Professional Documents
Culture Documents
Fall 2005
COURSE DESCRIPTION
The goal of this graduate level course is to provide an introduction into current theoretical
research in corporate finance, covering a broad range of topics. Special attention will be paid to
developing techniques for model writing and analysis. Students will also have a chance to
practice written and oral presentation of their research ideas.
TEXTBOOK
The main reading is the textbook by Joao Amaro De Matos, “Theoretical Foundations of
Corporate Finance”, Princeton university press, 2001.
In addition to the presentation, each student is required to write a term paper. The term
paper should be written as a referee report on the paper you choose for your oral
presentation. More specific guidelines on writing a term paper will be posted on WebCT
by September. The term paper will be due November 15.
Your grade will be determined by a presentation (20%), a term paper (40%), and a final
exam (40%). There also will be several homework assignments. These assignments will
NOT be graded. Instead, they will serve as a basis for the final exam. The final exam will
also include questions about the papers discussed in class.
TENTATIVE COURSE OUTLINE
2. Capital Structure
• Myers S., and Majluf, 1984, “Corporate Financing and investment
Decisions when Firms Have Information That Investors Do Not Have”
Journal of Financial Economics 13, pp. 187 – 221.
• Leland, H., 1998, “Agency Costs, Risk Management, and Capital
Structure,” The Journal of Finance 53, pp. 1213 – 1243.
• Biais, B., and C. Casamatta, 1999, “Optimal Leverage and Aggregate
Investment,” The Journal of Finance 54, pp. 1291 – 1323.
• Allen, J. and G Phillips, 1998, “Corporate Equity Ownership and Product
Market Relationship,” Journal of Finance pp.
• Harris, M., and A. Raviv, 1991, “The Theory of Capital Structure,” The
Journal of Finance 46, pp. 297 – 355.
• Bolton, P. and D. Sharfstein, 1990, “A Theory of Predation Based on
Agency Problems in Financial Contracting,” American Economic Review
80, pp. 93 – 103.
• Maksimovic, V., 1995, “Financial Structure and Product Market
Competition,” in Jarrow, R., V. Maksimovic and W. Ziemba, (eds.),
Handbook of Finance, North-Holland.
• Stein, J., 1996, “Rational Capital Budgeting in an Irrational World,”
Journal of Business 69, pp. 429 – 455.
• Leland, H. and D Pyle, 1977, “Information Asymmetries, Financial
Structure, and Financial Intermediation,” The Journal of Finance 32
pp.371 – 387.
• Baker, M. and Jeffrey Wurgler, 2002, “Market Timing and Capital
Structure,” The Journal of Finance 57, pp. 1 – 32.
3. Allocation of Control
• Aghion P and Bolton P (1989) The Financial Structure of the Firm and the
Problem of Control, European Economic Review.
• Aghion, P., J. Tirole, 1994, “On the management of innovation,”
Quarterly Journal of Economics 109, pp. 1185-1207.
• Aghion P and Bolton P (1992) An Incomplete Contracts Approach to
Financial Contracting, Review of Economic Studies 59(3): 473-494.
6. Going Public
• Yung, C., 2005, “IPOs with Buy and Sell-Side Information Production:
The Dark Side of Open Sales,” Review of Financial Studies 18, pp 327 –
347.
• Rock, K., 1986, ‘‘Why New Issues Are Underpriced,’’ Journal of
Financial Economics 15, pp. 18`7 – 212.
• Chemmanur, T., 1993, ‘‘The Pricing of Initial Public Offerings: A
Dynamic Model with Information Production,’’ The Journal of Finance
48, 285 – 304.
• Welch, I, 1992, “Sequential Sales, Learning, and Cascades,” Journal of
Finance 47, pp. 695 – 732.
7. Going Private
• Elitzur, R., P. Halpern, R. Kieschnick, and W. Rotenberg, 1998,
“Managerial Incentives and the Structure of Management Buyouts,”
Journal of Economic Behavior and Organization 36, pp. 347 – 367.
9. Governance
• Jensen, M. and Meckling, 1976, “Theory of the Firm: Managerial
Behavior, Agency Costs and Ownership Structure,” Journal of Financial
Economics pp. 305 – 360.
• Shleifer, A. and R. Vishny, 1997, “A Survey of Corporate Governance,”
Journal of Finance 52, pp. 737 – 783.
• LaPorta, R., F. Lopez-de-Silanes, A. Shleifer and R. Vishny, “Investor
Protection and Corporate Valuation,” The Journal of Finance 57, pp. 1147
– 1170.
• Grossman, S. and O. Hart, 1982, “Corporate Financial Structure and
Managerial Incentives,” in J.J. McCall, ed., The Economics of Information
and Uncertainty. Chicago: University of Chicago Press.