valuation methods and shareholder value creation, Fernandez P., 2009

Recommended Additional Bibliography

  • Financial theory and corporate policy, Copeland T. E., Weston J. F., 2005
  • Principles of corporate finance, Brealey R. A., Myers S. C., 1996