BEFORE PANIC SETS IN:
Yes, there is a great deal of reading and watching videos. However, I am sure you can handle it. I really only want you to be able to get the top one of two things from each article. From many of the links you do not even need to do that, but rather the links serve as means of documenting things for class (so you know that I am not just making things up;))
YOU DO NOT HAVE TO READ EVERY WORD! If you get the main point (or in some cases a couple of points) from the papers, I am generally quite happy. :)
I would much rather you learn the material than worry about a grade. Learn the material and the test should take care of itself. But really know the material. become an expert it will help you and make it more fun at the same time.
These notes are constant works in process. They will likely be updated repeatedly throughout the semester. They serve as a much better indicator of what is due when then does the syllabus (which is made once and then does not change). For that reason you should make a practice of checking back frequently.
Welcome to class!
This section SHOULD BE review:
My Video Intro #1, video intro #2
Please read the Summaries of each chapter we cover (the introductions and conclusions couldn't hurt either for the real ambitious). It will help give you an idea of what is coming in the class.
In past semesters I had several requests for review material, so here some links from my introductory corporate finance page that should help. We will not spend much time on these, but you are expected to know it.
Review material that you may find useful:
This is where our class will start:
Financial system and why markets are important
Model of the financial system
Foundation to everything:
Introduction to Corporate finance (conflicts) and why contracts and forms matter
Financial System video
Financial Intermediary video
Where in the financial system is this class?
(If you had me for 517/604, this may look VERY familiar)
We will spend quite a bit of time here
(Examples, explanations, and implications)
Pulling the goalie:
"Galai and Masulis (1976) show that debt in the capital structure may give shareholders the incentive accept risky negative NPV projects and pass on safe positive NPV projects. This happens when the benefits of the project must go to pay off debt holders. The shareholders will want to take on a risky project (even if it has a negative NPV) in order to have a chance at getting paid after the debt holders have been paid."
"Chevalier and Ellison (1996) apply similar logic and show that mutual fund managers who have underperformed their benchmarks increase the risk of their selections in order to “catch-up.” This is partially because of the high correlation between cash inflows into the fund (i.e. “new money”) and recent fund performance. In both settings, the situation is similar: unless something “big” happens, the principals get no, or a dramatically reduced, return. This creates incentives to take risks that in other settings would appear irrational."
Want a football example? Hail of Mary pass. Click here.
Boards of directors
Read the intro: http://www.nber.org/papers/w14486.pdf
think WIN WIN! Acting ethically is good for shareholders and good for you!
Would you dump toxic wastes in the river? Ok, how about withhold information? Stretch the truth? Hide bad numbers?
Are you sure? What might influence you? Money (traditional), overload, stress? “everyone else is doing it?” Behavioral influence.
Helpified tool set: Why do Ethics matter in finance? FYI we will spend quite a bit of time on the CFA ethic section from this, so definitely read it!
The Market as a disciplinarian
The case of Solomon Brothers
How you draw up contracts matters:
Convertible, callable, and Putable debt
an analysis of bond covenants by Cliff Smith
See Becker Stiglitz 1974 on law enforcement
Why low pay, then big retirement pay?
Smith, Brickley, and Zimmerman--a must read summary
CEO Pay AFL CIO executive paywatch website, some links from the financeprofessorblog, more restricted shares seem to be working,
Here is a pretty cool podcast on this from Planet Money:
CEO pay and Bankers on Board
Firm behavior at employee owned firms
and now a quick review of the science (math) of finance)
Risk and return
A first look at risk and return (a history of returns):
Returns =( Price at end of period + dividend (or income) - Price at beginning of the period)
divided by the price at beginning of period
Arithmetic returns vs Geometric returns
A video from Bionic Turtle on how to measure "periodic" returns.
can’t do it yourself? here is a calculator
What is a market index: Price weighted vs Market weighted
my toolset on this:
Bonds and stocks
First some data:
http://www.sifma.org/research/statistics.aspx for bonds
-review of time value of money and valuation
Finding what something is worth-
--->putting it all together--
-->the hardest thing to do in all of finance :
Bond Valuation: (chapter 4)
Don’t forget the bond market!
A video from class on Bond Pricing
and one on that includes what happens when interest rates change
My helpfied toolset on bond pricing:
Spreadsheet for bonds
Spreadsheet to calculate price of bonds and duration (be sure to see each sheet)
I love this picture of duration:
Convexity and duration
Bond pricing template to make multiple choice questions
Bogle on “stuff” http://financeprofessorblog.blogspot.com/2011/01/john-bogle-talks-about-stock-and-bond.html
Stock Valuation: (Chapter 5)
My Video introduction to stock valuation
Want another angle on it? Here are some videos that might help:
From SavingandInvesting, PE ratio valuation,
Capital Budgeting “extras”: on cannibalism, agency costs, and different lives
Spreadsheet covering NPV, IRR, etc--
this will be the bulk of what we do on capital budgeting (chapters 12,13,14)
*Be sure to note how similar this is to valuation
What is the correct discount rate?
First a few caveats:
What is “Normal”? Discussion of Normal distribution
Are stock returns normal? Fat tails. On log normal returns.
new notes on fat tails: https://helpified.com/paths/fat-tails-a-look-at-non-normal-distributions
Review of Portfolio Math and Valuation
Diversification: the basics (Don’t put all your eggs in one basket) It is simple advice, but many do not follow it!
Modern portfolio theory (Enter Markowitz)
but then again, maybe 1/N is not that bad?
So why do people not diversify as much as they “should”?
Why? Statman suggests it is a behavioral story (much like swinging for the fences)
Moreover in bad times diversification often does not work as well as expected. (Butler paper on same topic). Here is a good article from Fidelity reminding us that while correlations go up, they do not go to one and there is still a large benefit to diversification.
(What about options?)
RISK and Return--what is risk? Systematic vs non systematic
Risk aversion (video),
More on Risk aversion (bit easier from Wikipedia
A visual look at correlation coefficients
Portfolio standard deviations as n gets large
Markowitz from Yahoo.
Much math discussion here. Hold on, it looks worse than it is!
What's it all means: diversify!,international correlations (home country bias),commodities, real estate, market neutral hedge funds, easier one on hedge funds
Notes on CAPM
Leading up to CAPM
Fama French multifactor model on International Markets
More notes from Investopedia:
Why study CAPM if it doesn't work? Long answer but theory is important and the idea that systematic risk is important.
Ok, so CAPM may or may not work. There is still a soft spot in my heart for CAPM. Why? Because it is such an important and elegant model and I still think it should work. But of course most research over the last decade suggests it does not work very well (example Fama And French!). Now why it does not work is the real fun. Is it the model? The market? The researcher? Or some combination of the above? Research from Ang and Chen finds that the time period studied matters as well. For instance, from 1963 on there appears to be a Value anomaly. However, this disappears when the 1926-2001 period is examined and “the market factor alone is able to explain the spread of average returns of these portfolios.” [note the portfolios were created based on book to market values.] Further they find evidence of a time-varying beta relationship where value stocks (i.e. high book to market or equivalently and more commonly in the popular press low market to book ratios) “were risky in the early part of sample, but not in the latter part. This could be really big.
Fama-French Three Factor Model from Wikipedia, from MoneyChimp,
Links likely to be useful to you:
A quick video introduction (by me)
A fascinating (well to me) interview with Eugene Fama (Nobel prize 2013)
The wisdom of crowds video Video on Wisdom of Crowds
Dean Labaron provides a good introduction, Damodoran has a bit more academic look.
Overview: Class notes
Market efficiency and sophisticated investors (video)
Primer on Behavioral Finance: http://yes.you.is/jezzper/Discussions.nsf/f72637182738a22ec1257082007010ef/6c8109397472e6e5c1257180007db601/$FILE/Behavioral%20Finance-%20Ritter.pdf
Prospect theory from Copenhagen Business School: https://www.youtube.com/watch?v=VjRfcFxzxEs
Prospect theory and framing behavior: http://youtu.be/Ng9V2JneJ68 (BBC)
Prospect theory (From Yale) http://youtu.be/fyOA2nbjVVQ
Kahneman on Prospect theory https://www.youtube.com/watch?v=VorB7X5L8ZY
Monkey Fairness #1: https://www.youtube.com/watch?v=3XXQMDGErL0
Monkey Fairness #2 http://youtu.be/2BYJf2xSONc
Monkey fairness #3 https://www.youtube.com/watch?v=3XXQMDGErL0
Marshmallow study: http://youtu.be/QX_oy9614HQ
Laurie Santos on Monkey Economy: http://youtu.be/DUd8XA-5HEk
my tool set:
more on neuroscience: https://helpified.com/toolsets/more-on-neuroscience
Can we read minds?
FMRI and mind reading: http://youtu.be/8jc8URRxPIg
is oxytocin bad? maybe not, but not always good either:
Oxytocin and autism link? Maybe? http://www.autismspeaks.org/blog/2013/12/02/oxytocin-treating-autism-not-so-fast-%E2%80%A6
Why this matters to finance? (gee this would make a great essay)
I can pay more!
Applying the lessons:
Corporate finance and behavioral finance
video: on motivation
Football, Baseball, Weather, and more on behavioral finance
Barber and Odean: http://faculty.haas.berkeley.edu/odean/papers/gender/BoysWillBeBoys.pdf
Decision making under stress:
Debondt and Thaler
Behavioral and investment strategy:
some from Wikipedia
Capital Structure: Capital structure decisions are basic part of doing business yet often misunderstood. In terms of modern financial theory and EMH it should not matter what we issue as there is a zero NPV. Managers, however, spend much time worrying about what to issue and when. Why? Partially because some of the assumptions we use in developing EMH do not hold, partially because of transaction costs, partially for agency cost reasons, and partially because the Investment banking community is convinced that what firms issue does matter.
Chapter 14 notes : essentially definitions/review of what financing alternatives are available
Debt ratios are down since the GFC:
Notes on Capital Structure
videos by me
Capital Structure 1
Capital Structure 2,
intro video if you need to hear it from someone else
Levered beta =
(Notice the higher the debt, the higher the levered beta)
Efficient markets and capital structure--Modigliani and Miller
Does it hold in practice?
In a Modigliani and Miller world when corporate taxes are introduced, the optimal debt level increases. Desai, Foley, and Hines have a cool paper that finds, among other things, that this positive relationship between tax rates and interest does hold. FWIW one of the “other things” that influences debt financing is the interest rate: the higher the interest rate, the less debt firms use, which fits nicely with the story above! (BTW, yes this is predominantly intended as an International Finance article, but it is cross-listed here because it is so relevant.)
Philippon examines firms' capital structure empirically and theoretically. He finds that firm value does not exactly fit the static trade-off model. Specifically he finds that low levels of debt are not accompanied by as low of firm values as would be expected. However, in other areas, what we have been teaching seems exactly right: more growth options means less debt, highly profitable firms do have higher target debt ratios (even though they may not all be at the targets), and expected future financing deficits makes financial slack more valuable.
Interestingly, he also finds some evidence that managerial power (as proxied by CEO tenure) is associated with lower levels of debt. READ IT!!! :)
Capital Structure Debt is good, debt is bad ("Debt makes good times great, bad times horrible")
Financial Distress costs and investments-- Whited 1992
Pecking order--Myers and Majluf. The "Quess what I am thinking" game!
Types of debt-
Why are there so many types of securities?
a look at Convertible Debt, Callable debt, Puttable debt
Non investment grade debt
Private vs. Public
Types of equity
Common- what rights do you get?
Prefered - why does it exist? If it looks like debt and smells like debt, ut is not necessarily debt!
Super shares--letter stock
Does the Pecking Order still hold? A mini lesson.
So if it is not the pecking order, what is it? A closer look at debt financing
What else influences the type of debt a firm uses?
Denis and Mihov find that the largest determinant is the credit rating of the firm. In their
JFE article, they report that high quality firms are more likely to opt for a public issuance while medium rated firms take the
bank debt route and low credit rated firms go for private debt placements. However, credit quality is by no means the only
For example (Barclay and Smith 1995) report that riskier firms use shorter term debt and Petersen and Rajan 1994 found that bank relationships are especially important for smaller firms.
Kisgen reports that managers manage capital structure in a way to prevent downgrades and to get upgrades. For instance firms that "are near a change in credit rating" make moves to improve their rating by issuing less debt and retiring more debt.
Want still more on debt financing? Ok, but only since you are nice. ;) Baker, Greenwood, and Wurgler report in a JFE piece that firms also time debt obligations. When long-term rates are low, the firms try to capture these “low” rates, by issuing longer-term debt. Which, while not surprising, may be further evidence that market efficiency is not market perfection and that the financing waves we see may make sense (and cents) after all.
Several papers have shown that capital structure does impact operations. For instance a few papers have looked at grocery stores and leverage. For instance after LBOs, stores raised their prices and another paper has found that those with high debt had more out of stocks.
Famous " Smith-Masulis " papers
Capital Structure articles from the Blog.
Introduction to Security Issuance
Asquith and Mullins have the classic paper in this area. It is a tad dated (1986) but is still pretty much the gold standard.
Capital structure review--
Harris and Raviv is as close to mandatory on the area as possible: http://www.eco.sdu.edu.cn/jrtzx/uploadfile/pdf/corporatefinance/27.pdf
Raising capital continued--IPOs--some blog entries on IPOs
Recent IPO filings: from IPO Monitor
The Bernie Ebbers story: http://wealthmanagement.com/archive/broker-inside-ipo-scandal
What is Insider Trading? From the SEC
What is Insider Trading from the UK video from Marketplace
Is it Good or bad?
legal and illegal: http://www.seclaw.com/docs/insidertrading033104.htm
A collection of stories from my blog:
See if insiders at your firm have been trading,
Good description of what is and is not allowed
Will talk about the following in class, but do not worry too much about the specifics until then
Heard on the street:
Accused does not mean guilty: Mark Cuban case
More on Mark Cuban: http://www.businessinsider.com/how-mark-cuban-defeated-the-sec-2013-10
A good look at Insider Trading and anonymity
Panther energy: http://www.cftc.gov/PressRoom/PressReleases/pr6649-13
International Insider Trading
High Frequency trading (NOT illegal)
Good or bad?
Good side: more liquidity.
Bad side: front running
UPDATE om IE: https://www.nytimes.com/2016/06/18/business/dealbook/iex-group-gains-approval-for-stock-exchange.html?rref=collection%2Ftimestopic%2FHigh-Frequency%20Trading&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=6&pgtype=collection
Mark Cuban on HFT:
Dividends and Buybacks-
What are dividends?
What are buybacks?
Probably the best recap of dividends is by Brav, Graham, and Harvey (2005)
Here is a newer working paper by Farre-Mensa, Michaely, and Schmalz
Which is better? The debate is seemingly never ending:
* A buyback index outperforms the overall market plus a look at buybacks in 2013
* In 2013, Dividends seem to continue their comeback (the comeback was first documented by Julio and Ikenberry 2005): http://www.usatoday.com/story/money/business/2013/05/31/buybacks-dividends-cash-sp-500/2145333/
Dividends can act as a signal---
Do Dividends and Buybacks improve operating performance?
Maybe. Why? best guess better incentives and lower FCF problem.
Grullion and Michaely in in a journal of finance article give us an in depth look at stock repurchases. They find more buybacks and that the buybacks reduce the free cash flow problem. They also find that buybacks apparently do not signal improved operating performance in the future.
"between 1984 and 2000 corporations spent approximately 26 percent of their annual earnings on repurchases." Additionally, the paper brings up some interesting questions. Probably the most interesting question is why stock repurchases lead to lower systemic risk?! My guess is that there is a confounding variable at work. Specifically, suppose that firms who have seen recent increases in slack (so lower leverage) are more apt to do buy backs. These same firms would be more likely than their peers (who have not seen their leverage drop) to have lower systemic risk. Which is a bit of a stretch, but is consistent with the finding.
On the other hand, in the Journal of Financial Intermediation, Hirtle finds that profitability at banks who do repurchases does in fact increase following the repurchase.
History of dividend yields:
Fama and French (1998) on dividends (and debt).
The math behind buyback vs dividend decision (CFA review)
A video look at dividend dates (and other dates that are useful to know):
Types of Leases: Operating vs Capital (Financial)
notes from IRS--Highly recommended esp for accountants!
Comes down to which is cheaper. Many financial calculators to help you decide. Looking for positive NAL (Net Advantage to Lease)
Smith and Wakeman's 1985 paper still helps clarify my thinking on leasing more than just about anything else on this topic.
There are many reasons firms lease but in the end they mainly boil down to lower taxes or lower transaction costs.
Forbes has a very basic (does not really live up to their usual standards) look at leasing. One highlight:
"The primary advantage of leasing business equipment is that it allows you to acquire assets with minimal initial expenditures. Because equipment leases rarely require a down payment, you can obtain the goods you need without significantly affecting your cash flow"
Other (admittedly biased) resources are Lease Source, Why lease? here is what Capital Resources says: http://www.cr-ny.com/whylease.html
http://www.youtube.com/watch?v=veVQqcnoooI&feature=share&list=UUTiP30x1INhn57HKKn3rDEw by Jim
another example of “what are derivatives”
Paddy Hirsh on derivatives (Turkey example)
Do you prefer seeing a class taught traditionally? here is a 75 min introduction to Derivatives class from Finance 401 that lays out the basic building blocks. Video quality is not the best, but the class was really good. http://sbu.hosted.panopto.com/Panopto/Pages/Viewer/Default.aspx?id=f023eae2-2c20-495d-a4b1-0500f5049173
What are they?, notes on how to price them using the Black Scholes formula, Put call parity
How to use them: DRAW PAYOFF DIAGRAMS!
Why use them? Speculating (leverage gives you much power), stock options can help align incentives (with some problems)
LINKS NOT RIGHT
Helpified path: https://helpified.com/links/binomial
Hedging (operational hedging and financial hedging) can lowers risk, can positively impact cashflows, lowers expected taxes, make it easier to monitor management, and allow management to do what they do best and not worry about what is beyond their control. Hedging can also allow firms better access to capital markets (SEE Simkins, Carter, and Rogers and Allayanis and Weston 1998)
Why studying them is important even if you do not personally plan to use them:
Derivatives are explosive, zero-sum games. Used correctly they can be powerful tools, used incorrectly they can blow up in your face. Knowing this may allow you to prevent the problems from happening at your firm or firms you do business with.
Here are just a few of the debacles,: Orange County, Barings, LTCM, Bankers Trust (although this argues for being stupid!)
Reading the entrails, a look at Implied Volatilities (there are hundreds of others but I might as well use my one ;) )
In sum, Derivatives are powerful tools. Used correctly they help greatly, used incorrectly they really can hurt!
Long Term Capital Management is a particularly good case dealing at least some with derivatives. If no one selects it as a case to present in week 5, we will spend some time going over it in class.
from erisk.com LTCM
from The Risk Institute Long Term Capital Management case
the view from the Fed's Patrick Parkinson
the cry for more regulation was not widely accepted.
Talk about hot topics! Corporate Governance has been on the front page of all major papers and has attracted much attention in academic world as well. It boils down to conflicts within the Nexus. Generally this focuses on manager and shareholder conflicts.
Here are a few notes on the topic from past newsletters, a speech by Alan Greenspan on the topic, an independent study paper by Joe Haller (former SBU MBA student) and a class project on the topic from Andy Bubbs (former SBU student).
Does governance matter? Definitely, but it is often difficult to measure how much it matters. For instance looking at studies that show separate CEO-Chair positions are often driven by multiple factors and the choice is somewhat endogenous.
However there is much evidence suggests that governance matters. Looking at cross listing literature, Nofsinger and Weaver (2003) report that that one reason firms cross list (especially to the US) is to increased investor protections--Caveat, this is not universally held. Additionally, there is much other international evidence (where the difference between strong and weak governance is more pronounced than in the US) that shows that governance does matter. For example Black, Jang, and Kim report that shareholder wealth is strongly positively related to strong governance. Similarly Black finds the same evidence in looking at Russian Firms. And a whole bunch of people do the same for Chinese firms.
Practically, governance issues often come down to disagreements about Executive pay, shareholder voting, poison pills and other areas of entrenchment..
Transparency and Governance
Where does auditing fit into this? Can't improve things unless we know what is going on.
Better earnings quality and transparency lead to lower underpricing in IPOs.
Chaney and Phillpich (JAR 2002) find that stock prices dropped as Andersen's reputation worsened. Also Callen and Morel as well who find that with a similar results with a slightly different sample, Godbey and Mahar (RIF 2004) find that auditor reputation helps mitigate the information asymmetry problem.
(FWIW this is an early edition of the paper, I am not sure how to get around copyright laws, so I just put up working papers)
What is Wrong with Corporate Governance?
See Enron, Adelphia, Tyco, NYSE, etc., etc. The list goes on and on. We will talk about some of the cases in class.
Too high of stock prices?
Jensen talks about what led to the governance crises we saw at Tyco, Enron, etc. A big part of the answer may be overpriced equity. Why? A stock price that is overvalued is caused when investors have overly optimistic expectations. Thus, if the investors were to learn the truth, the stock price would fall. This creates an incentive to hide information from investors. Moreover, to keep the stock price high, management may be willing to take more chances and further hide the bad results. Typical control mechanisms fail to work on this problem. For instance, stock based pay makes the problem worse and the takeover market fails miserably since no one would want to take over an overpriced stock. Jensen suggests one solution: the board providing more information (including to short sellers).
Lack of transparency is likely the most severe problem.
What is Right with Corporate Governance?
Bauer, Guenster, and Otten look at the governance practices of European firms. By grouping the firms into portfolios, the authors
find that valuation and governance are “positively related.” Interestingly, they do not find the same relationship when various
“earning based performance measures” were examined. (my guess as to why the latter finding exists: fewer accounting games are played where there
is good governance. This game playing would skew any ratio comparison based on accounting numbers.) Link does not work---
US' system good but can be improved.
A few sites that you may find useful:
Executive compensation notes
Much of both the level and form of pay can be quickly summarized in these simple models.
LOWER---------------------Level of Pay----------------------------------HIGH
Assets in place Growth options
---------------------------Form of Pay---------------------------
Straight Salary is a higher proportion Market-based pay is more important
Assets in place firms with many growth options
Small Firms larger firms
Regulated Firms unregulated firms
The SEC's information on executive compensation
Executive Compensation Resources
the AFL-CIO's site, while biased, is a good resource
Erickson,Hanlon, and Maydew---GREAT!!!!
A look at where we have failed---ok, so it is cynical and somewhat anti-market
It's the form,. not the level--Jensen and Murphy
Gibson and Chesney point ou that call options are a staple in Executive pay packages, but the use of the options has come under attack for giving managers the incentive to take advantage of their informational advantages to the detriment of shareholders and other stakeholders. In fact the authors go even further and find that use of options can worsen what they call an “incentive to cheat.” Interestingly one suggestion they have for
solving this problem? Make the pay package include put options! This might lessen the incentive to “cheat” but would likely open a whole
other set of problems by creating an incentive to lower stock prices.
For a more “real world” look at options, CFO.com provides a survey that documents that at least some of the problems Gibson and Chesney suggest do in fact happen. READ IT!
Springfield Power Case
Market for corporate Control (mergers, takeovers, etc)
The Market for Corporate Control: in some ways this is what happens if internal measures do not work.
Off line Readings:
Is American Corporate Governance Fatally Flawed? –Merton Miller
Horizontal merger_acquiring competitor
Vertical mergers--taking over a supplier or distributor. Why? Be careful!
Fan and Goyal find that there are positive abnormal returns from vertical acquisitions.
Takeover waves (and types)
1898 to early 1900s--Horizontal mergers
1980s Leveraged bust ups
late 1990s to now: private equity, tech and regulatory as well as vertical
These in part of can be explained by the Agency costs and by stock price overvaluation.
These latter hypotheses won support from Gugler, Mueller, and Yurtoglu (2003)
Hostile or Friendly?
LBO--Opler finds improved performance following deal. Why? Best guess is better incentives
How a merger can create value
Generally overall value is created. Most of this goes to shareholders of target.
From Jensen and Ruback (1983)
Target % Bidder %
Tender offer 30% 4%
Merger 20 0 %
Proxy contest 8% NA
Unsuccessful bids may have value if they improve management or if they put firm in play. Bradley, Desai, and Kim (1983) find that those firms who do not receive another bid give up their abnormal returns in 2 years.
Updated Helpified path I made:
How a merger can destroy value
Dissynergy--Comment and Jarrell---can you say deworsifcation
Megginson, Morgan, and Nail find that focus decreasing (i.e diversifying deals) destroy value.
Maybe they destroy value by signalling overvaluation? That is one interpretation of Loughran and Vijh (1997)
Hostile vs friendly
Hostile deals get the publicity
Most deals are friendly
how to fight acquisitions
Fair Price Amendments
Asset restructuring --selling crown's jewels,
one time dividend
Make it political
Pac men and White Knights
Other forms of restructuring:
Carve-outs--selling a division (generally part of division) to public in form of IPO
Spin-offs--giving shares to existing shareholders
Discussion of Junk Bonds and Milken
Corporate Ownership and control in the UK, Germany, and France—Franks
Why do business internationally?
Country Risk-unexpected changes in country's business environment
Political from taxes to nationalization, protectionism, and expropriation
Financial--currency risk--MUCH easier to hedge
net or by division?
What to hedge?
Operating Exposure-more difficult
Translation exposure-marginal usefulness
Legal and infrastructure
Insider trading laws
Should US laws pertain to US firms?
How to do business internationally
Continuum from using agents to foreign branches to licencing (franchising) to Joint Venture/Merger
International Corporate finance
International Capital Budgeting
Raising capital internationally
Cost of capital
Mergers and Acquistions
Executive pay--A look at Japan--from Kato
Case: NatWest Takeover Battle-definitely not the final version.
An excel file of stock prices--just hit cancel when it asks for a password
A longer and earlier version (sorry for mistakes) but it has more tables
Trends in finance
What we know what we do not know
Tying it back together
Using finance in life