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SYLLABUS FOR FIN 7345 TOPICS IN EMPIRICAL CORPORATE FINANCE FIN 7345 Fall 2011 SOM 2.

901 W 1-3:45 p.m. Dr. Robert Kieschnick Office: 3.710 SOM Office Hours: Tuesday, 1 to 5pm Email: rkiesch@utdallas.edu

Course Objective The objective of this course is to introduce students to a range of topics in empirical corporate finance, including some of the empirical methods used in this research. It is not possible to cover every topic in this literature because it is so vast and so at best, you can get a sense of a variety of topics and methodologies.

Prerequisites A student should have sufficient knowledge of theoretical corporate finance (FIN 7340) and econometrics to be able to read the relevant literature. If you are in doubt, then consult with me.

Class Format This is a seminar, not a lecture course. Therefore, students should prepare for class by reading the assigned material before class and studying any necessary background materials in order to discuss the papers in depth. A high degree of effort on the students part will be expected.

Performance Evaluation Grading will be based on the following weights: 1. (30%) You will be expected to read the assigned papers (see list below) prior to class and be able to discuss them. You will be evaluated on how well you participate in these discussions as I will direct questions to you in class. 2. (30%) You will complete a term project (discussed below). 3. (40%) You will take a final exam that will draw from all the material covered in this course.

Outline of Course Schedule Date 8/24 Description Course introduction

Cochrane, J., 2005, Writing Tips for Ph.D. Students, University of Chicago working paper. Karolyi, G., 2011, The Ultimate Irrelevance Proposition in Finance?, Cornell University working paper.

8/31

Start-ups and Venture capital

Sahlman, William (1990) The Structure and Governance of Venture Capital Organizations, Journal of Financial Economics 27: 473-521. Kortum, Samuel and Josh Lerner (2000) Assessing the Contribution of Venture Capital to Innovation, Rand Journal of Economics 31: 674-692. Landier, A., and D. Thesmar, 2009, Contracting with Optimistic Entrepreneurs: Theory and Evidence, Review of Financial Studies 22, 117-150.

9/7

Financial constraints

Butler, A., and J. Cornaggia, 2011, Does Access to External Finance Improve Productivity? Evidence from a Natural Experiment, Journal of Financial Economics 99, 184-203. Campello, M., J. Graham, C. Harvey, 2010, The Real Effects of Financial Constraints: Evidence from a Financial Crisis, Journal of Financial Economics 97, 470-487. Hadlock, C., and J. Pierce, 2010, New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index, Review of Financial Studies 23, 1909-1940.

9/14

Cash

Faulkender, M. and Wang, R. (2006), Corporate Financial Policy and the Value of Cash, Journal of Finance 61, 1957-1990. Bates, T.W., Kahle, K.M., Stulz, R.M., 2009, Why do U.S. firms hold so much more cash than they used to?, Journal of Finance 64, 1985-2021. Fresard, L., Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings, Journal of Finance 65, 1097-1122.

9/21

Working capital

Huyghebaert, N. and L. Van de Gucht, 2007, The Determinants of Financial Structure: New insights from Business Start-ups, European Financial Management 13, 101-133. Hill, M., Kelly, G., and Highfield, M., 2010, Net Operating Working Capital Behavior: A First Look, Financial Management 39, 783-805. Kieschnick, R., M. LaPlante, and R. Moussawi, 2011, Working Capital Management and Shareholder Wealth, UTD working paper.

9/28

Initial public offerings of stock

Brau, J. and S. Fawcet, 2006, Initial Public Offerings: An Analysis of Theory and Practice, Journal of Finance 61, 399-436. Butler, Alexander W., Keefe, Michael O'Connor and Kieschnick, Robert L., 2011, The robust determinants of initial IPO returns and their implications for what drives IPO cycles, UTD working paper. Dahlquist, M. and F. de Jong, 2008, Pseudo Market Timing: A Reappraisal, Journal of Financial and Quantitative Analysis 43(3), 547-580.

10/5

Capital structure

Chris Hennessy and Toni Whited, 2007, How Costly is External Financing? Evidence from a Structural Estimation, Journal of Finance, 62, 1705-1745 Lemmon, M. M. Roberts, and J. Zender, 2008, Back to the beginning: persistence and the cross-section of corporate capital structure, Journal of Finance 63, 1-37. Welch, Ivo, 2010, A Critique of Recent Quantitative and Deep-Structure Modeling in Capital Structure Research and Beyond, Working paper December 22, 2010.

10/12

Capital structure

DeAngelo, H. and R. Roll, 2011, How Stable Are Corporate Capital Structures, UCLA working paper. Malmendier, U., Tate, G. and J. Yan, 2010, Overconfidence and Early-life Experiences: The Effect of Managerial Traits on Corporate financial policies, University of California at Berkely working paper.

Cook, D., M. Keefe and R. Kieschnick, 2011, The implications of capital structure measurement for capital structure research, UTD working paper.

10/19

Debt composition and issuance

Denis, D. J., and V. Mihov, 2003, The choice among bank debt, nonbank private debt, and public debt: Evidence from new corporate borrowings, Journal of Financial Economics 70 (1), p. 328. Li, Kai, Colla, Paolo and Ippolito, Filippo, 2011, Debt Specialization, SSRN: http://ssrn.com/abstract=1786708 Barry, Christopher B., Steven C. Mann, Vassil Mihov and Mauricio Rodriguez, 2009, Interest Rate Changes and the Timing of Debt Issues, Journal of Banking and Finance 33 (4), p 600-608.

10/26

Seasoned equity issues

Gao, X., and J. Ritter, 2010, The Marketing of Seasoned Equity Offerings, Journal of Financial Economics 97, 33-52. Henry, T., and J. Koski, Short Selling Around Seasoned Equity Offerings, forthcoming Review of Financial Studies. Babenko, I., Lemmon, M., and Y. Tserlukevich, Employee Stock Options and Investment, forthcoming Journal of Finance.

11/2

Corporate governance and security prices

Gompers, P., J. Ishii, and A. Metrick, 2003, Corporate Governance and Equity Prices, Quarterly Journal of Economics 118, 107-155. Cremers, K., V. Nair, 2005, Governance Mechanisms and Equity Prices, Journal of Finance 60, 2859-2893. Cremers, Martijn and Nair, Vinay B., 2007, Governance Mechanisms and Bond Prices, The Review of Financial Studies 20(5), pp. 1359-1388, 2007.

11/9

Corporate governance and incentives

Bettis, C., Bizjak, J., Coles, J., and S. Kalpathy, Stock and Option Grants with Performance-based Vesting Provisions, forthcoming Review of Financial Studies.

Hochberg, Y., and Laura Lindsey, Incentives, Targeting, and Firm Performance: An Analysis of Non-executive Stock Options, forthcoming Review of Financial Studies. Baranchuk, N., R. Kieschnick, and R. Moussawi, 2011, Motivating Innovation in Newly Public Firms, UTD working paper.

11/16

Internal mechanisms of corporate governance

Fich, E., and A. Shivdasani, 2006 Are Busy Boards Effective Monitors? Journal of Finance 61, 689-724. Taylor, L., Why are CEOs Rarely Fired? Evidence from Structural Estimation, Journal of Finance 65, 2051-2087. Matvos, G., and M. Osgtrovsky, Heterogeneity and Peer Effects in Mutual Fund Proxy Voting, Journal of Financial Economics 98, 90-112.

11/23

Mergers, acquisitions, and buyouts

Goktan, S., R. Kieschnick, and R. Moussawi, 2009, The effects of corporate governance on the likelihood of a corporation being acquired, going private, or going bankrupt, UTD working paper. Bharath, S., and A. Dittmar, Why Do Firms Use Private Equity to Opt Out of Public Markets? forthcoming Review of Financial Studies. Rau, P. and A. Souraitis, 2001, Patterns in the Timing of Corporate Event Waves, Journal of Financial and Quantitative Analysis 46, 209-246.

11/30

Corporate restructuring and bankruptcy

Gilson, S., K. John, and L. Lang, 1990, Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of firms in Default, Journal of Financial Economics 26, 315-353. Mitchell, M. and J. H. Mulherin, 1996, The impact of industry shocks on takeover and restructuring activity, Journal of Financial Economics 41, 193-229. John Armour & Douglas Cumming, 2008. "Bankruptcy Law and Entrepreneurship," American Law and Economics Review vol. 10(2), pages 303-350

Term Project I will assign you to one of the following topics. In the event of more than one being assigned to a topic, then I will discuss how you will differentiate yourselves in a separate meeting, which I plan to have with each of you. Topic 1: Topic 2: Topic 3: Topic 4: Topic 5: Topic 6: Topic 7: Topic 8: Specification of the conditional distribution Event studies Self selection Non-experimental design Endogeneity Standard error estimation Long-run performance measurement Model Calibration

For your assigned topic, you will prepare the following items to be distributed or made available to the whole class by November 16, 2011. 1. A paper (30 pages or less, both electronic and hard copy) which contains the following: a. A discussion of the issues raised by your topic and current methodological approaches to addressing them. This discussion should emphasize clarity as your purpose is to elucidate your topic. b. 2. A case study illustrating the issues and approaches to addressing them

A text file with the code to replicate your case study results. You may use SAS, STATA, MATLAB or MATEMATICA to do your analyses. The data set used in your case study. You should also provide a text file with a data dictionary for your data set that includes sources.

3.

If you have done your job well, then a fellow (or future student) should be able to read your paper and replicate your case study, and in so doing have a reasonable idea of how to address similar issues in their research.

Note: Some of your final exam questions will be based on these reports so you need to read them all before the final exam.