Corporate Finance

Course Director: Ramin P Baghai

Purpose and overview

The field of Corporate Finance deals with two broad and interrelated themes: what businesses and corporate investment opportunities are worth; and how to finance corporations and investments. These are intertwined because the terms at which firms are financed (the price of financial securities) ultimately determine capital structure choices.

This course is an introduction to the field for those students who have limited background and develop key tools and techniques. The course is an opportunity for more advanced students to develop and refine their understanding and toolbox. Topics covered in this course include: issuance of debt and equity securities, tax effects of capital structure, financial institutions such as banks and institutional investors and their role in financing firms, and transactions like initial public offerings, mergers, and restructurings. A set of key concepts and theories will be developed and employed throughout.

Content

The course is divided into three parts: (1) Financing and financial policy; (2) Valuation; and (3) Advanced topics. The course content is not finalized at the time of writing. Tentatively, the three parts of the course encompass the following topics. The first part covers the trade-of theory of capital structure, tax benefits, signaling models, as well as key features of the issuance process for various kinds of debt and equity. The second part introduces cash flow-based valuation techniques such as WACC and APV, including assigning an appropriate cost of capital based on a firm's capital structure. These are complemented with multiple-based valuation. The third part of the course covers topics such as M&A, IPOs, commercial banks and corporate lending, restructuring and divestitures.

ESG-related content

At least one session will be dedicated to a case study related to climate finance.

Format and instructional philosophy

The course is case-based. Case discussions aim to apply concepts and techniques to complex real-world situations. Each case will be available in PDF format for download in the Fall. To prepare for a case students prepare answers to assignment questions.

The case and assignment questions focus on one or several important decisions regarding the financial policy of a firm or some other managerial choice. To reach a conclusion, policy recommendations or strategy for the case, it will often be necessary to perform numerical analysis. To simplify the analysis, each case has a set of exhibits.

Students should come to class ready to address the questions in the case assignment. Students are encouraged to work together to prepare the case. When in class, each student is expected to be able to explain and motivate their own views (and are not expected to present joint viewpoints). Offering complementary perspectives and disagreeing constructively is part of the process.

Students have to be present and active in class meetings. Each student belongs to either the EARLY or the LATE meeting groups (will be posted in Canvas).

Optional TA-led seminars are offered throughout the course for students who want to review materials or ask additional questions. These are taught by a teaching assistant.

Course administrator: Kirandeep.Saini@hhs.se

After completing this course, students should be able to:

1. Value a firm, project or investment proposal, including assigning a cost of capital
2. Describe and understand the various types of financial instruments used to finance firms, from an economic, legal, financial and practical point of view
3. Suggest a suitable capital structure for any firm
4. Critically evaluate the effects of agency and information problems on the firms’ financial policies and capital structure
5. Apply valuation and capital structure to financial transactions such as buyouts and mergers, and propose a relevant transaction structure

This course is compulsory for all MSc Finance students. It is in principle also open to second-year MSc students from other programs (provided they have the required pre-knowledge in corporate finance and accounting).

Students are assumed to know basic accounting (e.g., as covered in the SSE MSc course 3310). Students should also have some background in corporate finance, perhaps from an introductory course based on a standard textbook (e.g. Berk Demarzo or Brealey Allen Myers). The course moves very fast.

A limited number of students who are not studying for the MSc Finance will be admitted. Students from other programs or on exchange who wish to take the course must email the course administrator, Kirandeep Saini (Kirandeep.saini@hhs.se), with (1) their CV and (2) a copy of their grade transcript. Highlight relevant information on your accounting and finance coursework.

Admission for non-MFIN students is subject to availability and will be confirmed at the beginning of the term, following the end of the summer (end of August).

Textbook: Berk and DeMarzo, Corporate Finance, latest edition

Cases: For many cases, there are Excel files available

Other materials: As needed, additional files will be available (Assignment questions will indicate when a particular file is needed for the case preparation).

TBA

Find the course schedule in: TimeEdit

Have you been granted educational support because of a documented disability? If so, please contact the course director as soon as possible so that adequate accommodations can be made.

Contact specialneeds@hhs.se if you have questions about being granted educational support or need a copy of your educational support certificate.

For more information, visit the Specific Educational Needs page on the Student Hub (login required).