FINA511-17A (HAM)

Advanced Corporate Finance

30 Points

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Waikato Management School
Te Raupapa
Department of Finance

Staff

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Convenor(s)

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: clive.wilkinson@waikato.ac.nz
: kathryn.mercer@waikato.ac.nz

You can contact staff by:

  • Calling +64 7 838 4466 select option 1, then enter the extension.
  • Extensions starting with 4, 5 or 9 can also be direct dialled:
    • For extensions starting with 4: dial +64 7 838 extension.
    • For extensions starting with 5: dial +64 7 858 extension.
    • For extensions starting with 9: dial +64 7 837 extension.
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Paper Description

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This paper is designed to bring students up to date on current thinking and research in corporate finance. Material covers core areas such as beta (dead or alive?), the cost of capital, determinants of the optimal capital structure, dividend policy, leasing, agency theory and its applications, initial public offerings, and managerial compensation. A feature will be an extension of finance theory to small business, with consideration of special problems in this context.
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Paper Structure

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A variety of methods are used in the delivery of the contents, that is, lectures, seminars, debates, discussions. Student participation is the key component of this paper
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Learning Outcomes

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Students who successfully complete the course should be able to:

  • Identify and evaluate the the core components and issues relating to finance and in particular, corporate finance.
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  • Apply core corporate finance thinking and approaches to different context and situations.
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  • Facilitate a discussion on current academic papers from the finance literature.
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  • Critique research papers relating to capital structure and financial decision-making.
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  • Discuss and evaluate the broader factors affecting corporate governance and shareholder paradigm.
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  • Conduct research relating to corporate finance that is of a publishable standard.
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Assessment

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To gain maximum mark in this paper, students will have to submit all assessment for marking.
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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 1:0. There is no final exam. The final exam makes up 0% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 1:0 or 0:0, whichever is more favourable for the student. The final exam makes up either 0% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. Executive Summaries Completed
19 May 2017
8:00 AM
10
  • Online: MyWeb
2. Vissing-Jorgensen (NBER 2004)
1 Mar 2017
8:00 AM
-
  • Online: MyWeb
3. Shiller (JEP, 2003)
2 Mar 2017
8:00 AM
-
  • Online: MyWeb
4. Fama (JF 1991)
3 Mar 2017
8:00 AM
-
  • Online: MyWeb
5. Brounen, de Jong and Koedijk (FM 2004)
6 Mar 2017
12:00 PM
-
  • Online: MyWeb
6. Lewellen (CFR, 2014)
8 Mar 2017
8:00 AM
-
  • Online: MyWeb
7. Paster, L. & Stambuagh, R. F. (JPE, 2003)
9 Mar 2017
8:00 AM
-
  • Online: MyWeb
8. Switzer and Picard (2013))
10 Mar 2017
8:00 AM
-
  • Online: MyWeb
9. Liu (SSRN, 2008)
13 Mar 2017
8:00 AM
-
  • Online: MyWeb
10. Bartholdy and Peare (IRFA, 2005)
15 Mar 2017
8:00 AM
-
  • Online: MyWeb
11. Leary and Roberts (JF, 2005)
20 Mar 2017
8:00 AM
-
  • Online: MyWeb
12. Oztekin (JFQA, 2015)
22 Mar 2017
8:00 AM
-
  • Online: MyWeb
13. Kashay and Zingales (JFE, 2010)
-
  • Online: MyWeb
14. Lemmon and Zender (2008)
31 Mar 2017
8:00 AM
-
  • Online: MyWeb
15. Handley (JFE, 2008)
5 Apr 2017
8:00 AM
-
  • Online: MyWeb
16. DeAngelo, DeAngelo and Skinner (JFE, 2004)
7 Apr 2017
8:00 AM
-
  • Online: MyWeb
17. Brav, Graham, Harvey Michaely (JFE 2005)
24 Apr 2017
8:00 AM
-
  • Online: MyWeb
18. Devos, Kadapakkam and Krishnamurthy (RFS 2009)
26 Apr 2017
8:00 AM
-
  • Online: MyWeb
19. Savor and Lu (JF 2009)
28 Apr 2017
8:00 AM
-
  • Online: MyWeb
20. Ritter (EFM 2003)
1 May 2017
8:00 AM
-
  • Online: MyWeb
21. Bhagat and Bolton (JCF 2008)
3 May 2017
8:00 AM
-
  • Online: MyWeb
22. Erkens, Hung & Matos (JCF 2012)
5 May 2017
8:00 AM
-
  • Online: MyWeb
23. Cole (MPRA Working paper 2008)
8 May 2017
8:00 AM
-
  • Online: MyWeb
24. Berger and Udell (JBF 1998)
10 May 2017
8:00 AM
-
  • Online: MyWeb
25. Executive Summaries Reviewed
15
  • In Class: In Lecture
26. Executive Summaries of Student Presentations
2 Jun 2017
11:00 PM
5
  • Online: MyWeb
27. Seminar Presentation
5 Jun 2017
8:00 AM
10
  • Online: MyWeb
28. Seminar Written Report and Executive Summaries
2 Jun 2017
11:00 PM
15
  • Online: MyWeb
29. Debates
31 May 2017
8:00 AM
15
30. Research Paper
12 Jun 2017
5:00 PM
30
  • Online: MyWeb
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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Advanced Corporate Finance 2016

Order of Articles

Overview

Vissing-Jorgensen, A. (2004). Perspective on Behavioral Finance: Does "Irrationality" Disappear with Wealth? Evidence from Expectations and Actions. Kellogg School of Management, Northwestern University, NBER, and CEPR, 139 - 208. http://www.nber.chapters/c11443.pdf

Shiller, R. J. (2003). From Efficient Markets Theory to Behavioral Finance. Journal of Economic Perspective, Vol. 17(1), 83-104.

Fama, E.F. (1991). Efficient Capital Markets: II. Journal of Finance, Vol. 46(5): 1575-1617. http://www.jstor.org/stable/2328565

Brounen, D., de Jong, A. and Koedijk, K.(2004). Corporate Finance in Europe: Confronting Theory with Practice. Financial Management, Vol. 33(4) : 71-101. http://www1.fee.uva.nl/fm/PAPERS/Brounen/brounen.pdf

Asset Pricing, Investment Theory, and Portfolio Management

Lewellen, J.(2014). The cross section of expected stock returns. Critical Finance Review (forthcoming), 1-33. http://faculty.tuck.dartmouth.edu/images/uploads/faculty/jonathan-lewellen/ExpectedStockReturns.pdf

Pastor, L. and Stambaugh, R. F. (2003, June). Liquidity Risk and Expected Stock Returns. The Journal of Political Economy, Vol. 111(3): 642-685.

Switzer, L. N. and Picard, A. (2013). Idiosyncratic Volatility, Liquidity Risk, and Expected Stock Returns. Retrieved from http://www.mfsociety.org/modules/modDashboard/uploadFiles/conferences/MCSymposium~56~MEAckL7LgqYF8zSAVEXYaZ1dhpbs.pdf

Liu, W. (2008). A liquidity-augmented CAPM over 1926 to 1963. SSRN Working paper. 1-41

Bartholdy J. and Peare., P. (2005) Estimation of expected return: CAPM vs Fama and French. International review of Financial Analysis,Vol. 14(4): 407-427.

Capital Structure and Corporate Financing Decisions

Leary, M. T. and Roberts, M. R. (2005). Do firms rebalance their capital structures. Journal of Finance, Vol. LX(6): 2575-2620. http://finance.wharton.upenn.edu/~mrrobert/resources/Publications/Duration.pdf

Oztekin, O. (2015). Capital Structure Decisions around the World: Which Factors Are Reliably Important? Journal of Financial and Quantitative Analysis, Vol. 50(3), 301-323.

Lemmon, M. L. and Zender, J. F. (2008). Debt Capacity and Tests of Capital Structure Theories. Working paper, University of Utah. 1-49.
http://ecocomm.anu.edu.au/media/1491799/lemmon_12may2008_004.pdf

Kashyap, A. and Zingales, L. (2010). The 2007-8 financial crisis: Lessons from corporate finance. Journal of Financial Economics, Vol. 97, 303-305.
http://faculty.chicagobooth.edu/anil.kashyap/research/papers/The_2007-2008_Financial_Crisis_Lessons_from_Corporate_Finance.pdf

Payout Decisions

Handley, J. C. (2008, February). Dividend policy: Reconciling DD with MM. Journal of Financial Economics, Vol. 87(2): 528-531.

DeAnglo, H., DeAnglo, L. and Skinner, D. J. (2004). Are dividends disappearing? Dividends concentration and the consolidation of earnings. Journal of Financial Economics, Vol. 72(3): 425-456.

Brav, A., Graham, J. R., Harvey, C. R. and Michaely, R. (2005). Payout policy in the 21st century. Journal of Financial Economics, Vol. 77 (3), 483-527. http://ac.els-cdn.com/S0304405X05000528/1-s2.0-S0304405X05000528-main.pdf?_tid=410ef378-98ee-11e3-bab7-00000aab0f26&acdnat=1392763661_9c88cb29186c90d24c47f787c0cac684M&As, Security Offerings, and Investment Banking

Devos, E., Kadapakkam, P-R. and Krishnamurthy, S. (2009). How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies. The Review of Financial Studies, Vol. 22(3): 179-211.

Savor, P. G. and Lu, Q. (2009, June). Do Stock Mergers Create Value for Acquirers? Journal of Finance, Vol. 64(3): 1061-1097.

Ritter, J. R. (2003). Differences between European and American IPO Markets. European Financial Management, Vol. 9(4): 421-434.

Corporate Governance

Bhagat, S. and Bolton, B. (2008, June). Corporate governance and firm performance. Journal of Corporate Finance, Vol. 14(3): 257-273.

Erkens, D. H., Hung, M. and Matos, P. (2012). Corporate Governance in the 2007-2008 Financial Crisis: Evidence from Financial Institutions Worldwide. Journal of Corporate Finance (forthcoming), 1-55. http://www.darden.virginia.edu/web/uploadedFiles/Darden/Faculty_Research/Directory/Full_time/EHM_CorporateGovernanceCrisis_2012_01_04%20JCF.pdf

Small Business Finance

Cole, R. (2008, March). What do we know about the capital structure of privately held firms? Evidence from survey of Small Business Finance. MPRA Paper No. 8086: 1-58.

Berger, A.N. and Udell, G.F. (1998). The Economics of Small Business Finance: The Roles of Private Equity and Debt Markets in the Financial Growth Cycle. Journal of Banking and Finance 22(6): 613-673.

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Recommended Readings

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Other Resources

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Online Support

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Online support via Myweb is provided.
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Workload

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You are required to spend 300 learning hours in this paper as follows:

1: Lectures: Students will participate in open discussions about the assigned corporate finance readings. Each assigned reading is to be reviewed prior to class. Attendance is required. (3 hours per week for 8 weeks: 24 total hours)
To understand the current thinking in the existing literature and gain an ability to critically analyse what is required in your research paper.
2 : Course Readings: Students will complete the assigned readings before class. (8 weeks of readings at approximately 11 hours per week: 88 total hours)
To gain an advanced knowledge of corporate finance theory.
3 : Executive Summaries: Write a one page summary for each of the assigned readings and submit it before class. (approx 24 summaries at approx 1.5 hours each: 36 total hours)
Gain ability to summarize complex work in your own words. To determine important points as well as critically analyse the paper. NOTE: Attendance will be taken in class. Executive summaries will NOT be counted as completed if you are not in class for the entire class session to discuss the assigned paper(s).
4 : Analysis and debate: Several lecture times are set aside for the assigned groups to debate a paper (or assigned chapters from a book). There are 4 groups. Each week, two groups will be 'alive' and required to engage and maintain the discussion for the entire 50 mins of the class. The other two groups will be required to assess their performance and assist if appropriate. (Total of 8 debates. 4 of which you are 'engaged' and 4 of which you assess. Approx 4 hours to prepare for the debate plus one hour in class. 5 x 4 = 20 + 4 hours of assessment: total 24 hours)
This activity will serve to mingle all students. It will ensure that students prepare for class and participate while in class. It will provide 'practice' in critical analysis.
5 : Seminar Presentation: Present to the class a detailed description (and analysis) of two papers from the most recent (past 5 years) finance literature. Presentation time: 25 mins. (Total time approx 21 hours).
To gain an in depth knowledge of one specific area in finance which could be used to delve deeper into the topic in your research paper.
6 : Summarise other students' presentations: Attend at least 5 seminar presentation sessions, not counting your own. From these 5 pick one paper from each to summarize and submit. (5 class hours plus 3 hours writing: total 8 hours)
To broaden your knowledge in the literature. To observe and learn presentation skills by observing others.
7 : Research Paper: Complete a research paper which is fit for publication. Criteria will be determined in class. (Total time approx 99 hours)
To gain confidence that your research ability and written skills are functioning at the highest possible level.

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Linkages to Other Papers

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Prerequisite(s)

FINA311 or equivalent

Corequisite(s)

Equivalent(s)

Restriction(s)

FINA503

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