Corporate Finance I course description - Niels Kroner

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May 28, 2012 ... Corporate Finance builds on the Finance I course taught last winter. ... Jaffe/ Westerfield/Ross) we will be using the text by Ivo Welch for the ...
  EUSP  Economics  Department  –  Spring  2012   Corporate  Finance  and  Empirical  Accounting  Research  

Niels  Kroner     Introduction       Corporate  Finance  builds  on  the  Finance  I  course  taught  last  winter.  Due  to  visa   problems,  I  can  now  only  be  in  St  Petersburg  on  four  days,  so  the  course  will  be   somewhat  compressed.   • Monday,  May  28th:  investment  decisions  and  funding  decisions   • Tuesday  and  Wednesday,  May  29th  and  30th:  valuation,  mergers  and   acquisitions   • Thursday,  May  31st:  financial  reporting  –  theory  and  practice     While  there  are  several  established  textbooks  (e.g.,  Brealey/Myers,   Jaffe/Westerfield/Ross)  we  will  be  using  the  text  by  Ivo  Welch  for  the  simple   reason  that  it  is  quite  up  to  date  and  available  for  free  online  (http://book.ivo-­‐ welch.info/).       Grading  for  the  course  is  a  mix  of  a  final  exam  (50%),  short  homework  exercises   due  each  day  (25%)  and  classroom  participation  (25%).  I  expect  you  to  attend  all   classes  as  the  discussion  forms  an  important  part  of  your  learning  experience.   Office  hours  are  immediately  after  class;  in  addition  you  can  reach  me  via  email   ([email protected])  and  on  Skype  (niels.kroner).     The  plan  is  to  spend  the  four  days  of  the  module  as  follows:     Day  1  (Monday,  May  28th,  10am-­‐12:50pm):  Evaluating  investment   opportunities   • A  review  of  valuation  principles  from  Finance  I   o The  firm  in  an  asset  /  liability  view   o Net  present  value   o Perpetuities  and  annuities   • A  comparison  of  investment  rules   • Value  drivers   • CAPM     Readings:  Welch,  chapter  13;  Koller/Goedhart/Wessels  chapter  7-­‐8     Optional:  Welch,  chapters  1-­‐9,  Mishkin,  chapter  6;  Ross/Westerfield/Jaffe,   chapters  9-­‐12,  Jones,  chapters  4  and  7        

Day  2  (Tuesday):  Funding  choices  and  distribution  of  cash   • Financing  structures   • Financing  instruments   o Equity  instruments   o Secured/unsecured  debt  instruments  and  asset-­‐backed  finance   o Other  funding  sources   • Risk  factors  in  financing  choices   • Uses  of  free  cash   • Dividends  vs.  buybacks   • Valuation  implications  of  funding  choices  and  cash  distribution   • Earnings  and  cash  flows;  operating  and  non-­‐operating  items   • Value  drivers       Readings:  Welch  chapter  16-­‐18  and  21;  Minsky,  Hyman:  Stabilizing  and  Unstable   Economy,  New  York:  McGraw  Hill  2008  (1st  published  1986),  chapter  9;  Arnott,   Robert  D.,  and  Clifford  S.  Asness:  Surprise!  Higher  Dividends  =  Higher  Earnings   Growth,  Financial  Analysts  Journal  2003,  p.  70-­‐87;  Koller/Goedhart/Wessels   chapter  2-­‐6,  32     Optional:  DeAngelo,  Harry,  Linda  DeAngelo  and  Douglas  J.  Skinner,  Corporate   Payout  Policy,  in:  Foundations  and  Trends  in  Finance  3,  2008,  p.  95-­‐287     Day  3  (Wednesday):  Valuation  in  practice,  and  Mergers  &  Acquisitions   • Valuation  frameworks   • Real  options   • Value  creation  through  inorganic  growth   • Investment  Banking   • Private  Equity   • Non-­‐value  creating  motives  for  mergers  and  acquisitions     • Empirical  evidence   • Anti-­‐trust  considerations     Readings:  Bild,  Magnus,  Andy  Cosh,  Paul  Guest  and  Mikael  Runsten,  Do   Takeovers  Create  Value?  A  Residual  Income  Approach  on  U.K.  Data,  ESRC   working  paper  252;  Campa,  Jose  Manuel,  and  Ignacio  Hernando,  Shareholder   Value  Creation  in  European  M&A,  in:  European  Financial  Management,  Vol.  10,   No.  1,  2004,  47–81;  Acharya,  Viral  V.,  Moritz  Hahn  and  Conor  Kehoe,  Corporate   Governance  and  Value  Creation:  Evidence  from  Private  Equity,  working  paper   2010;  Jensen,  Michael,  Eclipse  of  the  Public  Corporation,  in  Harvard  Business   Review  1989     Optional:  Cartwright,  Susan,  and  Richard  Schoenberg,  30  Years  of  Mergers  and   Acquisitions  Research.  Recent  Advances  and  Future  Opportunities,  in:  British   Journal  of  Management,  Volume  17  Issue  S1,  Pages  S1-­‐S5,  2006      

Day  4  (Thursday):  Accounting  and  Corporate  Finance;  Introduction  to   Financial  Statement  Analysis   • Information  asymmetry  and  the  reason  for  mandatory  financial   disclosure   • Accounting  quality     • Empirical  evidence   • Financial  Statement  analysis  -­‐  issues   o Revenue  recognition   o Impairment   o Forensic  accounting   • Sino-­‐Forest  case     Readings:  Beaver,  William:  Financial  reporting  –  an  accounting  revolution,   Englewood  Cliffs:  Prentice-­‐Hall,  3rd  edition,  1998;  Sino-­‐Forest  case  study   materials  (on  course  website)     Optional:  Dechow,  Patricia,  Weili  Ge,  Chad  R.  Larson,  Richard  G.  Sloan,  Predicting   Material  Accounting  Misstatements,  in:  Contemporary  Accounting  Research  28   (2011),  p.  17-­‐82;  Coffee,  John  C.,  What  Caused  Enron?:  A  Capsule  Social  and   Economic  History  of  the  1990's,  Columbia  Law  and  Economics  Working  Paper   No.  214;  Michael  Jones,  Creative  Accounting,  Fraud  and  International  Accounting   Scandals,  West  Sussex:  John  Wiley  2011,  chapters  1-­‐5,  10,  13;  Goncharov,  Igor,   and  Jochen  Zimmermann,  Supply  and  Demand  of  Accounting  Information:  The   Case  of  Bank  Financing  in  Russia,  working  paper  2006.       Literature   • Mishkin,  Frederic:  The  Economics  of  Money,  Banking  and  Financial   Markets,  Global  Edition,  9th  edition,  Boston  et  al.:  Pearson,  2010.   • Ross,  Stephen  A.,  Randolph  W.  Westerfield,  Jeffrey  Jaffe:  Corporate   Finance,  any  edition,  Boston  et  al.:  McGraw-­‐Hill  Irwin   • Brealey,  Richard  A.,  and  Stewart  C.  Myers:  Principles  of  Corporate  Finance,   any  edition   • Jones,  Chris:  Financial  Economics,  Abingdon:  Routledge,  2008   • Koller,  Tim,  Marc  Goedhart  and  David  Wessels:  Valuation:  Measuring  and   Managing  the  Value  of  Companies,  5th  Edition