Enrico Perotti
Spring, 1995
Department of Economics

Course Description

The first four classes will cover the theory of financial structure and corporate control. The second part will focus on specific theoretical issues concerning financial reform in Eastern Europe and the development of security markets.

The textbook is Brealey and Myers, McGraw Hill, 4th Edition.
As a general reference, a good book is Copeland, Thomas E. and J. Fred Weston, Financial Theory and Corporate Policy, Addison-Wesley, Reading, MA.

Session I March 13
The Modigliani-Miller Theorems
The Cost of Capital and the Valuation of Real Investment

Session II March 15
Modern Definitions of Debt and Equity
I) Corporate Securities as Options
Debt Financing, and Conflicts of Interests: Risk Taking

Session III March 17
Debt Financing and Conflicts of Interests: the Underinvestment Problem
Bank Lending in Transition Economies

Session IV March 20
II) Corporate Securities as Contingent Control Allocation
Residual Claimants and Rights of Control
The Enforcement of Financial Discipline by Creditors

Session V March 22
Financial Regulation and the Development of Security Markets
Raising Outside Equity

Session VI March 24
Dividend Policy
Macroeconomic Stabilization and Microeconomic Adjustment

Session VII March 27
Modern Forms of Corporate Governance
Takeovers: Their Causes and Consequences

Session VIII March 29
Reciprocal Ownership: Crossholdings as Mutual Monitoring
Bank Monitoring and Control

March 30
Meeting with students interested in a Master Thesis in Finance or Banking

CRC-Curriculum Resource Center
CEU Budapest, Hungary
Modified: May, 1996


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