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FIN 7345 Empirical Corporate Finance
Spring 2009
Professor:
David C. Mauer
Office:SOM 3.710
Phone:
972-883-5844
E-mail:dmauer@utdallas.edu
Office hours:F 3:30 - 5:00 pm
Class Time:M 9:30 am - 12.15 pm (SOM 2.803)
Course Objective

The purpose of this course is to review some of the key areas of corporate finance research. We will discuss a selective set of research papers, with an emphasis on recent empirical research. The ultimate goal of our discussions is to formulate new avenues for research in corporate finance, which may ultimately lead to dissertation topics and/or publishable papers.

Course Material
The course material consists of journal articles and working papers that I will assign in advance.
See the list of topics and articles on the following pages.
Grading
Presentations
20%
Participation
20%
Referee reports
20%
Paper
40%
Presentations

Each student will present several papers during the course of the semester. You are expected to gain an understanding of the central idea of each paper, the data and research methodology, and the conclusions drawn. Ideally, you should also be able to critically evaluate each paper and suggest possible extensions.

Class Participation

I have high expectations for attendance, preparation, and participation. You should carefully and critically read each paper that is assigned before class and think about weaknesses and possible extensions. Hopefully, this will provide the basis for several interesting class discussions and perhaps future research.

2
Referee Reports

You must write two referee reports during the semester. First, pick a subject area that interests you. Next, find working papers on SSRN that you would like to referee and check with me whether the papers are appropriate for review. Finally, write a two to three page referee report on each paper that follows the guidelines in the appendix at the end of this syllabus.You may

give me your referee reports at any time during the semester. The reports must be turned in on
or before Monday, May 4.
Research Paper

The paper requirement is intended to get you started on research in corporate finance. Ideally, it is the beginning of a thesis proposal and/or research publication. You should, at a minimum, do the following:

\ue000
Develop a research hypothesis and explain how it contributes to the existing literature.
\ue000
Write a review of the related literature.
\ue000
Describe how you intend to test your hypothesis. In particular, describe how you will get
the data and what statistical methods you will employ.

If time permits, you should also start to gather some of the data and perhaps run some of the statistical analysis. We will talk more about his project in class, and you are encouraged to come by my office for guidance.The research paper must be turned in on or before Monday, May 4.

Readings
Below is a list of articles that forms the foundation for this course. I will assign articles one
week in advance. We will only discuss a portion of the articles.
Articles are available from the following sources:
\u2022
Articles published in the Journal of Finance are available from the JF website
(http://www.afajof.org/journal/browse.asp) and JStor (www.jstor.org).
\u2022
Articles published in the Journal of Financial Economics are available from Elsevier
Science (www.sciencedirect.com
).
\u2022
Articles published in the Review of Financial Studies are available from the RFS website
(www.rfs.org
).
\u2022
For articles published in other journals, you can go to the library website, which lists
websites for access to articles in all major journals.
\u2022
Many working papers are available on SSRN (www.ssrn.com) or on the authors\u2019 personal
websites.
3
A. Capital Structure
1. Agency Theory \u2013 Debt and Private Action
Jensen, M. C., and W. H. Meckling, 1976, Theory of the firm: Managerial behavior, agency costs
and ownership structure, Journal of Financial Economics 3, 305-360.
Myers, S. C., 1977, Determinants of corporate borrowing, Journal of Financial Economics 5,
147-175.
Fama, E., 1980, Agency problems and the theory of the firm, Journal of Political Economy 88,
288-307.
Green, R., 1984, Investment incentives, debt and warrants, Journal of Financial Economics 13,
115-136.
Titman, S., 1984, The effect of capital structure on a firm\u2019s liquidation decision, Journal of
Financial Economics 13, 137-151.
Jensen, M. C., 1986, Agency costs of free cash flow, corporate finance and takeovers,American
Economic Review 76, 323-329.
Berger, P. G., E. Ofek, and D. L. Yermack, 1997, Managerial entrenchment and capital structure
decisions, Journal of Finance 52, 1411-1438.
Morellec, E., 2004, Can managerial discretion explain observed leverage ratios?, Review of
Financial Studies 17, 257-294.

Childs, P. D., D. C. Mauer, and S. H. Ott, 2005, Interactions of corporate financing and investment decisions: The effects of agency conflicts, Journal of Financial Economics 76, 667- 690.

Eisdorfer, A., 2008, Empirical evidence of risk-shifting in financially distressed firms, Journal of
Finance 63, 609-637.
2. Asymmetric Information \u2013 Private Information
Leland, H. E., and D. H. Pyle, 1977, Information asymmetries, financial structure, and financial
intermediation, Journal of Finance 32, 371-387.
Ross, S. A., 1977, The determination of financial structure: The incentive-signalling approach,
Bell Journal of Economics 8, 23-40.
Myers, S. C., and N. S. Majluf, 1984, Corporate financing and investment decisions when firms
have information that investors do not have, Journal of Financial Economics 13, 187-221.
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