Finance: Theory of Corporate Finance

You will be familiarised with the key theoretical contributions, as well as some empirical research, that has shaped the current understanding of corporate financial policies and strategies.

Starting from an efficient markets framework (which results in the Modigliani-Miller irrelevance propositions), we go on to consider the constraints imposed by market imperfections such as taxes, financial distress costs, information asymmetries and agency conflicts. We also examine how these factors play out in the main areas of corporate finance: capital structure choice, payout policy, debt contracting, equity issuance and initial public offerings, mergers and acquisitions, and corporate governance.

The course is theoretically oriented, but we will keep the theoretical approach as unified as possible, with an emphasis on common building blocks and economic intuition. You will get ample illustrations and practical examples of the theories and concepts covered.

The course is mainly for those of you who would like to pursue a career in corporate finance functions within investment or commercial banks, consulting firms or non-financial corporations. You also get a solid theoretical foundation for further studies in more applied or specialised advanced level courses in areas such as corporate valuation, risk management or banking.

Course literature

The course literature listed may be updated up to eight weeks before the course begins.

The teaching on the course consists mainly of lectures. During the course, you will get ample opportunities for collaborative learning in groups through multiple assignments.

You are assessed by a mix of an individual written exam, several smaller hand-in assignments (problem sets with numerical applications of theory), and a case assignment that is focused on one specific area of corporate finance and carried out in groups. The written exam takes place at the end of the course.

Prerequisites

at least 90 ECTS-credits in economics or business administration are required, which must include an introductory course in finance and an intermediate course in corporate finance.