Theoretical Corporate Finance

The objective of this course is to undertake a rigorous study of the theory of corporate finance. A wide variety of topics will be discussed. To set the stage, the course will begin with an economic overview of corporate institutions. As the semester progresses, we will discuss corporate financing and agency costs and security design.

We will talk about a number of topics including the determinants of outside financing capacity and the implications of credit rationing, liquidity, free cash flow, and long-term finance, corporate financing under asymmetric information, the allocation of control rights, and takeovers. The course focuses in depth on selected topics rather than attempting to give a complete overview of the field of corporate finance theory. The course is necessarily theoretically oriented. The material consists of game- and contract-theoretic tools applied to corporate finance. However, the focus is on gaining economic intuition and the math is kept at a minimum.