Corporate finance FN3025

This course deepens students’ understanding of concepts and theories to critically assess major corporate financial policy decisions.

Corporate finance discusses classic topics in corporate finance, such as the market for corporate control and shareholder voting rights, as well as current trends, such as socially responsible investing. In developing tools to analyze these issues, students will consolidate the key concepts of corporate finance theory, including financial constraints, debt overhang, risk shifting, and the free-rider problem. This course is designed to help students learn how to apply various theoretical frameworks to solve real-world problems that are commonly faced by corporate managers, investors, and entrepreneurs. Teaching delivery will include examination of real life case studies.

Learning outcomes

If you complete the course successfully, you should be able to:

  • List and explain the predictions of the Modigliani and Miller proposition, highlighting the relevance of each underlying assumption.
  • Discuss and critically assess the impact of taxes, financial distress and asymmetric information on the firm’s financing decisions.
  • Assess the links between managerial compensation and corporate governance.
  • Summarize and describe recent empirical evidence on the topics covered.
  • Apply present value techniques to solve project valuation case studies.
  • Extend covered concepts on capital structure to solve cases studies.
  • List and explain different pay-out policies critically assessing the pros and cons of each in the context of real-life examples.

Assessment

Unseen written exam (3 hrs).

Essential reading

  • Financial Markets and Corporate Strategy by Mark Grinblatt and Sheridan Titman, McGraw-Hill.
  • Corporate Finance by Ivo Welch.
  • The Theory of Corporate Finance by Jean Tirole, Princeton University Press

Course information sheets

Download the course information sheets from the LSE website.