Handbook for Completing Course Outlines

FINC402 – Advanced Corporate Topics
Semester 1, 2015
COURSE OUTLINE
Paper Description and Aims
The primary aim of the course is to provide the student with an in depth understanding of
advanced issues in corporate finance. The general approach followed will include:
(i) Formal instruction: Derivation and detailed discussion of the main results of seminal
papers dealing with capital structure policy and dividend policy will constitute the primary
mode of instruction in the first 5 weeks of the semester. This is expected to equip the students
with adequate theoretical understanding of issues such as why capital structures and dividend
policies vary across firms. This groundwork will then be used to understand empirical
findings that attempt to test their implications.
(ii) Student presentations: Students will present the empirical papers from the list provided
(The structure of student presentation will be ascertained upon knowledge of final
enrollment). Every student is expected to read the papers and come to class with some
critically thought out questions/comments pertaining to the issues in the papers prescribed for
that class before coming to the class.
Learning Outcomes
Upon successful completion of this paper, you should be able to (i) To develop an ability to
communicate information, arguments, ideas and analyses effectively both orally and in
writing (ii) To develop a critical approach to the contextualisation, presentation and
evaluation of arguments and evidence with respect to relevant literature and perspectives (iii)
To acquire advanced specialist knowledge in a particular area of study (iv) To develop
organisational, personal and research skills so as to ensure completion of a substantial piece
of original advanced research in an acceptable period of time and (v) To develop the
capability to present and engage in debate about the ideas and conclusions of the research
with the international community of scholars.
Teaching Staff
Paper Coordinator
Name:
Gurmeet Singh Bhabra
Office:
Room 5.38
Email:
[email protected]
Office Hours: Tuesday 1:00-3:00pm, Wednesday 2:00pm - 3:00pm
You should contact me with any and all administrative enquiries about the paper.
Course Delivery
Lecture Day/Time: Mondays and Wednesdays 3:00-4:50pm
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Room: Commerce 5.37
Course Calendar: The following set of readings will be discussed in class in sequence (as
much as possible). Any change to the assigned readings will be announced in class.
Students are expected to prepare for and attend all classes to gain full benefit from the course
These activities should be prepared for by reviewing information detailed on Blackboard and
completing any assigned readings. Students unable to attend a lecture are expected to catch
up on missed material. Unless stated otherwise, all aspects of the course are examinable.
The following set of papers will be covered in class. There is a possibility that we might have
to make revisions to this list but you will be informed about any changes so that such changes
do not inconvenience you. Dates of submission of the research proposal/literature review
reports will be notified in class.
Miller, M.H., 1977, “Debt and Taxes”, Journal of Finance 32, 261-276.
Scott, J.H., 1976, “A Theory of Optimal Capital Structure”, Bell Journal of Economics and
Management Science7, 33-54.
Myers, S.C., 1977, “Determinants of Corporate Borrowing”, Journal of Financial Economics
5, 147-175.
Jensen, M.C. and W.H.Meckling, 1976, “Theory of the Firm: Managerial Behaviour, Agency
Costs and Ownership Structure”, Journal of Financial Economics 4, 305-360.
Titman, S., 1984, “The Effect of Capital Structure on a Firm’s Liquidation Decision”,
Journal of Financial Economics 13, 137-151.
Myers, S.C. and N.S. Majluf, 1984, “Corporate Finance and Investment Decisions when
Firms have Information that Investors Do Not Have”, Journal of Financial Economics
13, 187-221.
Jensen, M.C., 1986, “Agency Costs of Free Cash Flow, Corporate Finance and Takeovers”,
American Economic Review 76, 323-329.
Altman, E.I., 1984, “A Further Empirical Investigation on the Bankruptcy Cost Question”,
Journal of Finance 39, 1067-1089.
Lehn, K. And A. Poulsen, 1989, “Free Cash Flow and Stockholder Gains in Going Private
Transactions”, Journal of Finance 19, 771-787.
Ang, J.S., Cole, R.A. and Lin, J.W., 2000, “Agency costs and ownership structure”, Journal
of Finance 55, 81-106.
Bebchuk, L.A., Cohen, A., 2005, “The costs of entrenched boards”, Journal of Financial
Economics 78, 409-434.
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Denis, D.J., Denis, D.K., Sarin, A., 1997, “Agency Problems, Equity Ownership, and
Corporate Diversification Decisions”, Journal of Finance 52, 135-160.
Goyal, V.K., Lehn, K. and Racic, S., 2002, “Growth Opportunities and Corporate Debt
Policy: The Case of US Defense Industry”, Journal of Financial Economics 64, 35-60.
Harford, J., Klasa, S., and Walcott, N., 2009, “Do Firms have Leverage Targets? Evidence
from Acquisitions”, Journal of Financial Economics 93, 1-14.
Garvey, G.T. and Hanka, G., 1999, “Capital Structure and Corporate Control: The Effect of
Antitakeover Statutes on Firm Leverage, Journal of Finance 54, 519-546.
Miller M., and K. Rock, 1985, “Dividend Policy under Asymmetric Information”, Journal of
Finance 40, 1031-1051.
John, K. and J. Williams, 1985, “Dividends, Dilution and Taxes: A Signalling Equilibrium”,
Journal of Finance 40, 1053-1070.
Easterbrook, F., 1984, “Two-Agency Cost Explanation of Dividends”, American Economic
Review 74, 650-659.
Healy, P.M. and K. Palepu, 1988, “Earnings Information Conveyed by Dividend Initiations
and Omissions”, Journal of Financial Economics 21, 149-175.
Dewenter, K.L. and Warther, V.A., 1998, “Dividends, Asymmetric Information and Agency
Conflicts: Evidence from a comparison of the Dividend Policies of Japanese and U.S.
Firms”, Journal of Finance 53, 879-904.
Denis, D. and Osobov, I., 2008, “Why do Firms Pay Dividends? International Evidence on
the Determinants of Dividend Policy”, Journal of Financial Economics 89, 62-82.
John, K., Knyazeva, A., 2006, “Payout Policy, Agency Conflicts, and Corporate
Governance”, Working Paper, Stern School, New York University.
Loughran, T. and A.M. Vijh, 1997, “Do long-Term Shareholders Benefit from Corporate
Acquisitions”, Journal of Finance 52, 1765-1790.
Devos, E., Kadapakkam, P.R., Krishnamurthy, S., 2008, “How Do Mergers Create Value? A
Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations”,
Review of Financial Studies 22, 1179-1211.
Safieddine A. and Sheridan Titman, 1999, “Leverage and Corporate Performance: Evidence
from Unsuccessful Takeovers”, Journal of Finance 54, 547-580.
Bradbury, M.E. and Mak, Y.T., 2000, “Ownership Structure, Board Composition and the
Adoption of Charter Takeover Procedures”, Journal of Corporate Finance, 6, 165-188.
Core, J.E., Holthausen, R.W. and Larcker, D.F., 1999, “Corporate Governance, Chief
Executive Compensation, and Firm Performance”, Journal of Financial Economics 51,
371-406.
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Henderson, B.C., Masli, A., Richardson, V.J. and Sanchez J.M., 2010, “Layoffs and Chief
Executive Officer (CEO) Compensation: Does CEO Power Influence the Relationship?
Journal of Accounting, Auditing and Finance 25, 709-748.
Datta, S., M.I. Datta and Kartik Raman, 2001, “Executive Compensation and Corporate
Acquisition Decision”, Journal of Finance 56, 2299-2336.
Datta, S., Datta, M.I., Raman, K., 2005, “Executive Compensation Structure and Corporate
Equity Financing Decisions”, Journal of Business 78, 1859-1890.
D. Nance, C. Smith and C. Smithson, 1993, “On the Determinants of Corporate Hedging”,
Journal of Financial Economics 19, 31-44.
K. Froot, D. Sharfstein and J. Stein, 1994, “A Framework for Risk Management”, Journal of
Applied Corporate Finance7, 22-33.
M.A. Petersen and S.R. Thiagarajan, 2000, “Risk Measurement and Hedging: With and
Without Derivatives”, Financial Management 29, 5-30.
Expectations and Workload
Students are expected to follow the following the suggested schedule for work load to successfully
complete the course requirements (note that these are only guidelines):
Preparation for the classes
92 hours
Class contact hours
48 hours
Critiques
20 hours
Preparation for the final exam
80 hours
Course Learning Resources
Text Book: There is no prescribed textbook. However, the following books are recommended to
supplement the readings covered in class:
·
Financial Theory and Corporate Policy by Thomas E. Copeland, J. Fred Weston, and
Kuldeep Shastri, Addison-Wesley Publishing Co. Fourth Edition.
·
Financial Markets and Corporate Strategy (2nd Edition) by Mark Grinblatt and Sheridan
Titman, McGraw-Hill Irwin.
Blackboard
Blackboard https://blackboard.otago.ac.nz/ provides you with access to course materials,
class notices, and resources. All readings assigned for this class along with notes for papers
presented by me will be posted on the Blackboard. In addition, Blackboard will also be used
to email the class so it is important that you check your student email and Blackboard
regularly.
Student Webmail
IMPORTANT - DO THIS NOW:
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Forward your University email address to an email address that you use regularly as follows:
1. Log into your StudentMail account using your student username and password
2. Click Cog button (top right corner) > Options
3. Under Account, select the Forward your email shortcut under the Short Cuts menu on
the right side of the screen.
4. Under the Forwarding heading, type in the email address you want your email to be
forwarded to. You can also choose to have a copy of these emails kept on your
StudentMail account, so please check the box if you would like this.
5. Click the Start forwarding button.
Assessment
All material presented is examinable (except where stated otherwise) by assignments and the
final examination. All important assessment information such as due dates and times,
content, guidelines and so on will be discussed at lectures and, where appropriate, detailed on
Blackboard. Students are responsible for ensuring that they are aware of this information,
keeping track of their own progress, and catching up on any missed classes.
Assessment
Presentations
Class participation
Research proposal/literature review
Final Test
% of
final grade
Requirements to pass
this paper
15%
10%
20%
55%
50% pass mark on the final exam
Course Requirements
You will have to score a minimum of 50% on the final exam to pass this course.
Assignments:
(i) Research proposal/literature review: This may be a group assignment depending on the
final numbers enrolled in the class. You can choose one of two different options. Written
project report is due at 5:00pm Thursday in the penultimate week.
Option 1: A research proposal that will contain the following sections: an introduction,
literature review, hypothesis development, data and methodology and expected
results. Remember, you are not required to either collect any data or perform any
analysis. However, the project should be doable i.e. the data source should be
credible and the research question should be original and interesting. I suggest you
visit www.ssrn.com and either look for a potential topic or ensure your research
idea is not the subject of another study.
Option 2: Pick an interesting topic either from the papers we discuss in the class or an issue
connected with corporate finance but not necessarily touched upon in the class and
do a review of the literature for the most recent 10-year period. However, there
could be some seminal papers that might fall outside of this date range which
should also be included in your review.
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(ii) Presentations: Depending on the class size, the class will be split into groups and each
group will have to present a minimum of twice during the second half of the semester.
Assessment of presentations is however based on individual performance so ever
member of the group will be responsible for his/her own performance.
Quality Assurance
At the Otago Business School we monitor the quality of student learning and learning
experience. Your assessed work may be used for assurance of learning processes, such as
evaluating the level of achievement of learning outcomes, with the aim of improving the
quality of our programmes. All material used for quality assurance purposes will be treated
as confidential and the outcome will not affect your grades.
Grading System
The grading scheme used at Otago is:
A+
A
AB+
B
B-
90-100
85-89
80-84
75-79
70-74
65-69
C+
C
CD
E
60-64
55-59
50-54
40-49
<40
Dishonest Practice and Plagiarism
Students should ensure that all submitted work is their own. Plagiarism is a form of
dishonest practice (cheating). It is defined as copying or paraphrasing another’s work and
presenting it as one’s own. Any student found responsible for dishonest practice in any piece
of work submitted for assessment shall be subject to the University’s dishonest practice
regulations, which may result in serious penalties, including forfeiture of marks for the piece
of work submitted, a zero grade for the paper, or in extreme cases, exclusion from the
University. The University of Otago reserves the right to use plagiarism detection tools.
Students are advised to inform themselves about University policies concerning dishonest
practice and take up opportunities to improve their academic and information literacy. If
necessary, seek advice from academic staff, or the Student Learning Centre. The guideline
for students is available at this link: http://www.otago.ac.nz/study/plagiarism/
The Library resource on ethical use of information is available via this link:
http://oil.otago.ac.nz/oil/module8.html
Lectures end Friday 29 May 2015
University Exam Period First Semester Begins 30 May 2015
End 17 June 2015
Student Learning Support and Information
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Student Charter
http://www.otago.ac.nz/about/otago005275.html
Guidelines for Learning at Otago
http://hedc.otago.ac.nz/hedc/wp-content/uploads/2012/12/Guidelines-for-Learning.pdf
http://hedc.otago.ac.nz/hedc/learning/
Student Learning Centre
The Student Learning Centre, which is part of the Higher Education Development Centre,
provides learning support, free of charge, to ALL enrolled students. Their services include:
 a workshop programme designed to help students to improve their learning strategies and
their generic skills;
 individual assistance with learning issues;
 on-line study skills advice;
 a student leadership programme
 a student-led peer support programme for students of all ages and backgrounds.
 conversational English groups for students from a non-English speaking background
The Centre also provides two very helpful study guides, “Guidelines for Writing and Editing”
and “Writing University Assignments” and these are available on the SLC website.
http://slc.otago.ac.nz/
Library Support
The Library website http://www.otago.ac.nz/library provides access to resources and
services, including group room bookings, library hours and locations, past exam papers,
subject guides, article databases and more.
If
you
need
assistance
either
check
out
the
self-help
guides
http://otago.libguides.com/selfhelp, or ask Library staff at the ground floor service desks, or
email [email protected]
Māori Student Support
Tënā koutou katoa,
Ko Corey Bragg töku ingoa
Ko Ngāi Tahu, Kāti Mamoe, Waitaha me Ngāti Kahungunu öku iwi
Kia ora, my name is Corey Bragg and I am the Māori student support person in the Business
School. My role is to help link Māori students with the various support networks throughout
the university and the community. Kaua e whakamā, don't be shy - come in for a chat. Mauri
ora mai.
Tel 479 5342
Email [email protected]
Room CO 3.21
Nicola Beatson is the Kaiāwhina Māori in the Department of Accountancy and Finance
Tel 479 8321
Email [email protected]
Room CO5.32
Pacific Islands’ Student Academic Advisor
Warm Pacific Greetings
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Talofa lava, my name is Esmay Eteuati and my role is to liaise with Academic Departments
and Student Services relating to Pacific students’ and their course of study. I support both
staff and students in the Business School and have a network of Pacific contacts in other
Divisions around the University.
Tel +64 3 479 4756 Email: [email protected]
Disability Information and Support
Students are encouraged to seek support if they are having difficulty with their studies due to
disability, temporary or permanent impairment, injury or chronic illness. It is important to
seek help early, through one of the contacts below:
Dyna Seng
Tel 479 9072
Email [email protected]
Room CO5.47
Student Feedback
We encourage your feedback. This can be in the form of contacting staff, participating in
course evaluation surveys and communicating with class representatives. Continual
improvements will be made to this course based in part on student feedback. Recent changes
to this course as a result of constructive feedback include (insert summary of improvements)
Class Representatives
The class (or student) representative system is an avenue for encouraging communication and
consultation between staff and students. It provides you with a vehicle for communicating
your views on the teaching and delivery of the paper and provides staff with an opportunity to
communicate information and gain constructive feedback from students. It contributes to the
development of a sense of community within a department and it adds a further dimension to
the range of support services offered to students.
Volunteers for the role of class representatives will be called early in the semester. The
OUSA invites all class representatives to a training session, conducted by OUSA, about what
it means to be a class representative and some of the possible procedures for dealing with
issues that arise. They also provide information on the services that OUSA offers and the
role it can play in solving problems. The OUSA provides support to class representatives
during the semester. Departmental staff will also meet with class representatives during the
semester to discuss general issues or matters they wish to have considered.
Your class representative’s name and contact details will be posted on Blackboard early in
the semester.
Concerns about the Course
We hope you will feel comfortable coming to talk to us if you have a concern about the
course. The Course Co-ordinator will be happy to discuss any concerns you may have.
Alternatively, you can report your concerns to the Class Representative who will follow up
with departmental staff. If, after making approaches via these channels, you do not feel that
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your concerns have been addressed, there are University channels that may aid resolution.
For further advice or more information on these, contact the departmental administrator or
head of department.
Disclaimer
While every effort is made to ensure that the information contained in this document is
accurate, it is subject to change. Changes will be notified in class and via Blackboard.
Students are encouraged to check Blackboard regularly. It is the student’s responsibility to
be informed.
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