MGT3033 Winter07

UNIVERSITY OF TORONTO
Rotman School of Management
MANAGEMENT 3033
Ph.D. Seminar in Corporate Finance
Winter 2007 Francois Derrien

MGT 3033 Craig Doidge
Corporate Finance Jan Mahrt-Smith
The course
• This is an advanced course in corporate finance. It provides a theoretical and empirical overview
of major topics in corporate finance. The course will survey classic papers, methodology papers,
as well as papers that represent some of the most recent developments in the field. The objective is
to prepare students to critically evaluate and conduct research in corporate finance.
Class meetings
• Wednesday, 2:00pm – 4:00 pm, Rotman TBA (see the course webpage for the schedule)
Course resources
• There is no required textbook for the course. There are three optional texts.
Copeland, T., F. Weston, and K. Shastri, 2005, Financial theory and corporate policy, 4th
edition, Addison-Wesley, New York.
Amaro de Matos, J., 2001, Theoretical foundations of corporate finance, Princeton University
Press, New Jersey.
Campbell, J., A. Lo, and C. MacKinlay, 1997, The econometrics of financial markets, 1st
edition, Princeton University Press, New Jersey.
Tirole, J., The Theory of Corporate Finance, Princeton University Press
• Most papers that you are required to read will be available from the course website in .pdf format
at: http://www.rotman.utoronto.ca/~CDoidge/
• Papers not posted on the website can be found on the web or in the library.
Class requirements and grading

• Classroom participation, two empirical exercises (10% each), two referee reports (15% each), and
a final exam (50%). The empirical exercises and referee reports are to be done individually. The
final exam will be on April 18 from 2-4 in Room 448.
• Depending on the topic, we will cover at least 2-3 papers each class. Students are expected to read
these papers carefully and should be prepared to actively contribute to class discussions. At a
minimum, you should have a thorough understanding of the central idea of each paper, the data
and methodology (for empirical papers), and the conclusions drawn. You should critically evaluate
each paper and think of some improvements, extensions, and additional research ideas related to
the paper.
• Additional papers are listed for each topic, including overview and survey papers. We will not
have time to cover these papers in class, but you should make an effort to read them.
Tentative reading list and course schedule
You are required to read all papers marked in bold. Papers marked with a “*” will be discussed in class.
Overview
Smith, C., 1990, The theory of corporate finance: a historical overview, in The modern theory of corporate
finance, 2nd edition, ed. C. Smith, McGraw-Hill, New York.
Zingales, L., 2000, In search Of new foundations, Journal of Finance, 1623-1653.
Graham, J., and C. Harvey, 2001, The theory and practice of corporate finance: evidence from the field,
Journal of Financial Economics 60, 187-243.
Introduction and capital structure (Jan Mahrt-Smith)

January 10
January 17
Overview
Harris, M., and A. Raviv, 1991, The theory of capital structure, Journal of Finance 46, 297-356.
Capital structure and taxes

Modigliani, F., and M. Miller, 1958, The cost of capital, corporation finance and the theory of investment,
American Economic Review 48, 261-297.
Miller, M., 1977, Debt and taxes, Journal of Finance 32, 261-275.
DeAngelo, H., and R. Masulis, 1980, Optimal capital structure under personal and corporate taxation,
Graham, J., 2000, How big are the tax benefits of debt?, Journal of Finance 55, 1901-1941.
MacKie-Mason, J., 1990, Do taxes affect corporate financing decisions?, Journal of Finance 45, 1471-
1493.
Capital Structure and signaling

Leland, H. and D. Pyle, 1977, Informational asymmetries, financial structure, and financial intermediation,
Journal of Finance 32, 371-387.
*Ross, S., 1977, The determination of financial structure: the incentive signaling approach, Bell
Journal of Economics 8, 23-40.
Capital structure and agency costs

*Jensen, M, and W. Meckling, 1976, Theory of the firm: managerial behavior, agency costs and
ownership structure, Journal of Financial Economics 3, 305-360.
*Myers, S., 1977, Determinants of corporate borrowing, Journal of Financial Economics 5, 147-175.
Parrino, R., and M. Weisbach, 1999, Measuring investment distortions arising from stockholder-
bondholder conflicts, Journal of Financial Economics 53, 3-42.
Jensen, M., 1986, Agency costs of free cash flow, corporate finance, and takeovers, American Economic
Review 76, 323-329.
Zwiebel, J., 1996, Dynamic capital structure under managerial entrenchment, American Economic Review
86, 1197-1215
Pecking order theory of capital structure
*Myers, S., and N. Majluf, 1984, Corporate financing and investment decisions when firms have
information that investors do not have, Journal of Financial Economics 13, 187-221.
Myers, S., 1984, The capital structure puzzle, Journal of Finance 39, 575-592.
Frank, M., and V. Goyal, 2003, Testing the pecking order theory of capital structure, Journal of Financial
Economics 67, 217-248.
Shyam-Sunder, L, and S. Myers, 1999, Testing static tradeoff against pecking order models of capital
structure, Journal of Financial Economics 51, 219-244.
Capital structure and product markets

Brander, J., and T. Lewis, 1986, Oligopoly and financial structure: the limited liability effect,
American Economic Review 76, 956-970.
Maksimovic, V., 1988, Capital structure in repeated oligopolies, RAND Journal of Economics 19, 389-402.
Chevalier, J., 1995, Capital structure and product market competition: empirical evidence from the
supermarket industry, American Economic Review 85, 206-256.
Phillips, G., 1995, Increased debt and industry product markets: an empirical analysis, Journal of Financial
Capital structure and bankruptcy

Shleifer, A., R. Vishny, 1992, Liquidation values and debt capacity: a market equilibrium approach,
Asquith, P., R. Gertner, and D. Scharfstein, 1994, Anatomy of financial distress: an examination of junk-
bond issuers, Quarterly Journal of Economics 109, 625-658.
Gertner, R. and D. Scharfstein, 1991, A theory of workouts and the effects of reorganization law, Journal of
Finance 46, 1189-1222.
Warner, J., 1977, Bankruptcy costs: some evidence, Journal of Finance 32, 337-348.
Franks, J., and W. Torous, 1989, An empirical investigation of United States firms in reorganization,
General empirical evidence

*Bradley, M., G. Jarrell, and E. Kim, 1984, On the existence of an optimal capital structure: theory
and evidence, Journal of Finance 39, 857-878.
*Rajan, R., and L. Zingales, 1995, What do we know about capital structure? Some evidence from
international data, Journal of Finance 50, 1421-1460.
MacKie-Mason, J., 1990, Do taxes affect corporate financing decisions? Journal of Finance 45, 1471-1493.
Aivazian, V., L. Booth, V. Maxsimovic, and A. Demirgic-Kunt, 2001, Capital structures in developing
countries, Journal of Finance 56, 87-130.
Baker, M., and J. Wurgler, 2002, Market timing and capital structure, Journal of Finance 57, 1-32.
Financial contracting (Jan Mahrt-Smith)

January 24
Complete contracts
Innes, R., 1990, Limited liability and incentive contracting with ex-ante action choices, Journal of
Economic Theory 52, 45-67.
*Gale, D., and M. Hellwig, 1985, Incentive compatible debt contracts: the one period problem,
Review of Economic Studies 52, 647-663.
Diamond, D., 1984, Financial intermediation and delegated monitoring, Review of Economic Studies 51,
393-414.
Diamond, D., 1991, Debt maturity structure and liquidity risk, Quarterly Journal of Economics 56, 709-
738.
Diamond, D., 1993, Seniority and maturity of debt contracts, Journal of Financial Economics 33, 341-368.
Incomplete contracts
Bolton, P., and D. Scharfstein, 1996, Optimal debt structure and the number of creditors, Journal of
Political Economy 104, 1-25.
*Hart, Oliver, 2001, Financial Contracting , Journal of Economic Literature 39, 1079-1100
Hart, O., 1995, Firms, Contracts, and Financial Structure, Oxford University Press.
Mahrt-Smith, J., 2005, The interaction of capital structure and ownership structure, Journal of Business,
forthcoming.
Corporate diversification and focusing (Jan Mahrt-Smith)

January 31 – Empirical exercise 1 is due.
Overview
Martin, J., and A. Sayrak, 2003, Corporate diversification and shareholder value: a survey of recent
literature, Journal of Corporate Finance 9, 37-57.
Theory
Stein, J., 1997, Internal capital markets and the competition for corporate resources, Journal of Finance 52,
111-133.
Gertner, R., D. Scharfstein, and J. Stein, 1994, Internal versus external capital markets, Quarterly Journal of
Economics 109, 1211-1230.
Theory plus empirics

Rajan, R., H. Servaes, and L. Zingales. 2000, The cost of diversity: the diversification discount and
inefficient investment, Journal of Finance 55, 35-60.
Scharfstein, D., and J. Stein, 2000, The dark side of internal capital markets: divisional rent seeking and
The diversification discount

Lang, L, and R. Stulz, 1994, Tobin's q, corporate diversification, and firm performance, Journal of Political
Economy 102, 1248-1280.
*Berger, P., and E. Ofek, 1995, Diversification’s effect on firm value, Journal of Financial Economics
37, 39-65.
More empirics
Denis, D., D. Denis, and A. Sarin, 1997, Agency problems, equity ownership, and corporate diversification,
Shin, H., and R. Stulz, 1998, Are internal capital market efficient, Quarterly Journal of Economics 113,
531-552.
Rajan, R., H. Servaes, and L. Ziangales. 2000, The cost of diversity: the diversification discount and
Scharfstein, D., and J. Stein, 2000, The dark side of internal capital markets: divisional rent seeking and
Whited, T., 2001, Is it inefficient investment that causes the diversification discount?, Journal of Finance
56, 1667-1691.
Aggarwal, R., and A. Samwick, 2003, Why do managers diversify their firms? Agency reconsidered,
*Lamont, O., 1997, Cash flow and investment: evidence from internal capital markets, Journal of
Finance 52, 83-109
Campa, J., and S. Kedia, 2002, Explaining the diversification discount, Journal of Finance 57, 1731-1762.
Graham, J., M. Lemmon, and J. Wolf, 2002, Does corporate diversification destroy value?, Journal of
Finance 57, 695-720.
Lamont, O. and C. Polk, 2002, Does diversification destroy value? Evidence from industry shocks, Journal
of Financial Economics 63, 51-77.
Villalonga, B., 2003, Diversification discount or premium? New evidence from BITS establishment-level
data, Journal of Finance, forthcoming.
Comment, R. and G. Jarrell, 1994, Corporate focus and stock returns, Journal of Financial Economics 37,
67-87.
John, K., and and E. Ofek, 1995, Asset sales and increase in focus, Journal of Financial Economics 37,
105-126.
Berger, P., and E. Ofek, 1996, Bustup takeovers of value-destroying diversified firms, Journal of Finance
51, 1175-1200.
Berger, P., and E. Ofek, 1999, Causes and effects of corporate refocusing programs, Review of Financial
Studies 12, 311-345.
Schlingemann, F., R. Stulz, and R. Walkling, 2002, Divestitures and the liquidity of the market for
corporate assets, Journal of Financial Economics 64, 117-144.
Lins, K., and H. Servaes, 1999, International evidence on the value of corporate diversification, Journal of
Finance 54, 2215-2239.
Global diversification
Denis, D., D. Denis, and K. Yost, 2002, Global diversification, industrial diversification, and firm value,
Fauver, L., J. Houston, and A. Naranjo, 2003, Capital market development, international integration, legal
systems, and the value of corporate diversification: a cross-country analysis, Journal of Financial and
Quantitative Analysis 38, 135-157.
Takeovers (Jan Mahrt-Smith)

February 7
Overview
Jensen, M., and R. Ruback, 1983, The market for corporate control: the scientific evidence, Journal of
Financial Economics 11, 5-50.
Hirshleifer, D., 1995, Mergers and acquisitions: strategic and informational issues, Finance: Handbooks in
Operations Research and Management Science, eds. R. Jarrow, M. Maximovich and W. Ziemba,
North Holland.
*Grossman, S., and O. Hart, 1980, Takeover bids, the free rider problem, and the theory of the
corporation, Bell Journal of Economics 11, 42-69.
Jensen, M., 1986, Agency costs of free cash flow, corporate finance, and takeovers, American
Economic Review 76, 323-329.
*Bradley, M., A. Desai, and E. Kim, 1988, Synergistic gains from corporate acquisitions and their
division between the stockholders of target and acquiring firms, Journal of Financial Economics
21, 3-40.
Shleifer, A. and R. Vishny, 1986, Large shareholders and corporate control, Journal of Political Economy
94, 461-88.
Stulz, R., 1988, Managerial control of voting rights: financing policies and the market for corporate control,
Scharfstein, D., 1988, The disciplinary role of takeovers, Review of Economic Studies 60, 185-199.
*Lang, L., R. Stulz, and R. Walkling, 1989, Managerial performance, tobin’s q, and the gains from
successful tender offers, Journal of Financial Economics 24, 137-154.
Mitchell, M., and K. Lehn, 1990, Do bad bidders make good targets?, Journal of Political Economy 98,
372-398.
Healy, P., K. Palepu and R. Ruback, 1992, Does corporate performance improve after mergers?, Journal of
Servaes, H., 1994, Do takeover targets overinvest?, Review of Financial Studies 7, 253-277.
Loughran, T., and A. Vijh, 1997, Do long-term shareholders benefit from capital acquisitions?, Journal of
Finance 52, 1765-1790.
Schwert, W., 2000, Hostility in takeovers: in the eyes of the beholder?, Journal of Finance 55, 2599-2640.
Holmström, B., and S. Kaplan, 2001, Corporate governance and merger activity in the U.S.: making sense
of the 80's and 90's, Journal of Economic Perspectives 15, 121-144.
Moeller, S., F. Schlingemann, and R. Stulz, 2003, Firm size and the gains from acquisitions, Journal of
Financial Economics, forthcoming.
Raising capital (Francois Derrien)

February 15 – Referee report 1 is due.
February 22 (no class)
March 1
March 8
Overview
Eckbo, E., and R. Masulis, 1995, Seasoned equity offerings: a survey, Finance: Handbooks in Operations
Research and Management Science, eds. R. Jarrow, M. Maximovich and W. Ziemba, North Holland.
Ibbotson, R., and J. Ritter, 1995, Initial public offerings, Finance: Handbooks in Operations Research and
Management Science, eds. R. Jarrow, M. Maximovich and W. Ziemba, North Holland.
Ritter, J., and I. Welch, 2002, A review of IPO activity, pricing, and allocations, Journal of Finance 57,
1795-1828.
Ljungqvist, A., and T. Jenkinson, 2001, Going public: the theory and evidence on how companies raise
equity finance, Oxford University Press, 2nd edition.
IPOs: theory
Baron, D., and B. Holmstrom, 1980, The investment banking contract for new issues under asymmetric
information: delegation and the incentive problem, Journal of Finance 35, 1115-1138.
Baron, D., 1982, A model of the demand for investment banking advising and distribution services for new
issues, Journal of Finance 37, 955-976.
Booth, J., and R. Smith, 1986, Capital raising, underwriting and the certification hypothesis, Journal of
Beatty, R., and J. Ritter, 1986, Investment banking, reputation, and the underpricing of initial public
offerings, Journal of Financial Economics 15, 213-232.
*Rock, K., 1986, Why new issues are underpriced, Journal of Financial Economics 15, 187-212.
*Beneviste, L., and P. Spindt, 1989, How investment bankers determine the offer price and allocation
of new issues, Journal of Financial Economics 24, 343-361.
*Allen, F., and G. Faulhaber, 1989, Signaling by underpricing in the IPO market, Journal of
Grinblatt, M., and C. Hwang, 1989, Signaling and the pricing of new issues, Journal of Finance 44, 383-
420.
*Welch, I., 1992, Sequential sales, learning and cascades, Journal of Finance 47, 695-732.
IPOs: empirics
Carter, R., and S. Manaster, 1990, Initial public offerings and underwriter reputation, Journal of Finance
45, 1045-1067.
Ritter, J., 1991, The long run performance of initial public offerings, Journal of Finance 46, 3-28.
Hanley, K., 1993, The underpricing of initial public offerings and the partial adjustment phenomenon,
Jegadeesh, N., M. Weinstein, and I. Welch, 1993, An empirical investigation of IPO returns and subsequent
equity offerings, Journal of Financial Economics 34, 163-175.
Ruud, J., 1993, Underwriter price support and the IPO underpricing puzzle, Journal of Financial Economics
34, 134-151.
*Loughran, T., and J. Ritter, 1995, The new issues puzzle, Journal of Finance 50, 23-51.
Brennan, M., and J. Franks, 1997, Underpricing, ownership and control in initial public offerings, Journal
Barber, B., and J. Lyon, 1997, Detecting long-run abnormal stock returns: the empirical power and
specification of test-statistics, Journal of Financial Economics 43, 341-372.
*Brav, A., and P. Gompers, 1997, Myth or reality? The long-run underperformance of IPOs:
evidence from venture and nonventure capital-backed companies, Journal of Finance 52, 1791-
1821.
Pagano, M., F. Panetta, and L. Zingales. 1998, Why do companies go public? An empirical analysis,
Teoh, S., I. Welch, and T. Wong, 1998, Earnings management and the long-run market performance
of initial public offerings, Journal of Finance 53, 1935-1974.
Michaely, R., and K. Womack, 1999, Conflict of interest and the credibility of underwriter analyst
recommendations, Review of Financial Studies 12, 653-686.
Barber, B., and J. Lyon, 1999, Improved methods for tests of long-run abnormal stock returns, Journal of
Finance 54, 165-201.
Chen, H., and J. Ritter, 2000, The seven percent solution, Journal of Finance 55, 1105-1131.
Ellis, K., R. Michaely, and M. O’Hara, 2000, When the underwriter is the market maker: an examination of
trading in the IPO aftermarket, Journal of Finance 55, 1039-1074.
Loughran, T., and J. Ritter, 2002, Why don’t issuers get upset about leaving money on the table in IPOs,
Review of Financial Studies 15, 413-443.
Gompers, P., and J. Lerner, 2003, The really long-run performance of initial public offerings: the pre-
Nasdaq evidence, Journal of Finance 58, 1355-1392.
Cornelli, F., and D. Goldreich, 2003, Bookbuilding: how informative is the order book?, Journal of Finance
58, 1415-1443.
Smart, S., and C. Zutter, 2003, Control as a motivation for underpricing: a comparison of dual and single
class IPOs, Journal of Financial Economics 69, 85-110.
Purnanandam, A., and B. Swaminathan, 2003, Are IPOs really underpriced?, Review of Financial Studies,
Forthcoming.
SEOs
*Asquith, P., and D. Mullins, 1986, Equity issues and offering dilution, Journal of Financial
Masulis, R. and A. Korwar, 1986, Seasoned equity offerings: an empirical investigation, Journal of
Lee, I., 1997, Do firms knowingly sell overvalued equity?, Journal of Finance 52, 1439-1466.
Bayliss, M., and S. Chaplinsky, 1996, Is there a ‘window of opportunity’ for seasoned equity issuance?,
Kang, J-K., Y-C. Kim, and R. Stulz, 1999, The underreaction hypothesis and the new issue puzzle:
evidence from Japan, Review of Financial Studies 12, 519-534.
*Brav, A., C. Geczy, and P. Gompers, 2000, Is the abnormal return following equity issuances
anomalous?, Journal of Financial Economics 2000, 56, 209-250.
Eckbo, E., O. Norli, and R. Masulis, 2000, Seasoned equity offerings: resolution of the ‘new issues puzzle’,
Corwin, S., 2003, The determinants of underpricing for seasoned equity offers, Journal of Finance,
forthcoming.
Cooney, J., H. Kato, and J. Schallheim, 2003, Underwriter certification and Japanese seasoned equity
issues, Review of Financial Studies 16, 949-982.
Private equity
Wruck, K., 1989, Equity ownership concentration and firm value: evidence from private equity financing,
Hertzel, M., M. Lemmon, J. Linck, and L. Rees, 2002, Long-run performance following private placements
of equity, Journal of Finance 57, 2595-2617.
Moskowitz, T., and A. Vissing-Jorgensen, 2002, The returns to entrepreneurial investment: a private equity
premium puzzle?, American Economic Review 94, 745-778.
Financial distress (Francois Derrien)
March 15 – Referee report 2 is due.
Overview
Senbet, L., and J. Seward, 1995, Financial distress, bankruptcy, and reorganization, Finance: Handbooks in
North Holland.
Wruck, K., 1990, Financial distress, reorganization, and organizational efficiency, Journal of Financial
Weiss, L., 1990, Bankruptcy resolution: direct costs and violation of priority of claims, Journal of Financial
Gertner, R., and D., Scharfstein, 1991, A theory of workouts and the effect of reorganization law,
*Aghion, P., O. Hart, and J. Moore, 1992, The economics of bankruptcy reform, Journal of Law,
Economics, and Organization 8, 523-546.
*Shleifer, A., and R. Vishny, 1992, Liquidation values and debt capacity: a market equilibrium
approach, Journal of Finance 47, 1343-1366.
Asquith, P., R. Gertner, and D. Scharfstein, 1994, Anatomy of financial distress: an examination of junk-
bond issuers, Quarterly Journal of Economics, 625-657.
Pulvino, T., 1998, Do asset fire sales exist? An empirical investigation of commercial aircraft transactions,
Stromberg, P., 2000, Conflicts of interest and market illiquidity in bankruptcy auctions: theory and tests,
Ownership structure (Craig Doidge)

March 22
Demsetz, H., and K. Lehn, 1985, The structure of corporate ownership: causes and consequences, Journal
of Political Economy 93, 1155-1177.
Morck, R., A. Shleifer, and R. Vishny, 1988, Management ownership and market valuation: an empirical
analysis, Journal of Financial Economics 20, 293-316.
Holderness, C., and D. Sheehan, 1988, The role of majority shareholders in publicly held corporations: an
exploratory analysis, Journal of Financial Economics 20, 317-346.
Stulz, R., 1988, Managerial control of voting rights: financing policies and the market for corporate control,
*McConnell, J., and H. Servaes, 1990, Additional evidence on equity ownership and corporate value,
*Himmelberg, C., G. Hubbard, and D. Palia, 1999, Understanding the determinants of managerial
ownership and the link between ownership and performance, Journal of Financial Economics
53, 353-384.
Denis, D., and A. Sarin, 1999, Ownership and board structures in publicly traded corporations, Journal of
*Holderness, C., R. Kroszner, and D. Sheehan, 1999, Were the good old days that good? Changes in
managerial stock ownership since the great depression, Journal of Finance 54, 435-469.
Claessens, S., S. Djankov, J. Fan, and L. Lang, 2002, Disentangling the incentive and entrenchment effects
of large shareholdings, Journal of Finance 57, 2741-2771.
Lins, K., 2003, Equity ownership and firm value in emerging markets, Journal of Financial and
Quantitative Analysis 38, 159-184.
Coles, J., M. Lemmon, F. Meshke, 2002, Endogeneity in corporate finance, working paper, Arizona State
University.
Executive compensation and turnover (Craig Doidge)
March 29
Jensen, M., and K. Murphy, 1990, Performance pay and top-management incentives, Journal of Political
Economy 98, 225-264.
Agarwal, A., and R. Walkling, 1994, Executive careers and compensation surrounding takeover bids,
Yermack, D., 1995, Do corporations award CEO stock options effectively?, Journal of Financial
*Yermack, D., 1997, Good timing: CEO stock option awards and company news announcements,
Aggarwal, R., and A. Samwick, 1999, Executive compensation, strategic competition, and relative
performance evaluation: theory and evidence, Journal of Finance 54, 1999-2043.
Ofek, E., and D. Yermack, 2000, Taking stock: equity-based compensation and the evolution of managerial
ownership, Journal of Finance 55, 1367-1384.
Warner, J., R. Watts, and K. Wruck, 1988, Stock prices and top management changes, Journal of Financial
Weisbach, M., 1988, Outside directors and CEO turnover, Journal of Financial Economics 20, 431-460.
Martin, K., and J. McConnell, 1991, Corporate performance, corporate takeovers, and management
turnover, Journal of Finance 46, 671-688.
Weisbach, M., 1994, CEO turnover and the firm's investment decisions, Journal of Financial Economics,
37, 159-188.
*Denis, D., and D. Denis, 1995, Performance changes following top management dismissals, Journal
of Finance 50, 1029-1057.
*Volpin, P., 2002, Governance with poor investor protection: evidence from top executive turnover in
Italy, Journal of Financial Economics 64, 61-90.
Payout policy (Craig Doidge)

April 5 – Empirical exercise 2 is due.
Overview
Allen, F., and R. Michaely, 2002, Payout policy, Handbook of the Economics of Finance, ed., G.
Constantinides, M. Harris, and R. Stulz, North Holland.
Brav, A., J. Graham, C. Harvey, and R. Michaely, 2002, Payout policy in the 21st century, working paper,
Duke University.
Dividend policy
Black, F., 1976, The dividend puzzle, Journal of Portfolio Management 2, 5-8.
Miller, M., and M. Scholes, 1978, Dividends and taxes, Journal of Financial Economics 6, 333-364.
Miller, M., and K. Rock, 1985, Dividend policy under asymmetric information, Journal of Finance 40,
1031-1051.
Dewenter, K., and V. Warther, 1998, Dividends, asymmetric information, and agency conflicts: evidence
from a comparison of the dividend policies of Japanese and U.S. firms, Journal of Finance 53, 879-
904.
Allen, F., A. Bernardo, and I. Welch, 2000, A theory of dividends based on tax clienteles, Journal of
Finance 55, 2499-2536.
*Fama, E., and K. French, 2001, Disappearing dividends: changing firm characteristics or lower
propensity to pay?, Journal of Financial Economics 60, 3-43.
Baker, M., and J. Wurgler, 2002, Why are dividends disappearing? An empirical analysis, working paper,
NYU.
Repurchases
Dann, L., 1981, Common stock repurchases: an analysis of returns to bondholders and stockholders,
Vermaelen, T, 1981, Common stock repurchases and market signalling: an empirical study, Journal of
*Ikenberry, D., J. Lakonishok, and T, Vermaelen, 1995, Market underreaction to open market share
repurchases, Journal of Financial Economics 39, 181-208.
*Stephens, C., and M. Weisbach, 1998, Actual share reacquisitions in open-market repurchase
programs, Journal of Finance 53, 313-333.
Ikenberry, D., J. Lakonishok, and T, Vermaelen, 2000, Stock repurchases in Canada: performance and
strategic trading, Journal of Finance 2000 55, 2373-2397.
Law and finance (Craig Doidge)

April 12
Survey papers
Shleifer, A., and R. Vishny, 1997, A survey of corporate governance, Journal of Finance 52, 737-783.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 2000, Investor protection and
corporate governance, Journal of Financial Economics 58, 1-27.
Theoretical background
Shleifer, A., and D. Wolfenzon, 2002, Investor protection and equity markets, Journal of Financial
Economics 66, 3-27.
Legal origins and measures of investor protection

La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1998, Law and finance, Journal of Political
Economy 106, 1113-1155.
Shleifer, A., and E. Glaesser, 2002, Legal origins, Quarterly Journal of Economics, forthcoming.
Private benefits of control

Zingales, L, 1994, The value of the voting right: a study of the Milan Stock Exchange experience,
Review of Financial Studies 7, 125-148.
*Dyck, A., and L. Zingales, 2004, Private benefits of control: an international comparison, Journal of
Finance 59, 537-600.
Nenova, T., 2003, The value of corporate voting rights and control: a cross-country analysis, Journal of
Ownership structure
Bebchuk, L., 1999, A rent protection theory of corporate ownership and control, working paper, NBER.
*La Porta, R., F. Lopez-de-Silanes, A. Shleifer, 1999, Corporate ownership around the world,
Claessens, S., S. Djankov, and L. Lang, 2000, The separation of ownership and control in East Asian
corporations, Journal of Financial Economics 58, 81-112.
Faccio, M., and L. Lang, 2002, The ultimate ownership of Western European corporations, Journal of
Valuation
*La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 2002, Investor protection and
corporate valuation, Journal of Finance 57, 1147-1170.
Doidge, C., A. Karolyi, and R. Stulz, 2004, Why are foreign firms listed in the U.S. worth more?, Journal
Durnev, A., and E.-H. Kim, 2004, To steal or not to steal: firm attributes, legal environment, and valuation,
Journal of Finance, forthcoming.
Dividend policy
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 2000, Agency problems and dividend
policies around the world, Journal of Finance 55, 1-33.
Financial market development, external finance, and capital allocation

La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1997, Legal determinants of external
finance, Journal of Finance 52, 1131-1150.
Rajan, R., and L. Zingales, 2003, The great reversals: the politics of financial development in the 20th
Century, Journal of Financial Economics 69, 5-50.
Wurgler, J., Financial markets and the allocation of capital, Journal of Financial Economics 58, 187-214.
Pagano, M., F. Panetta, and L. Zingales, 1998, Why do companies go public? An empirical analysis,
Rajan, R., and L. Zingales, 1998, Financial dependence and growth, American Economic Review 88, 559-
587.
Demirguc-Kunt, A., and V. Maksimovic, 1999, Law, finance, and firm growth, Journal of Finance 53,
2107-2137.
Beck T., and R. Levine, 2000, Industry growth and capital allocation: does having a market or bank-based
system matter, Journal of Financial Economics 64, 147-180.
Demirguc-Kunt, A., and V. Maksimovic, 2002, Funding growth in bank based and market based financial
systems: evidence from firm-level data, Journal of Financial Economics 65, 337-363.
Himmelberg, C., G. Hubbard, and I. Love, 2001, Investor protection, ownership, and capital allocation,
working paper, Columbia University.
Crises
Johnson, S., P. Boone, A. Breach, and E. Friedman, Corporate governance and the Asian financial crisis,
Information content
Morck, R., B. Yeung, and W. Yu, 2000, The information content of stock markets: why do emerging
markets have synchronous stock price movements?, Journal of Financial Economics 58, 215-260.
Bhattacharya, U., H. Daouk, B. Jorgenson and C. Kehr. When an event is not an event: the curious case of
an emerging market, Journal of Financial Economics 55, 2000, 69-101.
Event studies
To be read on your own time.
Overview
Thompson, R., 1995, Empirical methods of event studies in corporate finance, Finance: Handbooks in
North Holland.
Campbell, J., A. Lo, and C. MacKinlay, 1997, Chapter 4, The econometrics of financial markets, 1st edition,
Princeton University Press, New Jersey.
Brown S., and J. Warner, 1985, Using daily stock returns: the case of event studies, Journal of
Barber, B., and J. Lyon, 1997, Detecting long-run abnormal stock returns: the empirical power and
specification of test statistics, Journal of Financial Economics 43, 341-372.
Kothari, S., and J. Warner, 1995, Measuring long-horizon security price performance, Journal of Financial
Fama, E., 1998, Market efficiency, long-term returns, and behavioral finance, Journal of Financial
Brav, A., 2000, Inference in long-horizon event studies: a bayesian approach with application to initial
public offerings, Journal of Finance 55, 1979-2016.
Mitchell, M., and E. Stafford, 2000, Managerial decision making and long-term stock price performance,
Journal of Business 73, 287-329.

MGT3033 Winter07

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

MGT3033 Winter07

Uploaded by

Copyright:

Available Formats

UNIVERSITY OF TORONTO

Rotman School of Management

Winter 2007 Francois Derrien

Class requirements and grading

Introduction and capital structure (Jan Mahrt-Smith)

Capital structure and taxes

Capital Structure and signaling

Capital structure and agency costs

Capital structure and product markets

Capital structure and bankruptcy

General empirical evidence

Financial contracting (Jan Mahrt-Smith)

Corporate diversification and focusing (Jan Mahrt-Smith)

Theory plus empirics

The diversification discount

Takeovers (Jan Mahrt-Smith)

Raising capital (Francois Derrien)

Ownership structure (Craig Doidge)

Payout policy (Craig Doidge)

Law and finance (Craig Doidge)

Legal origins and measures of investor protection

Private benefits of control

Financial market development, external finance, and capital allocation

You might also like