Discipline: Finance 1 Lecturer Bill Megginson is Professor and Rainbolt Chair in Finance at the University of Oklahoma s Michael F. Price College of Business. He is also Executive Director the Privatization Barometer. From 2002 to 2007, he was a voting member of the Italian Ministry of Economics and Finance s Global Advisory Committee on Privatization. During spring 2008, he was the Fulbright Tocqueville Distinguished Chair in American Studies and Visiting Professor at the Université- Paris Dauphine. He received the University of Oklahoma s top research prize, a George Lynn Cross Research Professorship, in April 2010. 2 Title Corporate Finance 3 Administration 3.1 Schedule Session 1: Monday, November 22 (0900-1200); Core Classic Theory Please note: There is no course session on Tuesday. Therefore it is possible not to attend the session on Monday but to read the required literature to reach the course aim. Short summary will be given on Wednesday. Session 2: Wednesday, November 24 (0900-1200); Core Classic Theory Session 3: Wednesday, November 24 (1400-1800); Capital Structure Theory and Evidence Session 4: Thursday, November 25 (1400-1800); Bankruptcy & Financial Distress, Payout Policy I Session 5: Friday, November 26 (0900-1200); Payout Policy II, Corporate Governance I Session 6: Friday, November 26 (1400-1800); Corporate Governance II 3.2 Location Humboldt-Universität zu Berlin Dorotheenstr. 1 (DOR 1), Room 005 10117 Berlin 1/7
3.3 Max. number of participants The number of participants is limited to 20. Doktorandenprogramm 3.4 Cost The course fee amounts to EUR 450,-. 2/7
4 Content The objectives of this course will be twofold. First, students will be exposed to the most important current and historical literature in three areas of corporate finance capital structure, payout policy, and corporate governance. Second, students will be trained to professionally evaluate and critique existing literature, and to acquaint them with the academic review and publication process. 5 Literature 5.1 Selected literature The textbook for this course will be John R. Graham, Scott B. Smart, and William L. Megginson, Corporate Finance: Linking Theory to What Companies Do, 3 nd Edition (South-Western Publishing, Cincinnati; 2010). The entire book can be purchased from several online bookstores, or the individual required chapters can be purchased directly from Cengage Publishing. Chapter 11: An Overview of Long-Term Financing Chapter 12: Capital Structure: Theory and Taxes Chapter 13: Capital Structure: Non-Tax Determinants of Leverage Chapter 14: The Link between Capital Structure and Capital Budgeting Chapter 15: Payout Policy Chapter 24: Mergers, Corporate Control, and Corporate Governance Chapter 25: Bankruptcy and Financial Distress In addition, students should read the following survey article before the course begins. This article can be downloaded from the Humboldt University library. Kaplan, Steven N. and Per Strömberg, Leveraged Buyouts and Private Equity. Journal of Economic Perspectives 23 (Winter 2009), pp. 121-146 3/7
5.2 Required Readings Doktorandenprogramm The articles below should be read before the assigned class period. Session 1: Monday, November 22 (0900-1200); Core Classic Theory Modigliani, Franco and Merton Miller, The Cost of Capital, Corporation Finance, and the Theory of Investment, American Economic Review 48 (June 1958), pp. 261-297. Galai, Dan and Ronald W. Masulis, The Option Pricing Model and the Risk Factor of Stock, Journal of Financial Economics 3 (January-March 1976), pp. 53-81. Jensen, Michael C., and William Meckling, Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, Journal of Financial Economics 3 (October 1976), pp. 305-60. Leland, Hayne E. and David H. Pyle, Information Asymmetries, Financial Structure, and Financial Intermediation, Journal of Finance 32 (May 1977), pp. 371-387. Session 2: Wednesday, November 24 (0900-1200); Core Classic Theory Miller, Merton H., Debt and Taxes, Journal of Finance 32 (May 1977), pp. 261-276. Bradley, Michael, Interfirm Tender Offers and the Market for Corporate Control, Journal of Business 53 (October 1980), pp. 345-76. Miller, Merton H. and Kevin Rock, Dividend Policy Under Asymmetric Information, Journal of Finance 40 (September 1985), pp. 1031-1051. Bradley, Michael, Anant Desai and E. Han Kim, Synergistic Gains From Corporate Acquisitions and Their Division Between the Stockholders of Target and Acquiring Firms, Journal of Financial Economics 21 (May 1988), pp. 3-40. 4/7
Session 3: Wednesday, November 24 (1400-1800); Capital Structure Theory and Evidence Myers, Stewart C. and Nicholas S. Majluf, Corporate Financing and Investment Decisions When Firms Have Information Investors Do Not Have, Journal of Financial Economics 13 (June 1984), pp. 187-221. Rajan, Raghuram G. and Luigi Zingales, What Do We Know About Capital Structure? Some Evidence from International Data, Journal of Finance 50 (December 1995), pp. 1421-1460. Baker, Malcolm and Jeffrey Wurgler, Market Timing and Capital Structure, Journal of Finance 57 (February 2002), pp. 1-32. [Brattle--First]* Hennessy, Christopher A. and Toni M. Whited, Debt Dynamics, Journal of Finance 61 (June 2006), pp. 1253-1302. Leary, Mark and Michael Roberts, The Pecking Order, Debt Capacity, and Information Asymmetry, Journal of Financial Economics 95 (March 2010), pp. 332-355. Session 4: Thursday, November 25 (1400-1800); Bankruptcy & Financial Distress, Payout Policy I Andrade, Gregor and Steven N. Kaplan, How Costly is Financial (not Economic) Distress? Evidence from Highly Leveraged Transactions that Became Distressed, Journal of Finance 53 (October 1998), pp. 1443-1493. [Smith Breeden--First]* Almeida, Heitor and Thomas Philippon, The Risk-Adjusted Cost of Financial Distress, Journal of Finance 62 (December 2007), pp. 2641-2692. [Brattle-First]* La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W. Vishny, Agency Problems and Dividend Policies around the World, Journal of Finance 55 (February 2000), pp. 1-33. Fama, Eugene F. and Kenneth R. French, Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay? Journal of Financial Economics 60 (April 2001), pp. 3-43. [Jensen-Second]* 5/7
DeAngelo, Harry, Linda DeAngelo, and Douglas J. Skinner, Are Dividends Disappearing? Dividend Concentration and the Consolidation of Earnings, Journal of Financial Economics 72 (June 2004), pp. 425-456. [Jensen- First]* Session 5: Friday, November 26 (0900-1200); Payout Policy II, Corporate Governance I von Eije, Johann and William L. Megginson, Dividends and Share Repurchases in the European Union, Journal of Financial Economics 89 (August 2008), pages 347-374. Chay, J.B. and Jungwon Suh, Payout and Cash-Flow Uncertainty, Journal of Financial Economics 93 (July 2009), pp. 88-107. Megginson, William L., Robert C. Nash, and Matthias van Randenborgh, The Financial and Operating Performance of Newly-Privatized Firms: An International Empirical Analysis, Journal of Finance 49 (June 1994), pp. 403-452. [Smith Breeden-Distinguished Paper]* La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W. Vishny, Law and Finance, Journal of Political Economy 106 (1998), 1113-1150. Session 6: Friday, November 26 (1400-1800); Corporate Governance II Stefano Rossi and Paolo F. Volpin, "Cross-Country Determinants of Mergers and Acquisitions" Journal of Financial Economics 74 (November 2004), pp. 277-304. Moeller, Sara B., Frederik P. Schlingemann, and René M. Stulz, Wealth Destruction on a Massive Scale? A Study of Acquiring-Firm Returns in the Recent Merger Wave, Journal of Finance 60 (April 2005), pp. 757-782. Bargeron, Leonce L., Frederik P. Schlingemann, René M. Stulz, and Chad J. Zutter, Why Do Private Acquirers Pay so Little Compared to Public Acquirers? Journal of Financial Economics 89 (September 2008), pp. 375-390. [Jensen-First]* 6/7
Klein, April and Emanuel Zur, 2009, Entrepreneurial shareholder activism: Hedge funds and other private investors, Journal of Finance 64, pp. 182-229. Almazan, Andre, Adolfo de Motta, Sheridan Titman, and Vahap Uysal, Financial Structure, Acquisition Opportunities, and Firm Locations, Journal of Finance 65 (April 2010), pp. 529-yy. * [Best paper prize--rank]: The Journal of Finance (JF) and Journal of Financial Economics (JFE) each award two types of Best Paper awards each year, and the papers listed here that have been awarded one of these prizes are indicated with the prize name and whether it was a First Place, Second Place or Distinguished Paper award. The JF awards the Smith Breeden Prizes for outstanding research published in the Journal of Finance and the Brattle Prizes in Corporate Finance. The JFE awards the Jensen Prizes for best papers published in the areas of Corporate Finance and Organizations and the Fama- DFA Prizes for best papers published in the areas of Capital Markets and Asset Pricing. 6 Prerequisites Students will be expected to actively participate in (and contribute to) classroom discussion. In order to do this, each student must read the assigned primary articles for every class period and, when his or her turn comes, to present the article and to lead the class discussion. Each student will present one paper. He/she should also distribute to other class participants copies of his/her presentation or a short handout (2-3 pages) summarizing the assigned article. Though not required, students are strongly encouraged to present their assigned articles using PowerPoint or an equivalent presentation program. We will cover 24 papers during the 21-hour course, so students must not fall behind in their readings. 7 Assessment Class participation will count for 50% of the course grade, with 30% assigned based on the quality of the student s handout and presentation, and the other 20% based on general class participation and critiquing skill. A cumulative final exam will be given after the course ends and will also count for 50% of the course grade. 8 Credits The course is eligible for 6 ECTS. 7/7