FINANCIAL MANAGEMENT AND CORPORATE BANKING [20211]

AY 2016/2017
Program of the course

Coordinator: Professor Sandro Frova (sandro.frova@unibocconi.it)

Office hours: see Personal Webpage on the Bocconi University Website

Professor Andrea Beltratti (andrea.beltratti@unibocconi.it), class 33

Office hours: see Personal Webpage on the Bocconi University Website

Professor Alessandro Nova (alessandro.nova@unibocconi.it), classes 31,32

Office hours: see Personal Webpage on the Bocconi University Website

Professor Alberto DellAcqua (alberto.dellacqua@sdabocconi.it), class 34

Office hours: see Personal Webpage on the Bocconi University Website
http://bit.ly/1IogxWQ

Course calendar

Schedule of classes can be found on the Bocconi website in e-Learning platform.

Course content and objectives

The course is divided in to two parts: the first part is dedicated mainly to advanced and applied
corporate finance issues, while the second part deals with corporate banking and investment banking
issues. The first part provides students with a framework where corporate decision choices are
subjected to the analysis of their consequences in terms of use and generation of financial resources and
in the perspective of creating value for shareholders. Thus, the course presents the value management
approach in corporate management and the reference models for its practical application. Then, the
course deals with two main financial policies: the financing policy and the dividend policy. When
analyzing the choices related to corporate financing, the concept of risk will be discussed under
different theoretical approaches: the standard CAPM approach and a more advanced probabilistic
approach. The search for an optimal capital structure is debated and practically assessed. The
relationship between corporate debt policies and corporate value is then analyzed through the
discussion of the APV model. Finally, the optimal dividend policy is examined through the application
of DDM models and through the relationship between dividend pay-out decisions and corporate
growth. Final sessions on the relationship between opportunistic management and corporate financial
decisions conclude the first part of the program.
The second part of the program is dedicated to corporate and investment banking. This part presents
the concepts of risk management and the alternatives concepts of returns in financial intermediation.
This leads to the understanding of the mechanisms underlying credit risk management, the rating
assignment and credit pricing. The solutions of Debt and Capital Markets for corporate financing are
then presented and discussed and end the course.

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Prerequisites

Basics of Financial accounting and Corporate Finance.

Reference book and teaching material

For attending and non-attending students the reference material consists of reference book extracts,
lectures, slides, models in Excel and official documentation, downloadable from the learning space in
the specific course page. For each session there will be a combination of these materials. The use of
specific materials will be explained directly in class. The teaching materials prepared by the teachers
will be provided in parallel with the teaching sessions.

The recommended text for those wishing to review the essential concepts of modern corporate finance
is: Hillier, Ross, Westerfield, Jaffe, Jordan (HRWJJ) Corporate Finance, Italian edition edited by
Sandro Frova, McGraw Hill, 2015.

Attendance

Attendance is non mandatory but is strongly suggested in order to obtain a good preparation for the
final exam.

Detailed description of exam structure

The exam will be delivered in the general format only, at the end of the course and in the following
sessions. The exam (90 minutes) is in a written form, and will be structured with a mix of 23 multiple
choice questions (1 point each) and 2 open questions/exercises (4 points each). The dates of the exams
will be available on the University website.

Office hours and assistance to students

The teaching staff is available to students for each class within the office hours. Students are asked to
check any schedule changes that will be promptly notified on the web.

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 Financial Management and Corporate Banking [20211] MSc in Management
COURSE PROGRAM AY 2016/2017

Lesson # Subject

Course presentation
n.1
From accounting to market values.
Basic concepts

Managing the firm under a value management approach.

n.2

The cash flow statement and the relevant free cash flows (FCFO;
n.3 FCFE). The Asset and Equity side approach in value analysis.

The contractual relationships between shareholders, debtholders and

Value and risk

n.4 the firm: the distribution of value.

The concept of risk in Finance: the probabilistic distribution of free

n.5 cash flows and Enterprise Value.

The cost of debt: the relationship between the probability of default

n.6 and the interest rate an analytical simulation
Value and corporate cost of capital

The cost of debt: default costs and corporate equilibrium. The use of
n.7 market data to estimate the cost of debt (Introduction to rating).

The cost of capital: real and nominal flows. The effect of inflation.
(The 2-staged valuation model)
n.8

The determination of the asset side-cost of capital: the CAPM

n.9 approach and the meaning of the beta.

Beta levered, unlevered and re-levered: the cost of capital

n.10 computation - CAPM application.
operati

aspects
choice:

The fiscal effect of debt and the WACC and their impact on corporate
and
ng

n.11 value - the calculation of the WACC

3
 The determination of the equity value through the asset side method:
n.12 the APV model - the valuation through the APV

The determination of the equity cost of capital (Ke): theoretical and

n.13 empirical models

The determination of the optimal capital structure: reference models

n.14 and solutions

Optimal dividend policy and the market value of equity:

n.15 the Dividend Discount Model

The value of growth opportunities - an application of the Dividend

n.16 Discount Model

The free cash flow discount model and the equity valuation through
applications

n.17 the asset side method in presence of growth

Some

Corporate governance and corporate financing choices: the

opportunistic behaviors and their possible solutions (covenants)
n.18

Introduction to Corporate banking

n.19
Corporate Banking: the offer of capital to
corporates from the banking system

Strategies and organizational models in Corporate banking

n.20

Risk management in banking: the concepts of RAR, RAROC,

RARORAC
n.21

Credit risk management and rating assignment

n.22

n.23 Credit pricing

The financial solutions offered by the Debt and Equity Capital

n.24 Markets for corporate financing