Professor Xuewen Liu
Department of Finance, HKUST
Spring 2013
Email: Xuewenliu@ust.hk
Office hour: 13:30-14:30 Tuesday
Assessment: Assignments (12%), Midterm-exam (18%), Projects and presentations
(15%), and Final exam (55%)
Textbooks:
1.
Corporate Finance, by J. Beck and P. DeMarzo, 2nd edition 2011, Pearson
Education, Inc. Hereafter BD.
2.
Financial Markets and Corporate Strategy, by M. Grinblatt and S. Titman, 2nd edition, 2002, Irwin McGraw Hill. Hereafter GT.
I. Introduction to Corporate Finance
1. Corporations (Vs sole proprietorships, partnerships and limited liability companies)
Typical features: Separation of ownership and management
Limited liability
Types: Closed-held companies
Public companies
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Organizational structure of a typical corporation:
Corporate environment:
Real asset market of business (Real) product
Firm
Financial resource
Operation income
Financial market Payout
“Capital Markets: An Engine for Economic Growth”
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The relationship between economic efficiency and financial development
(Wurgler (1999))
Finance changes personal wealth
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Volatile banking industry
Financial markets grow faster
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Corporate finance will become important
The international comparison in comparative advantages
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2. Corporate finance
It studies corporate financial decision-making, including investment decision and financing decision.
Investment
Decision
Financing
Decision
Debt
Real asset market of business Financial market Asset
Equity
3. Outline of the course
Foundation of valuation
Firm's investment decision
Firm’s financing decision (capital structure and payout policy)
Investment and financing decision with market frictions
a. tax
b. agency problems
c. information asymmetry
Topics
a.