EC334: Topics in Financial Economics: Corporate Finance and Markets
Jo Turrall
Module Leader
Introduction
EC334-15 Topics in Financial Economics: Corporate Finance and MarketsPrincipal Aims
The module aims to develop the general intellectual abilities in understanding the roles of capital markets, corporate policy and governance, and the causes for the financial crises. It also introduces the subject specific technical skills in finance and financial policy for firms. The aims of the module are to equip students with an understanding of fundamental concepts in modern finance and corporate finance; to develop a range of appropriate analytical skills, including dynamic and theoretic methods; to develop in students the capacity to apply analytical techniques to real world problems.
Principal Learning Outcomes
Subject knowledge and understanding:...understand key concepts in corporate finance, markets and debt and equity.
Subject knowledge and understanding:...demonstrate knowledge of incomplete markets, dividends, and corporate financial governance.
Subject knowledge and understanding:...abstract and simplify basic economic problems through the application of simple theoretical methods.
Key Skills:...communicate knowledge and understanding of economics in written and in elementary mathematical forms.
Key Skills:...conduct individual and collaborative research into a finance topic, using world wide web and library resources.
Cognitive skills:...analyse and formulate models for understanding and solving problems.
Cognitive skills:...analyse competing models and hypotheses in a critical way.
Subject-specific/Professional skills:...select and apply appropriate models and techniques to particular problems, especially those of a policy nature.
Subject-specific/Professional skills:...produce concise and analytical reports relating to financial problems and issues.
Syllabus
The module will typically cover the following topics:
Weeks 1-3 Basics
鈥� Real options
1. Valuing simple real options
2. Valuing compound options
鈥� The efficient markets hypothesis
1. Market efficiency and the value of information
2. Rational expectations
3. Testing the EMH
鈥� 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, L1CA - Year 3, L1CC - Year 3, L1CG - 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%) + Centrally-timetabled examination (On-campus) (80%)
- Coursework Details
- Assignment 2 (20%) , Centrally-timetabled examination (On-campus) (80%)
- Exam Timing
- Summer