The purpose of this course is to introduce students to the theory and practice of corporate finance. The method of teaching will include lectures and case studies. The lectures will introduce some theories and give examples of applications. The case studies will give students a chance to apply these ideas themselves to real companies and discuss the advantages and disadvantages of different approaches.
Some issues we will discuss:
• What is finance? What role does it play in the economy?
• How do we price bonds, stocks and options? Can we use these ideas to help with other business decisions? Why did investment banks lose so much money on credit derivative swaps during the credit crisis?
• How can firms get capital for investment? What are the advantages of different sources of capital?
• How do we deal with conflicts of interest between different stakeholders? What role does bankruptcy play?
• Are hostile takeovers good for the firms involved? What about the economy as a whole?
• Why do we need venture capital? How does VC work in the US? In China?
• What caused the financial crisis? Why did the supposedly cutting edge risk management systems of major financial institutions fail? Is there a role for regulation?
The case studies will include:
• Baosteel’s corporate governance
• Bed, Bath and Beyond’s capital structure decision
• Consolidated Rail’s takeover
• Disney’s management of exchange rate risk
• Eastern Airlines bankruptcy
• Gobi Partners facing venture capital issues in China
The cases, prepared by Harvard Business School and have been chosen to offer students challenging, real-life decisions to analyze.