Research Seminar "Behavioral Finance and Corporate Governance"

Master 2019/2020

Category 'Best Course for New Knowledge and Skills'

Type: Elective course (Strategic Corporate Finance)

Area of studies: Finance and Credit

Delivered by: School of Finance

Where: Faculty of Economic Sciences

When: 2 year, 1-3 module

Mode of studies: offline

Instructors: Irina Ivashkovskaya, Anastasia N. Stepanova, Veronika Vinogradova

Master’s programme: Strategic Corporate Finance

Language: English

ECTS credits: 7

Contact hours: 80

Full Syllabus

Abstract

This course represents a system of research seminar for the 2nd year master students. The research seminar is aimed to develop the academic skills of the master students and to prepare them to make their own research in the area of finance. Research in this area applies specific mathematical and econometrical methods, as well as the perfect data mining skills. The course contains two types of research activity. The first activity for every 2nd year master student is to participate in the large research seminars of HSE School of Finance. The second type of activity is to participate in the small team seminars (that should be chosen before the beginning of the year). Both parts of the research seminar aim to help students to develop the academic writing skills and a number of soft skills that are useful for a financier (e.g. presentation skills, team work, project management). The first part of research seminar aims at fostering discussion and interaction on variable topics in finance. The second part aims to develop personal academic skills in the chosen area. Students who choose Behavioral Finance and Corporate Governance deepen their knowledge in behavioral and cognitive aspects of finance as well as in the decision-making mechanisms of the company. The students also develop their skills in the data-mining, work with the literature and text preparation in this area. To follow this course the courses of corporate finance, valuation, theory of finance and microeconomics are the prerequisites.

Learning Objectives

To provide the student with the proper tools and skills for making their own research in the area of finance

Expected Learning Outcomes

Be able to formulate and verify his or her own research question
Be able to choose and apply the proper methods to test the hypotheses
Be able to explain and demonstrate the challenges to the efficient market hypothesis using empirical data
Be able to explain the nature of biases rooted in data mining and statistical methods
Be able to prepare the literature review for his or her master thesis
Be able to know how to do the data-mining in financial and investment sphere

Course Contents

Лекция 3. Основные показатели финансово-хозяйственной деятельности гостиниц, службы питания в отеле и туристического бизнеса.
Процент загрузки номерного фонда (Occupancy rate), средняя фактическая стоимость номера (Average Achieved Room Rate - AARR), средняя дневная цена (Average Daily Rate- ADR), доход на номер от проживания (Revenue per Available Room per Day – RevPAR), валовая операционная прибыль на один номер (Gross operating profit per available room – GOPPAR) как индикатор финансового потенциала гостиницы. F&B служба как дополнительная услуга: проходимость и средний чек, товарооборот, выручка и операционная прибыль по видам услуг на квадратный метр / единицу оборудования / единицу персонала / точку, коэффициент корреляции и др. Объемные показатели в туристическом бизнесе, валовый доход, прочие доходы, издержки обращения, прибыль и рентабельность.
Work with new papers and data in area of behavioral finance and corporate governance
Progress discussion. Individual presentations (every class)
Participation in School of Finance seminar or Lab seminar
Presentations of master thesis results
1. Financial modelling in project evaluation
Groundwork of financial models with future cash flows forecasts. Industry analysis as an important stage in the preparation of the feasibility study. Applications of the NPV, profitability index, modified internal rate of return, equivalent cash flow. The choice of a suitable criterion for unlimited (very long) and limited projects. Abnormally profitable projects. Features of projects accounting in emerging markets. Analysis of incremental cash flows. Typical common mistakes in the evaluation of incremental cash flow for different types of projects. Features of the incremental cash flow for various types of intercompany projects. Calculation of incremental cash flow in projects that are related to the replacement of existing assets. Nominal and real cash flows. Methodological mistakes in the accounting of inflation. Impact of taxes on cash flow. Fiscal, marginal and effective tax rates.
2. Project analysis under certainty
Cash flow evaluation for a separate and integrated into the existing company project. Main problems associated with cash flows estimation of the project: correct prices determination, transfer pricing, infrastructure capital costs, sunk costs, opportunity costs. Choice of the discount rate for a separate project and integrated into the company. Change in the cost of capital of the company as result of project implementation. Structure justification of sources of financing. Capital structure of the project and structure of sources of external financing. Justification of the cost of capital in the case of non-marketable debt. Features of accounting in the cost of the additional capital payments (fees, insurance, deposit) to lender. Application the technique of adjusted present value (APV) for various types of projects. Comparison of methods NPV and APV. Problem of underinvestment, overinvestment, and the adoption of risky projects.
3. Investment program creation
Portfolio of investment projects of the company. Selection, justification and methods of assessment portfolio of projects. Analysis of interrelated projects. Evaluation of projects in the divisional structure and projects that are integrated into one complex. Creation of rational project complex. Coordination of the interests of the participants. Assessment of the strategic prospects: evaluating the possibilities of entering new markets or refusing of the project. Using real CALL option in the analysis. How to create the optimal capital budget, i.e. to distribute capital between projects? Creation of a rational combination of projects in time, evaluation of necessary delay projects. Graph of investment opportunities. Reasons for the growth of the cost of capital. Choice between substitutional projects. Optimization of the capital budget. Cross-financing of the projects. Realization of loss-making project in case of increasing profitability of the entire complex. Implementation of specific projects - cross-holding and the growth of company value. Projects that reduce the risks of the entire complex. Monitoring and reassessment projects. Control by the creditor and by the initiator. System financial effects in investment program: cross-funding, cross-subsidies, cross-hedging. System effects and financial strategy of the company.
4. Experience of international consultants in Russia (Ernst&Young).
Preparation of a feasibility study of investment projects. Main participants of the project. Structuring of the project financing transaction. Determination of the main technical and economic parameters. Preparation of a financial model with forecasts of future cash flows. Analysis of the industry as the most important stage in the preparation of feasibility studies. Analysis of financial performance indicators of the project. Analysis of the results of the investment project.
5. Project analysis under risk
Risks forecasting and analyzing in projects. Methodology of the analysis of project risks. Risk management process. A sensitivity analysis. The technique of sensitivity analysis: a method of control points, method of rational ranges. Conditions of the Monte Carlo method application. Scenario method. Stages of creation scenarios. Analysis of the decision tree.
6. Coordination of project participants
Investment project as a set of interests of its participants. The main categories of project participants: equity investors and sponsors; creditors and guarantors; suppliers and contractors; consumers of products. The interests of the project participants. Demands on the coordination of interests between the main participants of the project. Projects with the participation of the state. The role of the state in the implementation of the project: direct participant of the capital, guarantor. Tax holidays and benefits. Concessions. Public-Private Partnership (PPP). Concept, benefits and limitations. Projects with participation of foreign investor. The specifics of the calculations of the capital budget of the international project. Multi-currency nature of the project. The comparability of rates of return. Purchasing power parity. Reduction of rates of return to one currency in the implementation of financial calculations. Multi-currency cash flows and principles of evaluation of international projects. Transformation of cash flows.
Topic 1. How to write a research paper in finance. Formal and informal requirements to master theses.
Idea search. What to read? How to find the idea and a motivation? How to start writing? Formal and informal requirements to master theses.
Work with new papers and data in area of capital structure and investment decisions
Progress discussion. Individual presentations (every class)
Participation in School of Finance seminar or Lab seminar
Presentations of master thesis results
How to write a research paper in capital structure and investment decisions. Formal and informal requirements to master theses.
Participation in School of Finance seminar or Lab seminar
Presentations of master thesis results
How to write a research paper in M&A. Formal and informal requirements to master theses. Discussion of ideas and progress of student’s future master theses.
Work with new papers and data in area of M&A. Discussion of last research papers in developed and emerging capital markets.

Assessment Elements

Individual presentation
Participation in School of Finance seminar
Presentation of master thesis results and database (predefense of master thesis)
Group assignments
Cumulative mark

Interim Assessment

Interim assessment (3 module)
0.5 * Cumulative mark + 0.5 * Presentation of master thesis results and database (predefense of master thesis)

Bibliography

Recommended Core Bibliography

Baker, H. K., Filbeck, G., & Nofsinger, J. R. (2019). Behavioral Finance : What Everyone Needs to Know®. New York, NY: Oxford University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=2002278
Choices, values, and frames, , 2005
Corporate Finance: Theory and Practice / Pierre Vernimmen, Pascal Quiry, Maurizio Dal-locchio, Yann Le Fur, Antonio Salvi. – 5th ed. – Chichester: John Wiley & Sons Ltd, 2018. – 1010 p.

Recommended Additional Bibliography

Atif R. Mian, & Amir Sufi. (2018). Finance and Business Cycles: The Credit-Driven Household Demand Channel. NBER Working Papers. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.nbr.nberwo.24322

Course Syllabus