06300676 - Fundamentals of finance and research

The course has the core objective to analyze the two important corporate financial decisions from a theoretical and practical point of view, the investment and financing decisions.
After a quick remind of basic financial operations, the course presents the main goals of corporations and the logic behind financial decision-making. Then, it deals with corporate financial management and more precisely it provides knowledge and skills to appreciate the return of investments projects. More specifically, after defining the notion of creation value, the course presents the tools for capital budgeting in situations of certainty and uncertainty. Consecutive to investment analysis, the following part presents the main sources of financing (i.e., debt, private equity public equity and hybrid securities) and the criteria of choice between the different means. The funding decision is first based on a comparison of sources of financing and analyzed through the theory of capital structure. Aditionnally, the course presents some notions of financial analysis and audit

TARGETED KNOWLEDGE AND SKILLS 

After the course, the students should be able to understand how firms select investment projects, how corporate managers raise capital. Finally, the students should have some notions in financial analysis and audit.
Acquire the vocabulory of finance in English. Better know the corporate decisions, capital budgeting and raising capital.

This is an introductory course to corporate finance. If you want to go more deeply in corporate finance, you will have to choose courses more linked to accounting and advanced courses in the theory of corporate finance. There is no perequisite. However, some basic notions of mathematics or economics could be useful.

COURSE OUTLINE

The course will be divided into 6 topics. For each topic, reading the correspondent chapters from BMH is strongly recommended.

Topic 1. Introduction to firms’ financial decision-making (BMH, Chapters 3 and 4)
Topic 2. The analysis of interest rates and bond financing (BMH, Chapters 5 and 6) 
Topic 3. Introduction to financial statement analysis (BMH, Chapter 2) 
Topic 4. The analysis of investment decisions and capital budgeting (BMH, Chapters 8 and 9)
Topic 5. The analysis of corporate financing policy (BMH, Chapters 13 and 14) 
Topic 6. Some notions of audit

RECOMMENDED TEXTS AND PUBLICATIONS

Berk J., DeMarzo P. and Harford J., Fundamentals of Corporate Finance, 2021, Pearson, 5th edition, global edition, Pearson, BMH

Berk J. and DeMarzo P. Corporate Finance, 2020, Pearson, 5th edition, global edition, Pearson.
Brealey R., Myers S. and Allen F. Principles of corporate finance. 2013. Ed. McGraw-Hill.
Damodaran A. Corporate Finance. 2003. Ed. Wiley.
Emery D.R., Finnerty J.D. and Stowe J.D. Corporate Financial Management. 2006. Ed. Prentice Hall.
Gallagher T.J. and Andrew J.D. Financial Management. 2002. Ed. Prentice Hall.
Gitman L. J. Principles of Managerial Finance. 2011. Ed. Addison Wesley.
Pike R. and Neale B. Corporate Finance and Investment. 2008. Ed. Prentice Hall.
Shapiro A.C. and Sheldon D.B. Modern Corporate Finance. 1999. Ed. Prentice Hall.
Tirole J. the theory of corporate finance, 2006, Princeton University Press.
Van Horne J.C. et Wachowicz J.M. Fundamentals of Financial Management. 2008. Ed. Prentice Hall.

EMBLEMATIC BOOKS OR RESEARCH PAPERS REGARDING THE SUBJECT OF THE COURSE

Graham J.R. and Harvey C.R., 2001, “The theory and practice of corporate finance: evidence from the field”, Journal of Financial Economics 60, 187-243.
Li K. Griffin D., Yue H. and Zhao L., 2013, “How does culture influence corporate risk-taking?”, Journal of Corporate Finance 23, 1-22.
Brav A., Graham J.R., Harvey C.R. and Michaely R., 2005, “Payout policy in the 21st century”,
Journal of Financial Economics 77, 483–527.
Baker M. and Wurgler J., 2002, « Market timing and capital structure », Journal of Finance 51(1), 1-32.
DeAngelo H. and Roll R., 2015, « How stable are corporate capital structures », Journal of Finance 70(1), 373-417.
Shyam-Sunder L. and Myers S.C., 1999, “Testing static tradeoff against pecking order models of capital structure”, Journal of Financial Economics 51, 219-244.
Graham J.R., Harvey C.R. and Puri M., 2013, “Managerial attitudes and corporate actions”, Journal of Financial Economics 109, 103-121.
Malmendier U. and Tate G., 2008, “Who makes acquisitions? CEO Overconfidence and the market’s reaction”, Journal of Financial Economics 89, 20-43.

Final exam 

Written and oral exam, 3h
MCQ and oral presentation

TEACHING METHODS

NATURE OF MATERIALS
Slides and exercises.

TEACHING INNOVATIONS AND USE OF TECHNOLOGY
The teaching allows, thanks to MCQ and the use of applications on smartphone, to facilitate the acquisition of theoretical knowledge. Learning and practice are achieved through the analysis of concrete cases or real situations.

PRE-REQUISITES IN TERMS OF KNOWLEDGE AND SKILLS
Financial economics, financial theory of the firm, financial accounting, financial modeling techniques.

RECOMMENDED TEXTS AND PUBLICATIONS
Berk J., DeMarzo P. and Harford J., Fundamentals of Corporate Finance, 2021, Pearson, 5th edition, global edition, Pearson, BMH.