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, L100 - Year 3, L103 - Year 4, L116 - Year 3, L1P5 - Year 1, L1PA - Year 1, LM1D (LLD2) - Year 3, LM1H - Year 4, V7ML - Year 3, V7MM - Year 4, V7MP - Year 3, V7MR - Year 3, LA99 - Year 3, R9L1 - Year 4, R3L4 - Year 4, R4L1 - Year 4, R2L4 - Year 4, R1L4 - Year 4, L1L8 - Year 3
Pre or Co-requisites: Modules: EC202-30 or EC204-30 or (EC220-15 and EC333-15) or ST339-15 or IB253-15
Restrictions: May not be combined with modules IB254-15

Assessment

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