Universität Wien
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040410 KU Corporate Finance 1 (MA) (2017W)

4.00 ECTS (2.00 SWS), SPL 4 - Wirtschaftswissenschaften
Continuous assessment of course work
Moodle

Registration/Deregistration

Note: The time of your registration within the registration period has no effect on the allocation of places (no first come, first served).

Details

max. 50 participants
Language: English

Lecturers

Classes (iCal) - next class is marked with N

  • Wednesday 08.11. 09:00 - 12:30 Hörsaal 16 Oskar-Morgenstern-Platz 1 2.Stock
  • Wednesday 15.11. 09:45 - 13:00 Hörsaal 1 Oskar-Morgenstern-Platz 1 Erdgeschoß
  • Wednesday 22.11. 08:00 - 11:15 Hörsaal 14 Oskar-Morgenstern-Platz 1 2.Stock
  • Wednesday 29.11. 09:45 - 13:00 Hörsaal 1 Hauptgebäude Tiefparterre Stiege 1 Hof 1
  • Wednesday 06.12. 09:45 - 13:00 Hörsaal 1 Hauptgebäude Tiefparterre Stiege 1 Hof 1
  • Wednesday 13.12. 13:15 - 16:30 Hörsaal 6 Oskar-Morgenstern-Platz 1 1.Stock
  • Wednesday 10.01. 09:45 - 13:00 Hörsaal 1 Hauptgebäude Tiefparterre Stiege 1 Hof 1
  • Wednesday 17.01. 15:00 - 17:15 Hörsaal 4 Oskar-Morgenstern-Platz 1 Erdgeschoß

Information

Aims, contents and method of the course

The Corporate Finance I course an introductory course that forms the first part of a two-course sequence covering topics in Corporate Finance. The aim of the course is to provide a broad conceptual and practical platform for analysing issues in Corporate Finance.

The aim is to develop a framework to think about financial decisions firms regularly undertake. We will go back and forth between developing theories and confronting them with specific real life examples. We start by analyzing the firm’s financing decision in perfect markets. We outline the role of taxes in financing and project valuation. Incorporating the notion of financial distress and bankruptcy we draw on the Static Trade-off Theory of Capital Structure. We analyze the role of information in shaping the financing of corporations and discuss the resulting pecking order of financing. We then focus on the potential conflicts of interest between shareholders and debt holders and between shareholders and management, and their implications for the firm’s capital structure decision. We conclude this part by discussing dynamic considerations the firm might have to make when setting its capital structure.

Second, we will focus on the firm’s payout policy, i.e., we will look at the question of when and how the firm is able to distribute excess cash to shareholders. We show, that, as with capital structure, a firm can create value by its payout policy only in the presence of market imperfections such as taxes, agency costs, transaction costs or asymmetric information between management and investors. We also discuss cash-management by corporations and the usefulness of credit lines for them.

The third topic of the course analyzes corporate restructuring such as mergers and acquisitions (M&As) and initial public offerings (IPOs).
Learning objectives and competencies
Upon completing this course students should be able to:
• Discuss the financing decisions of corporations.
• Understand the importance of asymmetric information and signalling in capital markets and financial decisions.
• Critically discuss the question of the dividend policy a firm should follow.
• Understand the feasibility and trade-offs employed in the different forms of restructuring for financially distressed firms.
• Explore different methods of issuing securities and understand the stock price reaction to issuing securities.
• Appreciate the various channels of corporate governance and its impact on firm value and performance.
The course is held in English.
Course Contents
Part I: Capital Structure

Session 1-2: Irrelevance of capital structure in perfect capital markets
Impact of taxes on capital structure
Capital structure and financial distress

Session 3: Capital structure and asymmetric Information (Signaling)

Session 4: Conflicts of Interest between shareholders and debt holders
Conflicts of Interest between shareholders and managers

Part II: Payout Policy

Session 5: Payout policy in perfect capital markets
Impact of taxes on payout policy
Dividends and transaction costs
Dividends and asymmetric information

Part III: Corporate Restructuring

Session 6: The economics of M&A

Reasons to acquire.
Market reaction to M&A
Who gets the value added from takeovers
Takeover defenses
Case Study: Schneider
READINGS:

Session 7: Initital Public Offering

Benefits and Costs of IPOs
Short-term Underpricing, IPO Cycles, Long-run
Underperformance
CASES:
(1) Thunderbird
Schneider S. A. and Square D Company
(CF I)
A-09-97-0017

Assessment and permitted materials

Course format and methodological approach
The course “Corporate Finance” I consists of 7 three hour sessions. Sessions consist of lectures, execise-solving and at least one case study, and will involve class discussion.

Case Studies. The case method is one of the most effective pedagogical tools to sharpen your analytical and decision-making skills, as it requires you to be an active participant in financial decisions. The discussion constitutes an opportunity to defend your position and to learn from others, by listening to their comments and criticisms. Classrooms are our training environments to prepare you for business challenges.
You are encouraged to meet in groups to discuss and analyze the cases. In the past, students have found that these groups complement the class discussion well.
Regarding the cases, each group will submit a three-page memorandum of analysis and recommendations covering the case study questions plus any accompanying tables you wish to include. Tables should be well organized and labeled. Be sure to indicate how you arrived at your conclusions. In addition, groups are required to prepare a power porint presentation, including the main points of the analysis.
What do I expect from you in class
This is an interactive course, where your active participation is required. Attendance is compulsory.

Laptop/tablets policy. You are not supposed to use your laptop/tablets during case discussions. You have to be 100% focused in the discussions. You may use your laptops/tablets on the lectures/discussion sessions ONLY for academic use emailing, facebooking, tweeting, chatting, skyping, internet surfing, etc. should NOT be done during classes. Doing these would penalize strongly your grade on class participation.

A learning area will be available in the Intranet (Moodle). There, you would find instructions for the sessions, communications, bibliography, etc. Please look at it a couple of times a week. Slides of the sessions will also be posted here, always BEFORE the class.

Minimum requirements and assessment criteria

35% Mid-term exam

10% Case Study

55% Final Exam

Minimum requirement for a positive grade: at least 50% for the exam part and for the case study part, separately.

Examination topics

All lecture materials and paper presentations.

Reading list

The main reading material for the course is contained in:

- “Corporate Finance”, 3th Edition by P.DeMarzo and J.Berk, Pearson Global Edition. (2013).
- “The New Corporate Finance. Where Theory Meets Practice”, 3rd Edition by D.Chew, McGraw-Hill Irwin (CHEW).
Supplementary Readings by Topic:
I: Capital Structure Theories and Payout (Parts I-II)
Chew, D. (2001) The new corporate finance
Where theory meets practice 3th ed.
McGraw-Hill Irwin
Ch 12: ‘The Modigliani-Miller Propositions after Thirty Years’
Journal of Applied Corporate Finance, Vol. 6.Num.1
Graham, J. & Harvey, C. (2002) “How do CFOs make capital budgeting and capital structure decisions?” Journal of Applied Corporate Finance, 15(1): pp.8-23
Opler, T.C., Saron, M. & Titman, S. (1997) “Designing capital structure to create shareholder value.” Journal of Applied Corporate Finance, 10(1): pp.21-34
Smith, C.W. (1986) “Raising capital: theory and evidence.” Midland Corporate Finance Journal, 4: pp.6-22
OR
In: Chew, D.H. (eds.) (2001) New corporate finance: where theory meets practice. 3rd ed. Boston, Mass.: Irwin McGraw-Hill, pp.277-293
Barclay, M.J. & Smith, C.W. (1996) “On financial architecture: leverage, maturity, and priority.” In: Chew, D.H. (eds.) (2001) New corporate finance: where theory meets practice. 3rd ed. Boston, Mass.: Irwin McGraw-Hill, pp.210-223
Ghosh, C. & Woolridge, J.R. (1988) “An analysis of shareholder reaction to dividend cuts and omissions.” Journal of Financial Research, 11(4): pp.281-294
II: Selected Topics

Financial Distress and Restructuring

Franks, Nyborg and Torous, “A Comparison of US, UK and German Insolvency Codes,” Financial Management,Volume 25, No 3.

Stuart C. Gilson (1991), “Managing Default: Some Evidence on How Firms Choose Between Workouts and Chapter 11”, Journal of Applied Corporate Finance Volume 4, Issue 2.

Lawrence A. Weiss (1991), “The Bankruptcy Code and Violations of Absolute Priority”, Journal of Applied Corporate Finance, Volume 4, Issue 2.

Initial Public Offerings and Other Equity Issues

Chew, Chapter 18.
Ritter, J, “Investment Banking and Securities Issuance”, Chapter 5, Handbook of Economics of Finance, Edited by G.M. Constantinides, M.Harris, and R.Stulz

Association in the course directory

Last modified: We 15.12.2021 00:16