FINC413 Advanced Corporate Finance (Honors)
This capstone seminar course is designed for honors students who
want to develop their knowledge and skill in …nance as an applied so-cial science. It is especially appropriate for those considering graduateor professional school in …nance, and/or for those with high-level man-agement goals. The course’s motif is “depth, breadth and synthesis.”The depth is a study of two major corporate …nance topics: securityissuance and risk management. The breath is an ongoing thoughtfulconsideration of the …nancial news. The synthesis is a discussion andwriting project bringing a historical perspective to today’s corporate…nance milieu.
Department of Finance, Room 310 Purnell Hall, Alfred Lerner College of Business and
Economics, University of Delaware, Newark, Delaware 19716. Phone: +1.302.250.4598(VOIP, best for voicemail), +1.302.831.6598 (UD O¢ ce). Fax: +1.484.462.4004 Web:www.buec.udel.edu/laux. Email: [email protected]
This capstone seminar course is designed for honors students who want todevelop their knowledge and skill in …nance as an applied social science. It isespecially appropriate for those considering graduate or professional schoolin …nance, and/or for those with high-level management goals. The course’smotif is “depth, breadth and synthesis.”
The “depth”is the study of two core topics in …nance: raising equity cap-
ital and managing corporate risk. Both are key aspects of …nancial strategy,and they are a huge part of managing a …rm’s cost of capital. Moreover, astudy of these topics incorporates and integrates many other topics centralto the undergraduate …nance curriculum, including e¢ cient markets, assetpricing, capital structure, risk and return, and derivative pricing. We willstudy these topics via discussing readings and cases, and you will build anillustrative real-world case using resources available in the Exelon TradingLab.
The “breadth” is an ongoing, day-by-day consideration of the …nancial
news— with an especially sharp eye on news about capital raising and riskmanagement— linking current and past …nancial market events to the man-agerial science of …nancial economics. We will discuss the news, and you willextend the ideas it raises in some AV/presentation exercises.
The “synthesis”is accomplished via reading, writing and discussing linked
to a history of J.P. Morgan. We will use this story, which is essentially ahistory of U.S. …nance, as a base for building comparisons and implicationsfor today and tomorrow’s capital raising and risk management in particular,and …nancial markets and management in general. You will engage in asubstantial writing exercise on this topic.
The two “depth” topics together stretch over a bit more than the …rst
two-thirds of the course. The “synthesis”work occupies the end of the coursecalendar. The “breadth”e¤ort is ongoing, woven into the course day to day.
My goal is to invite you to see …nance in a new way— as a science linked
to practice— and to learn …nance in a way you haven’t tried before— by sem-inaring. The learning goal is to help you develop into a more ‡exible anddeeper-thinking future manager. I want your …nance and managerial ideasand arguments to be more compelling due to your practice in this course.
When I have conducted seminar courses in the past with managerially-
oriented students (which is something I have done more than a few times),they have come away convinced that they exercise has helped them make
more imaginative use of …nance thinking in their work and to communicateit better to others.
I expect that students in this course are members of the U.D. Honors pro-gram (or otherwise speci…cally approved by the Honors Program O¢ ce). Iexpect students have taken FINC 311, FINC 312, and FINC 314, or have theequivalent training in some other form that I approve.
Grinblatt, Mark and Sheridan Titman, 1997, Financial Markets andCorporate Strategy, Second Edition, McGraw Hill-Irwin.
– We will use the chapters on …nancing (Chapters 1, 2, 3, and 19)
and risk management (Chapters 21, 22, and 23).
– You can purchase these chapters in an electronic course-pack form
from ebooks.primisonline.com. From that webpage, choose the op-tion to look for the “custom ebook created by your professor”link,and point-and-click until you see our course at U.D., “AdvancedCorporate Finance.”Alternatively, you can buy a paper copy fromthe bookstore— but, as you know, the U.D. bookstore adds on apretty hefty markup.
Several risk management cases. These are included in the custom pub-lished ebook referred to just above.
Chernow, Ron, 2001, The House of Morgan: An American BankingDynasty and the Rise of Modern Finance, Grove Press.
– I purchased my most recent copy used via Amazon.com for about
$7. You will read a substantial part of the book, but not all of it. If you’d like to get started ahead of time before the semester (agood idea!), contact me for details.
The Financial Times Newspaper. You will need to read The Finan-cial Times regularly for this course. You should obtain a subscription
right away (don’t wait!). There is a semester long student subscriptionavailable for about $32 athttps://www.ftnewspaper.com/cgi-bin/ftusa.cgi/fess/vanity_us_student.
For a couple of assignments, we will use a selection of tool-tips fromBloomberg Magazine. I will provide this information for you at nocharge.
An important note: I am very sensitive to the cost of books you mustbear. You will …nd that the cost of the items above add up to a veryreasonable …gure, and less than you will spend for many of your classes.
Your core responsibility is to be an active and intellectually engaged man-agement scholar. More speci…cally, I expect the following.
You will prepare for class discussions by studying a set of readings and
cases. You will be prepared to discuss these every day, and to occasionallypresent material to your colleagues and lead them in discussion. You willkeep up with the …nancial news in The Financial Times on an ongoing basis.
You will produce several written or recorded exercises, noted as follows.
With a partner, you will develop two short presentations of …nance appli-cations on the Bloomberg News system in the Exelon Trading Lab, guidedby a tool-tip from Bloomberg Magazine that you …nd of interest. You willdevelop and present a summary of the experience of a company’s securityissue, based on news and data in the Exelon Trading Lab. You will writethe answers to preparation questions on four risk management cases. Youwill write an essay-paper linking the history of the U.S. …nancial sector tocurrent issues. With a partner, you will record three …ve-to-ten minute audio-slideshow analyses (called “Financial Fives”) of news as it links to …nanceideas. Most of these presentations are pretty short in terms of number ofpages or minutes, but are expected to the thoughtful and well-prepared.
There is a late lightly-weighted midterm exam, but no …nal.
Course grades will be based on class discussion and discussion-leader work(20 percent, with 7 points reserved speci…cally for risk-management case dis-cussions and associated exercises); three Financial Five news presentations(15 percent); two Bloomberg …nance task presentations (10 percent), oneequity issue case presentation (15 percent), one late-midterm exam (20 per-cent), and one J.P. Morgan history writing exercise (20 percent). Note thatthere is no …nal exam.
I expect every student to prepare for and contribute to every discussion.
That means doing the reading on time! I will not generally call you out tospeak up, but I may do so sometimes. It is your responsibility to be prepared,engaged, and look for the opportunity to build the conversation. Commentsthat link to the recent conversation, build it, and engage your colleagues willbe especially noted by me! This should be your goal. If you prepare andparticipate, class discussion scoring will not be a problem for you.
You will probably need all the class discussion points to achieve an A,
and almost all of them to achieve an A-. If you have not done the readingfor a class meeting, you should tell me. I will give each student two “freepasses”on this. Missing a class without a formal University-approved writtenexcuse counts as a free pass. Additional missed readings or classes will costa discussion point each. If I call on you and you are not prepared (in myopinion, based on what you say), it will cost two discussion points. Don’ttake the risk!
I have a long history of reasonable grades for fully-engaged students. This
is a course you “do”on an ongoing basis. Last year’s class was a group thatdived in to “do”the course, and it worked out …ne for them. Grade-wise, thiscourse resulted in a median grade of A-/B+ for that group. There were nogrades lower than B, though scoring a straight-A was also a bit hard to do. Clearly, I do not know if our class will repeat that strong performance— butif you do the work, I will put no barriers in your way.
Very brie‡y, my background is as a Finance Professor, …rst at The Universityof Texas and Case Western Reserve University, and now here at the Univer-sity of Delaware. I also held a faculty appointment in the Law School at CaseWestern. I’ve worked at the Commodity Futures Trading Commission, andin the summers I teach and do …nance research at ISCTE Business Schoolin Lisbon, Portugal. Growing out of my ISCTE work, U.D. has an exchangeprogram in Portugal— if you give me half a chance, I’ll tell you all aboutit. Over the years, I have taught courses in managerial …nance, investments,derivative assets, international …nance, law and …nance, and other topics. Most of my teaching has been at the MBA level, though over the past coupleof years I have enjoyed focusing on Honors undergraduates.
I enjoy teaching …nance in other places. I have taught more than a few
semester-long courses in …nance to MBAs and executives in Bosnia, Hungary,and Portugal. I expect to teach Ph.D. students in Italy next fall. (Let meknow if you or someone you know is interested in spending a semester atGalileo’s university.) I have led “study abroads”in both Europe and Africa. I have held twice held Fulbright fellowship positions.
I am actively engaged in …nancial economics research and publishing,
especially concerning securities issuance and corporate governance/marketslinkages. You can …nd current research papers on my website (see below foraddress).
I consult for business organizations including, over the years, stock and
futures exchanges like Nasdaq and the Chicago Stock Exchange, …nancialservices …rms like Equiserve, governmental organizations like the Treasury ofAustralia, and NGOs like the International Finance Corporation. Currently,my consulting work is with a currency and interest rate risk managementconsultancy with o¢ ces in the U.S., Europe and Asia. This work concernsraising …nance and managing risk— exactly the broad topics of our course).
What links these activities is that I know from experience that thinking at
a deeper level about …nance research can enrich the capabilities of managers. I am deeply convinced that …nance is fun, and that it will continue to be amajor source of value creation for regular people around the world.
If you’d like to know more about me, please check out my resume, research
and other activities on my website at www.buec.udel.edu/laux.
I encourage you to establish a dialog with me on the topics of our class. Establishing such a habit will help you overcome di¢ culties in your studies,deepen your knowledge of …nance, and prevent misunderstandings.
For turn-ins of assignments and routine class administration communi-
cations, please use email to [email protected] My T.A. and I both monitor this address to be sure everything is handled promptly.
Please reserve my personal email at [email protected] for more personal
communications. My T.A. does not monitor that address.
My o¢ ce is 310 Purnell Hall, where the phone is +1.302.831.6598 in the
U.S. Even better than that phone is to use +1.302.250.4598, or use Skype topaul_laux. Those come to my computer, which I tend to more closely thanthe telephone.
I will hold o¢ ce hours from 300 to 530 PM on Wednesdays. Please feel
free to work out other meetings with me as needed. I’m also be happy tohold occasional review or extension sessions for interested groups of students.
Key: GT = Grinblatt and Titman textbook chapter number; JPM = JP Mor-gan history & synthesis; FF=Financial Five assignment; BB = Bloombergassignment.
Week 1: Introduction and Financial Times/Bloomberg/Info Servicesintro in Trading Lab and GT 1
Week 5: Security issuance case exercise (using WRDS data service andnews in Trading Lab)
Week 9: Risk management cases #1 & #2 (TCAS and MQ do B)
Week 10: Risk management cases #3 & #4 (AIFS and Aspen)
Week 12: JPM and FF #2/3 (Finish JPM reading before this week!)
Every class: BB market numbers (WEI, WB, BTWW, USSW, andFXIP screens)
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