General provisions

The course is given at D-level within the regular programme and as a separate course.

The Course Description is established by the board of the Department of Business Studies by mandate of the Faculty of Social Sciences. The course plan is valid from 060901. The Course Description was last revised 2005-02-14.

Entry requirements

The following is applicable to Swedish students:

Qualified to be registered is any student who has studied both A-, B- and C-levels and who, at the time of registration, has obtained 20 points at A-level, 20 points at B-level and 15 points at C-level, including the degree project at C-level

Aims

Earlier courses in finance have emphasised financial theory and techniques. This course confronts these perspectives to behavioural theory and practise. The objective is to give students an understanding of how and why financial strategies and policies are set in companies, and what lies behind managers decisions concerning corporate finance. It is studied how the basic theories in corporate finance influence corporate decisions: strategic decisions on growth, risk acceptance and uncertainty avoidance, financial structure and control strategies, as well as on daily decisions such as strive for control over future cash flows, and as policies for working capital in inter-organisational co-operation.

Content

Corporate financial decisions have three theoretical bases: microeconomic theory, from which portfolio theory, the theory of capital costs etc. are derived; macroeconomic theory which provides the basis for the study of capital markets, risk and risk avoidance; and management theory, developed from studies of executive behaviour. In this course is studied how these partly contradictory theories influence corporate decisions. Since managers' goals and priorities are other than those of the owners, agency problems of different kind arise. The decisions can be divided into three areas. The first one concerns the company's objectives with regard to growth, profitability and financial structure. Are they compatible, what affects them, and by whom are they influenced? The management of the company's cash flows and profitability is discussed with respect to these objectives. The second area concerns capital needed and employed: how much capital is to be used in the company, and how should it be allocated to different investments? Assessment of investments is a central theme, which includes both strategies and costs of capital as well as practical calculations for various purposes. This area will be treated in International Capital Budgeting, a course with the same approach that can be chosen for the next period. The third area deals with the company's choice of financial sources. This concerns the balance between equity and loans for different kinds of assets, between short-term and long-term capital, taking into account both risk and profitability as well as dependence and control. Financing of foreign affiliates, of projects, and of joint ventures will be studied, where decisions often are influenced by control strategies, market needs, political factors, cash-flows at risk, and matching possibilities, more than by calculated profitability.

Instruction

The language is English. The course will comprise lectures, literature seminars with article discussions, prepared by small groups of students, and term paper seminars based on reports from these groups. Participation in seminars is compulsory.

Assessment

Performance is evaluated in a written test (3 points) and in seminar reports and activity (2 points). Both require at least G (pass). A higher grade for the whole course requires higher scores than for pass on the written test, including bonus points for good seminar work.

Moreover all remaining tasks must be completed and handed in at least within four weeks after the end of the course otherwise this part of the examination has to be redone the following semester , provided there is space in the course.

Attention Swedish students: only completed courses can be recognised in your degree.