F605 Corporate Finance
Kelley School of Business Doctoral Seminar for Finance Major
This course covers theoretical works in the major areas of corporate finance including capital structure, payout policy, mergers and corporate control, financial intermediation, and capital acquisition process. In addition to providing a framework to analyze issues in corporate finance, this course also introduces the basic analytical tools and modeling skills needed to generate theoretical research in applicable areas of financial economics.
There are two modules. In the first three classes we cover game theories and their general applications in economics. During the second module we cover major topics in corporate finance. It is impossible to go through every single development within each topic, so for each topic, I select and discuss in detail some theoretical and empirical papers. I then include at least one influential survey paper for that particular topic.
Course Requirements: It is essential for the students to read the assigned papers in advance and to participate in the class discussion. Homework problems will be assigned and should be turned in on the due date at the beginning of the class.
- Each student should complete two referee reports from appointed papers. One paper is theoretical and the other is empirical. I typically pick research papers at their early stage of development.
- On the day the report is due, the author of the appointed paper will present the paper after you turn in the report. Before his/her presentation, I will randomly select one student to present the report (20 minutes).
- The goal is to train your ability of critical thinking and to get you exposed with research initiation and implementation. In this way, you read a paper and formulate your understanding and critics in your referee reports. Then through the presentation by the author of the same paper, you can compare your interpretation with the research strategy of the author.
- You will receive two separate grades for each of your referee reports: from me and from the author of the paper.
Presentation of assigned papers
- Each student will be assigned papers from the reading list and present them in the class (see guideline for presentation below).
- If a survey paper is presented, I will assign two students to present. Students are encouraged to discuss the assigned papers among each other.
- Each student is required to turn in and present a term paper at the end of the semester.
- This paper could be empirical or theoretical, but it should represent original research. If it is empirical, the tests should be complete, which implies that it is useless to frame a hypothesis whose test requires unobtainable data. If it is theoretical, the proofs should be complete, which implies that it is useless to develop a model that is unsolvable.
Information about the Doctoral Program in Finance
This course provides an in-depth understanding of the way companies make decisions and how value is created in a business. The course builds on the material the students have learned in F301 as well as the 200 level Accounting courses. By the end of this course, students should be able to: (1) Evaluate corporate projects and make decisions based on financial data. (2) Analyze a firm’s financial statements. (3) Value a firm. (4) Understand how corporate decisions impact the value of the firm. (5) Develop complex spreadsheet models in Excel.
Textbooks: F305 Intermediate Corporate Finance Course Packet and Spreadsheet Modeling in Corporate Finance (Craig Holden)
Finance Department’s undergraduate major GPA policy: The average GPA of undergraduate finance major core course is required to fall between 2.70 and 3.0 (on a 4.0 scale).
Prerequisites: Taking and passing I-CORE.
Format: Lectures and labs.
Building on the core finance class, we examine financial decisions that managers face, with an emphasis on how decisions on the financing side of a firm’s business can enhance or destroy firm value. An additional theme is applying ideas from both the core and this course in realistic case settings. Specific issues covered include: (1) Valuing businesses while building in capital structure effects, (2) Capital structure and corporate strategy, (3) Costs of financial distress and conflicts between different investor groups, (4) Effects of financing decisions on managerial incentives, (5)Issuing securities, (6) Dividends and share repurchases, and (7) Options basics and applications.
Throughout the course, our primary viewpoint is that of a corporate financial manager; however, since corporations get funds from investors, we will often look at issues from an investor’s point of view and then examine the implications for managers.
You will notice that valuation is a central theme in this course: In order to make or understand decisions, you need to examine what consequences they have (we will focus on risky future cash flows) and how to compare the alternatives.
This course is essential for anyone planning a career in finance, whether at a corporation or a financial institution, and it is recommended for all business students.
Prerequisites: MBA6230 (Financial Management – Core Class).
Format: Lectures and cases