Advanced Corporate Finance
|Unit level:||Level 3|
|Teaching period(s):||Semester 1|
|Offered by||Alliance Manchester Business School|
|Available as a free choice unit?:||N
- BMAN23000 - Foundations of Finance A (Compulsory)
- BMAN23000B - Foundations of Finance B (Compulsory)
Additional RequirementsBMAN 23000 is a Pre-Requisite of BMAN 30111.
Pre-requisite course units have to be passed by 40% or above at the first attempt unless a higher percentage is indicated within this course outline. If the pre-requisite unit is defined as a compulsory course unit within your programme of study (Maths with Finance, IBFE, Accounting, BA Econ pathways for example) then progression onto the dependent unit is permitted as long as you have gained the appropriate amount of credit to progress on to the following year of your registered undergraduate programme.
The course unit aims to present students with an intermediate/advanced analytical treatment of corporate finance, building on first and second-year finance courses, in particular the second part of BMAN23000 on corporate finance. Where appropriate, there will be some revision of concepts covered in BMAN23000. The approach is analytical rather than mathematical, and the intuition behind theoretical concepts is emphasised throughout. The course unit focuses on the theory of corporate finance and corporate financial policy. Its aim is to provide an understanding (from both a theoretical and an empirical standpoint) of some of the central decision problems in corporate finance: capital raising, capital structure decisions, the effects of conflicts between different types of stakeholders within the firm and corporate ownership and governance issues. This module will help students to apply theoretical concepts to real case scenarios and develop their analytical skills in analysing and discussing case studies of real companies.
- Theories and evidence of initial public offering (IPO) & seasoned equity offering (SEO) anomalies
- Valuation of IPO companies
- Agency costs of Equity
- Corporate Governance mechanisms (applied also to IPO cases)
Capital structure theories with symmetric information:
- The Modigliani-Miller (MM) irrelevance theorem
- Capital structure with taxes and financial distress costs
- Valuation of debt tax shields
- The trade-off theory
Capital structure theories with asymmetric information and agency considerations:
- Adverse selection and signalling models
- Pecking order theory
- Agency theories (agency costs of debt and equity)
Issuance and valuation of:
- Debt, including both straight and convertible debt
- Practitioner’s lecture (provisional TBC)
Teaching and learning methods
Lecture Hours: 18
Practical Lectures Hours: 14
Private Study Hours: 168
Total study hours: 200
Please note there will be a several weeks with 4 hours of teaching - 2 hours of lectures and 2 hours of practical lectures.
Informal Contact Methods
1. Office Hours
2. Online Learning Activities (blogs, discussions, self assessment questions)
3. Other : Practical lectures/sessions.
On completion of this course successful students will be able to:
• Understand how the following factors influence the decisions of companies on capital structure
2. Information asymmetries
3. Agency costs of debt
4. Agency costs of equity
• Understand the ownership and control structure of firms
1. Impact of agency costs of equity both on IPO process and capital structure decisions;
2. Corporate governance mechanisms
• Understand some of the methods used to value
1. Equity (in Initial Public Offering)
2. Debt (both straight and convertible)
• Discuss and interpret a few case studies in corporate finance
• Grasp the perspective of a private equity fund in evaluating a firm/project.
Assessment Further Information
Unseen 3 hour examination at the end of the semester (100% )
The following texts cover (most of) the material taught in this course unit. Students are recommended to purchase one of them.
Hillier, D., Grinblatt, M. and S. Titman (2008), Financial Markets and Corporate Strategy: European Edition, 1st Edition, Irwin/McGraw-Hill. OR
Hillier, D., Grinblatt, M. and S. Titman (2012), Financial Markets and Corporate Strategy: European Edition, 2nd Edition, Irwin/McGraw-Hill.
Grinblatt, M. and S. Titman, 2002, Financial Markets & Corporate Strategy, Irwin/McGraw-Hill, 2nd ed. (the 1st edition of this book was published in 1998).
Berk, J., and P. DeMarzo, (2007). Corporate Finance, Pearson International Edition OR
Berk, J., DeMarzo, P., (2010). Corporate Finance. Pearson Global Edition. OR
Berk, J., DeMarzo, P., (2013). Corporate Finance. Pearson Global Edition (3rd edition).
Brealey, R. A.., S. C. Myers and F. Allen, 2006, Principles of Corporate Finance, 8th ed., London: McGraw-Hill. OR
Brealey, R. A., S. C. Myers and F. Allen, 2010, Principles of Corporate Finance, Global Edition, London: McGraw-Hill.
For the corporate governance part the following book is also recommended:
Goergen, M., (2012), “International Corporate Governance”, Pearson Education Publishing.
- Informal advice and discussion during lectures and seminars.
- Responses to student emails and questions from a member of staff including feedback provided to a group via an online discussion forum.
- Specific course related feedback sessions.
- Generic feedback posted on Blackboard regarding overall examination performance.
- Assessment written exam - 2.5 hours
- Lectures - 18 hours
- Practical classes & workshops - 14 hours
- Independent study hours - 165.5 hours