FINC402 Advanced Corporate Topics. Semester 1, 2015 COURSE OUTLINE

Transcription

1 FINC402 Advanced Corporate Topics Semester 1, 2015 COURSE OUTLINE

2 Paper Description and Aims The primary aim of the course is to provide the student with an in depth understanding of advanced issues in corporate finance. The general approach followed will include: (i) Formal instruction: Derivation and detailed discussion of the main results of seminal papers dealing with capital structure policy and dividend policy will constitute the primary mode of instruction in the first 5 weeks of the semester. This is expected to equip the students with adequate theoretical understanding of issues such as why capital structures and dividend policies vary across firms. This groundwork will then be used to understand empirical findings that attempt to test their implications. (ii) Student presentations: Students will present the empirical papers from the list provided (The structure of student presentation will be ascertained upon knowledge of final enrollment). Every student is expected to read the papers and come to class with some critically thought out questions/comments pertaining to the issues in the papers prescribed for that class before coming to the class. Learning Outcomes Upon successful completion of this paper, you should be able to (i) To develop an ability to communicate information, arguments, ideas and analyses effectively both orally and in writing (ii) To develop a critical approach to the contextualisation, presentation and evaluation of arguments and evidence with respect to relevant literature and perspectives (iii) To acquire advanced specialist knowledge in a particular area of study (iv) To develop organisational, personal and research skills so as to ensure completion of a substantial piece of original advanced research in an acceptable period of time and (v) To develop the capability to present and engage in debate about the ideas and conclusions of the research with the international community of scholars. Teaching Staff Paper Coordinator Name: Gurmeet Singh Bhabra Office: Room Gurmeet.bhabra@otago.ac.nz Office Hours: Tuesday 1:00-3:00pm, Wednesday 2:00pm - 3:00pm You should contact me with any and all administrative enquiries about the paper. Course Delivery Lecture Day/Time: Mondays and Wednesdays 3:00-4:50pm Page 1

3 Room: Commerce 5.37 Course Calendar: The following set of readings will be discussed in class in sequence (as much as possible). Any change to the assigned readings will be announced in class. Students are expected to prepare for and attend all classes to gain full benefit from the course These activities should be prepared for by reviewing information detailed on Blackboard and completing any assigned readings. Students unable to attend a lecture are expected to catch up on missed material. Unless stated otherwise, all aspects of the course are examinable. The following set of papers will be covered in class. There is a possibility that we might have to make revisions to this list but you will be informed about any changes so that such changes do not inconvenience you. Dates of submission of the research proposal/literature review reports will be notified in class. Miller, M.H., 1977, Debt and Taxes, Journal of Finance 32, Scott, J.H., 1976, A Theory of Optimal Capital Structure, Bell Journal of Economics and Management Science7, Myers, S.C., 1977, Determinants of Corporate Borrowing, Journal of Financial Economics 5, Jensen, M.C. and W.H.Meckling, 1976, Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure, Journal of Financial Economics 4, Titman, S., 1984, The Effect of Capital Structure on a Firm s Liquidation Decision, Journal of Financial Economics 13, Myers, S.C. and N.S. Majluf, 1984, Corporate Finance and Investment Decisions when Firms have Information that Investors Do Not Have, Journal of Financial Economics 13, Jensen, M.C., 1986, Agency Costs of Free Cash Flow, Corporate Finance and Takeovers, American Economic Review 76, Altman, E.I., 1984, A Further Empirical Investigation on the Bankruptcy Cost Question, Journal of Finance 39, Lehn, K. And A. Poulsen, 1989, Free Cash Flow and Stockholder Gains in Going Private Transactions, Journal of Finance 19, Ang, J.S., Cole, R.A. and Lin, J.W., 2000, Agency costs and ownership structure, Journal of Finance 55, Bebchuk, L.A., Cohen, A., 2005, The costs of entrenched boards, Journal of Financial Economics 78, Page 2

4 Denis, D.J., Denis, D.K., Sarin, A., 1997, Agency Problems, Equity Ownership, and Corporate Diversification Decisions, Journal of Finance 52, Goyal, V.K., Lehn, K. and Racic, S., 2002, Growth Opportunities and Corporate Debt Policy: The Case of US Defense Industry, Journal of Financial Economics 64, Harford, J., Klasa, S., and Walcott, N., 2009, Do Firms have Leverage Targets? Evidence from Acquisitions, Journal of Financial Economics 93, Garvey, G.T. and Hanka, G., 1999, Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage, Journal of Finance 54, Miller M., and K. Rock, 1985, Dividend Policy under Asymmetric Information, Journal of Finance 40, John, K. and J. Williams, 1985, Dividends, Dilution and Taxes: A Signalling Equilibrium, Journal of Finance 40, Easterbrook, F., 1984, Two-Agency Cost Explanation of Dividends, American Economic Review 74, Healy, P.M. and K. Palepu, 1988, Earnings Information Conveyed by Dividend Initiations and Omissions, Journal of Financial Economics 21, Dewenter, K.L. and Warther, V.A., 1998, Dividends, Asymmetric Information and Agency Conflicts: Evidence from a comparison of the Dividend Policies of Japanese and U.S. Firms, Journal of Finance 53, Denis, D. and Osobov, I., 2008, Why do Firms Pay Dividends? International Evidence on the Determinants of Dividend Policy, Journal of Financial Economics 89, John, K., Knyazeva, A., 2006, Payout Policy, Agency Conflicts, and Corporate Governance, Working Paper, Stern School, New York University. Loughran, T. and A.M. Vijh, 1997, Do long-term Shareholders Benefit from Corporate Acquisitions, Journal of Finance 52, Devos, E., Kadapakkam, P.R., Krishnamurthy, S., 2008, How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations, Review of Financial Studies 22, Safieddine A. and Sheridan Titman, 1999, Leverage and Corporate Performance: Evidence from Unsuccessful Takeovers, Journal of Finance 54, Bradbury, M.E. and Mak, Y.T., 2000, Ownership Structure, Board Composition and the Adoption of Charter Takeover Procedures, Journal of Corporate Finance, 6, Core, J.E., Holthausen, R.W. and Larcker, D.F., 1999, Corporate Governance, Chief Executive Compensation, and Firm Performance, Journal of Financial Economics 51, Page 3

5 Henderson, B.C., Masli, A., Richardson, V.J. and Sanchez J.M., 2010, Layoffs and Chief Executive Officer (CEO) Compensation: Does CEO Power Influence the Relationship? Journal of Accounting, Auditing and Finance 25, Datta, S., M.I. Datta and Kartik Raman, 2001, Executive Compensation and Corporate Acquisition Decision, Journal of Finance 56, Datta, S., Datta, M.I., Raman, K., 2005, Executive Compensation Structure and Corporate Equity Financing Decisions, Journal of Business 78, D. Nance, C. Smith and C. Smithson, 1993, On the Determinants of Corporate Hedging, Journal of Financial Economics 19, K. Froot, D. Sharfstein and J. Stein, 1994, A Framework for Risk Management, Journal of Applied Corporate Finance7, M.A. Petersen and S.R. Thiagarajan, 2000, Risk Measurement and Hedging: With and Without Derivatives, Financial Management 29, Expectations and Workload Students are expected to follow the following the suggested schedule for work load to successfully complete the course requirements (note that these are only guidelines): Preparation for the classes 92 hours Class contact hours 48 hours Critiques 20 hours Preparation for the final exam 80 hours Course Learning Resources Text Book: There is no prescribed textbook. However, the following books are recommended to supplement the readings covered in class: Financial Theory and Corporate Policy by Thomas E. Copeland, J. Fred Weston, and Kuldeep Shastri, Addison-Wesley Publishing Co. Fourth Edition. Financial Markets and Corporate Strategy (2 nd Edition) by Mark Grinblatt and Sheridan Titman, McGraw-Hill Irwin. Blackboard Blackboard provides you with access to course materials, class notices, and resources. All readings assigned for this class along with notes for papers presented by me will be posted on the Blackboard. In addition, Blackboard will also be used to the class so it is important that you check your student and Blackboard regularly. Student Webmail IMPORTANT - DO THIS NOW: Page 4

6 Forward your University address to an address that you use regularly as follows: 1. Log into your StudentMail account using your student username and password 2. Click Cog button (top right corner) > Options 3. Under Account, select the Forward your shortcut under the Short Cuts menu on the right side of the screen. 4. Under the Forwarding heading, type in the address you want your to be forwarded to. You can also choose to have a copy of these s kept on your StudentMail account, so please check the box if you would like this. 5. Click the Start forwarding button. Assessment All material presented is examinable (except where stated otherwise) by assignments and the final examination. All important assessment information such as due dates and times, content, guidelines and so on will be discussed at lectures and, where appropriate, detailed on Blackboard. Students are responsible for ensuring that they are aware of this information, keeping track of their own progress, and catching up on any missed classes. Assessment % of final grade Requirements to pass this paper Presentations 15% Class participation 10% Research proposal/literature review 20% Final Test 55% 50% pass mark on the final exam Course Requirements You will have to score a minimum of 50% on the final exam to pass this course. Assignments: (i) Research proposal/literature review: This may be a group assignment depending on the final numbers enrolled in the class. You can choose one of two different options. Written project report is due at 5:00pm Thursday in the penultimate week. Option 1: A research proposal that will contain the following sections: an introduction, literature review, hypothesis development, data and methodology and expected results. Remember, you are not required to either collect any data or perform any analysis. However, the project should be doable i.e. the data source should be credible and the research question should be original and interesting. I suggest you visit and either look for a potential topic or ensure your research idea is not the subject of another study. Option 2: Pick an interesting topic either from the papers we discuss in the class or an issue connected with corporate finance but not necessarily touched upon in the class and do a review of the literature for the most recent 10-year period. However, there could be some seminal papers that might fall outside of this date range which should also be included in your review. Page 5

7 (ii) Presentations: Depending on the class size, the class will be split into groups and each group will have to present a minimum of twice during the second half of the semester. Assessment of presentations is however based on individual performance so ever member of the group will be responsible for his/her own performance. Quality Assurance At the Otago Business School we monitor the quality of student learning and learning experience. Your assessed work may be used for assurance of learning processes, such as evaluating the level of achievement of learning outcomes, with the aim of improving the quality of our programmes. All material used for quality assurance purposes will be treated as confidential and the outcome will not affect your grades. Grading System The grading scheme used at Otago is: A C A C A C B D B E <40 B Dishonest Practice and Plagiarism Students should ensure that all submitted work is their own. Plagiarism is a form of dishonest practice (cheating). It is defined as copying or paraphrasing another s work and presenting it as one s own. Any student found responsible for dishonest practice in any piece of work submitted for assessment shall be subject to the University s dishonest practice regulations, which may result in serious penalties, including forfeiture of marks for the piece of work submitted, a zero grade for the paper, or in extreme cases, exclusion from the University. The University of Otago reserves the right to use plagiarism detection tools. Students are advised to inform themselves about University policies concerning dishonest practice and take up opportunities to improve their academic and information literacy. If necessary, seek advice from academic staff, or the Student Learning Centre. The guideline for students is available at this link: The Library resource on ethical use of information is available via this link: Lectures end Friday 29 May 2015 University Exam Period First Semester Begins 30 May 2015 End 17 June 2015 Student Learning Support and Information Page 6

8 Student Charter Guidelines for Learning at Otago Student Learning Centre The Student Learning Centre, which is part of the Higher Education Development Centre, provides learning support, free of charge, to ALL enrolled students. Their services include: a workshop programme designed to help students to improve their learning strategies and their generic skills; individual assistance with learning issues; on-line study skills advice; a student leadership programme a student-led peer support programme for students of all ages and backgrounds. conversational English groups for students from a non-english speaking background The Centre also provides two very helpful study guides, Guidelines for Writing and Editing and Writing University Assignments and these are available on the SLC website. Library Support The Library website provides access to resources and services, including group room bookings, library hours and locations, past exam papers, subject guides, article databases and more. If you need assistance either check out the self-help guides or ask Library staff at the ground floor service desks, or ask.library@otago.ac.nz Māori Student Support Tënā koutou katoa, Ko Corey Bragg töku ingoa Ko Ngāi Tahu, Kāti Mamoe, Waitaha me Ngāti Kahungunu öku iwi Kia ora, my name is Corey Bragg and I am the Māori student support person in the Business School. My role is to help link Māori students with the various support networks throughout the university and the community. Kaua e whakamā, don't be shy - come in for a chat. Mauri ora mai. Tel corey.bragg@otago.ac.nz Room CO 3.21 Nicola Beatson is the Kaiāwhina Māori in the Department of Accountancy and Finance Tel nicola.beatson@otago.ac.nz Room CO5.32 Pacific Islands Student Academic Advisor Warm Pacific Greetings Page 7

9 Talofa lava, my name is Esmay Eteuati and my role is to liaise with Academic Departments and Student Services relating to Pacific students and their course of study. I support both staff and students in the Business School and have a network of Pacific contacts in other Divisions around the University. Tel esmay.eteuati@otago.ac.nz Disability Information and Support Students are encouraged to seek support if they are having difficulty with their studies due to disability, temporary or permanent impairment, injury or chronic illness. It is important to seek help early, through one of the contacts below: Dyna Seng Tel dyna.seng@otago.ac.nz Room CO5.47 Student Feedback We encourage your feedback. This can be in the form of contacting staff, participating in course evaluation surveys and communicating with class representatives. Continual improvements will be made to this course based in part on student feedback. Recent changes to this course as a result of constructive feedback include (insert summary of improvements) Class Representatives The class (or student) representative system is an avenue for encouraging communication and consultation between staff and students. It provides you with a vehicle for communicating your views on the teaching and delivery of the paper and provides staff with an opportunity to communicate information and gain constructive feedback from students. It contributes to the development of a sense of community within a department and it adds a further dimension to the range of support services offered to students. Volunteers for the role of class representatives will be called early in the semester. The OUSA invites all class representatives to a training session, conducted by OUSA, about what it means to be a class representative and some of the possible procedures for dealing with issues that arise. They also provide information on the services that OUSA offers and the role it can play in solving problems. The OUSA provides support to class representatives during the semester. Departmental staff will also meet with class representatives during the semester to discuss general issues or matters they wish to have considered. Your class representative s name and contact details will be posted on Blackboard early in the semester. Concerns about the Course We hope you will feel comfortable coming to talk to us if you have a concern about the course. The Course Co-ordinator will be happy to discuss any concerns you may have. Alternatively, you can report your concerns to the Class Representative who will follow up with departmental staff. If, after making approaches via these channels, you do not feel that Page 8

10 your concerns have been addressed, there are University channels that may aid resolution. For further advice or more information on these, contact the departmental administrator or head of department. Disclaimer While every effort is made to ensure that the information contained in this document is accurate, it is subject to change. Changes will be notified in class and via Blackboard. Students are encouraged to check Blackboard regularly. It is the student s responsibility to be informed. Page 9