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EC334: Topics in Financial Economics: Corporate Finance and Markets

  • Jonathan Cave

    Module Leader
15 CATS - Department of Economics
Summer Module
Spring Module

Principal Aims

EC334-15 Topics in Financial Economics: Corporate Finance and Markets

Principal Learning Outcomes

Subject knowledge and understanding:...understand key concepts in corporate finance, markets and debt and equity. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, reading, exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Subject knowledge and understanding:...demonstrate knowledge of incomplete markets, dividends, and corporate financial governance. The teaching and learning methods that enable students to achieve this learning outcome are: Exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Subject knowledge and understanding:...abstract and simplify basic economic problems through the application of simple theoretical methods. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, reading, exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Key Skills:...communicate knowledge and understanding of economics in written and in elementary mathematical forms. The teaching and learning methods that enable students to achieve this learning outcome are: Exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Key Skills:...conduct individual and collaborative research into a finance topic, using world wide web and library resources. The teaching and learning methods that enable students to achieve this learning outcome are: Exercise question sheets. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Cognitive skills:...analyse and formulate models for understanding and solving problems. The teaching and learning methods that enable students to achieve this learning outcome are: Exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Cognitive skills:...analyse competing models and hypotheses in a critical way. The teaching and learning methods that enable students to achieve this learning outcome are: Analyse competing models and hypotheses in a critical way. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Subject-specific/Professional skills:...select and apply appropriate models and techniques to particular problems, especially those of a policy nature. The teaching and learning methods that enable students to achieve this learning outcome are: Lectures, reading, exercise question sheets, tutorial discussions. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Subject-specific/Professional skills:...produce concise and analytical reports relating to financial problems and issues. The teaching and learning methods that enable students to achieve this learning outcome are: Exercise question sheets. The assessment methods that measure the achievement of this learning outcome are: Formative: exercise question sheet answers. Summative: assessment, examination.

Syllabus

The module will typically cover the following topics:

Weeks 1-3 Basics

• Real options

1. Valuing simple real options

2. Valuing compound options

• The efficient markets hypothesis

1. Market efficiency and the value of information

2. Rational expectations

3. Testing the EMH

• Hidden information and Hidden Actions

1. Basic problem

2. Contract theory

3. Signalling Weeks

Weeks 4-5 Corporate Financial Policy

1. The role of the CFO and other executives

2. Capital structure – the first Modigliani-Miller Theorem

3. Pay-out policy

Weeks 6-8 Applying the theory

1. Choice of projects by firms – (risk-shifting, debt overhang)

2. Executive compensation and managerial effort

3. Competition and efficiency

4. Changes in structure including M&A

Weeks 9-10 Topics

1. Automated financial markets

2. The wisdom of crowds? Pricing uncertainty

Context

Optional Module
GL11 - Year 3, GL12 - Year 4, L1P5 - Year 1, L1PA - Year 1, LM1D (LLD2) - Year 3, LM1D (LLD2) - Year 4, V7ML - Year 3, V7MM - Year 4, LA99 - Year 3, R9L1 - Year 4, R3L4 - Year 4, R4L1 - Year 4, R2L4 - Year 4, R1L4 - Year 4, L1L8 - Year 3, L1CA - Year 3, L1CA - Year 4
Pre or Co-requisites

EC202-30 Microeconomics 2 AND EC333-15 Topics in Financial Economics: Theories and International Finance

OR

EC204-30 Economics 2 AND EC333-15 Topics in Financial Economics: Theories and International Finance OR

EC220-15 Mathematical Economics 1A AND EC333-15 Topics in Financial Economics: Theories and International

Finance OR

EC238 Economics 2: Microeconomics AND EC333-15 Topics in Financial Economics: Theories and International

Finance OR

ST339-15 Introduction to Mathematical Finance OR

IB253-15 Principles of Finance 1

Cannot be taken with EC333

Summary:

Modules: (EC220-15 and EC333-15) or ST339-15 or IB253-15 or (EC202-30 and EC333-15) or (EC204-30 and EC333-15)

Restrictions
May not be combined with modules IB254-15

Assessment

Assessment Method
Coursework (20%) + Examination (80%)
Coursework Details
Assignment 2 (20%) , Examination (80%)
Exam Timing
Summer

Exam Rubric

Time Allowed: 2 Hours

Read all instructions carefully - and read through the entire paper at least once before you start entering your answers.

There are TWO sections in this paper. Answer ONE question in Section A (50 marks) and ONE question in Section B (50 marks).

Answer each whole question in a separate booklet.

Approved scientific (non-graphical) pocket calculators are allowed.

You should not submit answers to more than the required number of questions. If you do, we will mark the questions in the order that they appear, up to the required number of questions in each section.

Previous exam papers can be found in the University’s past papers archive. Please note that previous exam papers may not have operated under the same exam rubric or assessment weightings as those for the current academic year. The content of past papers may also be different.

Reading Lists