Corporate Finance
(Optional course no. IE 518, MA (Economics), CITD, SIS, JNU by Dr. Gurbachan Singh)

This course is taught in two parts. The first part deals with basic principles of corporate finance. This is introductory. This is required because students come from Economics background with hardly any exposure to Finance. The second part of the course gives a more formal treatment.


1. Principles of Corporate Finance

Brealey, R. A., S.C. Myers, and F. Allen, 2005, 8th edition, Corporate Finance, McGraw-Hill Irwin, Chapters 5, 7-8, 13-14, 16-17, 20-21 and 24.

• Net present value, internal rate of return

• Risk, return

• Portfolio frontier, Capital asset Pricing Model

• Efficient market hypothesis, behavioral finance

• Options

• Modigliani Miller Theorem, debt-equity ratio, dividends, taxes, financial distress, debt and incentives, the trade-off theory of capital structure, the pecking order of financing choices
 

2. A More Formal Treatment

Tirole, Jean, 2006, Theory of Corporate Finance - chapters 1-5 and 12 (excluding the supplementary sections).

• A broad overview, corporate governance, corporate financing – some stylized facts

• Outside financing capacity, agency cost, role of net worth, debt overhang, equity multiplier, debt and equity

• Some determinants of borrowing capacity, diversification and incentives, collateral, inalienable human capital, re-deployable assets, group lending, build-up of net worth

• Liquidity and risk management, free cash flow, and long-term finance

• Consumer liquidity demand