The University of Hong Kong

School of Economics and Finance

MFIN7026 Advanced Corporate Finance
2017 - 2018

I. Information on Instructor and Teaching Assistant

Instructor: Prof. LIN Chen, Chair Professor in Finance, 1015 K. K. Leung Building
Office Hours: By appointment
Phone: 3917-7793
Email: chenlin1@hku.hk

Teaching Assistant:
Ms. Yuchen XU, Email: xuyuchen@connect.hku.hk
Mr. Sibo LIU, Email: sibo@hku.hk
Office Hours: By appointment

II. Course Information

1Class time and venue:

[1] Mar 21, 14:00 17:00 in KKL1121

[2] Mar 24, 14:00 17:00 in KKL1121
[3] Mar 28, 14:00 17:00 in KKL1121
[4] Mar 31, 14:00 17:00 in KKL1121
[5] Apr 07, 14:00 17:00 in KKL1121
[6] Apr 11, 14:00 17:00 in KKL1121
[7] [Mid-term Exam] Apr 18, 14:00 17:00 in KKL1121
[8] Apr 21, 14:00 17:00 in KKL1121
[9] Apr 22, 9:30 12:30 in KKL102
[10] Apr 25, 14:00 17:00 in KKL1121
[11] Apr 28, 14:00 17:00 in KKL315
[12] May 2, 14:00 17:00 in KKL1121
[Exam] May 05, 19:00 21:35 in B4, ATC

2Textbook: Jonathan Berk and Peter Demarzo, Corporate Finance, 3rd Edition (Pearson).
We will cover selected topics in Chapters 1-25, 28-30. Note that some chapters have been
covered in other courses so that we will not go into details. And you are responsible to refresh
your memory.

III. Course Objectives

The goal of this course is to develop the concepts of modern financial theory and practical tools
essential to corporate financial and investment decisions using case method. Due to the nature
of the course, it will be VERY case-intensive and it requires a lot of reading and discussions.
Do not take the course if you do not like the case teaching approach. The course also contains
lectures, problem solving and some academic paper reading. Lectures and problem sets are used

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to horn the skills, academic paper reading deepens the understanding, and case analyses develop
our decision-making ability under the complex real-world situations. The course assumes that
students already have a good knowledge and understanding about basic valuation and financial
analysis models.

Course Intended Learning Outcomes (CILOs)

Upon completing this course, students should be able to:
CILO01 Understand the concepts of modern financial theory and practical tools essential to
corporate financial and investment decisions.
CILO02 Discuss the theory and practical tools through case analysis and presentation.
CILO03 Comprehend knowledge on the various issues related to corporate finance theory and
empirical methodology.

Alignment of program ILOs and course ILOs

Program ILOs Course ILOs

Acquisition of quantitative techniques of finance CILO01, CILO02,
CILO03
Acquisition of advanced knowledge in finance CILO01, CILO02,
CILO03
Application and integration of financial knowledge and technical CILO02, CILO03
skills to identify and tackle practical problems
Inculcating leadership, professional ethics and competence in CILO02, CILO03
finance
Mastering communication skills CILO03

IV. Course Content and Tentative Teaching Schedule:

1. List of topics
Basic Tools: Arbitrage and Discounting
Capital Structure: Modigliani and Miller
Capital Structure: Tax, Financial Distress Costs and Agency Conflicts
Capital Structure: Pecking Order Theory and Market Timing Theory
Payout Policy
Raising External Capital: Equity Issuance
Raising External Capital: Bond Characteristics, Valuation and Hedging
Portfolio, Diversification and CAPM Capital Budgeting
Valuation
Real Options
Mergers, Acquisitions and Corporate Restructuring
Risk Management
Corporate Governance Behavior Corporate Finance
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2. Cases*:
Students are required to submit 8 case reports in a project group. Students will be assigned to
project groups with size of 4. Groups will be assigned to present 1 case in lecture; the
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presentation assignment will be announced in class (usually 1-2 weeks before the due date).

The list of the cases is as follows:

(1) Marriott Corporation: The Cost of Capital (HBS #298-101)
(2) Chase's Strategy for Syndicating the Hong Kong Disneyland Loan (A) (Harvard Business
School Case # 201-072)
(3) Blackstone and the Sale of Citigroups Loan Portfolio (Harvard Business School Case #
214-037)
(4) Magna International (A) (Harvard Business School Case #211-044)
(5) Bankruptcy and Restructuring at Marvel Entertainment Group (Harvard Business School
Case # 298-059)
(6) BW/IP International, Inc. (Harvard Business School Case #293-058)
(7) Acquisition of Consolidated Rail Corporation (A) (HBS Case #298-006).
(8) Acquisition of Consolidated Rail Corporation (B) (HBS Case #298-095)
(9) "Real Options Exercises." (Harvard Business School Exercise #208-045)
Investment Opportunities as Real Options: Getting Started on the Numbers, Harvard Business
Review.
(10) Arundel Partners: The Sequel Project (HBS Case #292-140)

*Depending on the class size and student background, there might be slight adjustments to the
cases.

3. Other Reading Materials (A partial list, all documents will be posted on line)
Shleifer, Andrei, and Robert Vishny (1997), "A Survey of Corporate Governance," Journal of
Finance 52, pp. 737-783.

Graham, John, Harvey, Campbell, 2001, The theory and practice of corporate finance:
evidence from the field, Journal of Financial Economics 60, 187-243.

Baker, Malcolm, and Jeffrey Wurgler (2002), Market Timing and Capital Structure Journal
of Finance 57, 1-32.

Ritter, J.R., 2003, Investment Banking and Securities Issuance, in: G.M. Constantinides, M.
Harris, and R. Stulz (eds.), Handbook of the Economics of Finance, North-Holland.

Brav, Alon, Graham, John, Harvey, Campbell, Micahely, Roni, 2005, Payout policy in the
21st century, Journal of Financial Economics 77, 483-527.

Jenkinson, Tim and Howard Jones, 2009, "IPO Pricing and Allocation: A Survey of the Views
of Institutional Investors," Review of Financial Studies 22, 1477-1504.

V. Assessment
Your grade will be based on your performance on examinations, class project, and class
attendance and participation. The weights are given below:

Group Case Reports and Presentation 70 points

In Class Discussion 20 points
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 Mid-Term Exam 20 points
Final Exam 40 points
Total Points 150 points

Group Case Reports and Group Presentation

The objective of the group project is to give students an opportunity to apply their knowledge
on a real world case. Each group must produce at least 8 case reports and 1 in-class
presentations.

In Class Discussion
Your contribution made to in-class discussion will be considered in assigning points. You are
encouraged to read the assigned readings, group cases prior to lectures.

Final Exams
Make-up exams are generally not possible. Any potential conflicts must be documented in
writing and submitted to Prof. Lin for approval. The exam will be closed-book and closed-notes.
A financial or scientific calculator is allowed.

Teaching and Learning Activities (TLA)

TLA1 Lecture Instructor will give lectures on major concepts and issues
TLA2 Consultation Instructor holds weekly consultation hours to answer students
questions.

Alignment among Course Intended Learning Outcome, Teaching and Learning

Activities and Assessment Tasks

Course Intended Learning Teaching and learning Assessment Tasks

Outcome (CILOs) activity
(TLA)
CILO01 TLA1, TLA2 Group project, presentation,
participation and final exam
CILO02 TLA1, TLA2 Group project, presentation,
participation and final exam
CILO02 TLA1, TLA2 Group project, presentation,
participation and final exam

Standards of Assessment

Grade Grade Definition Description

A+, A, A- High distinction Strong evidence of superb ability to fulfill the
80%-100% intended learning outcomes of the course at all
levels of learning: describe, apply, evaluate, and
synthesis
B+, B, B- Distinction Strong evidence of the ability to fulfill the intended

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 70%-79% learning outcomes of the course at all levels of
learning: describe, apply, evaluate, and synthesis
C+, C, C- Credit pass Evidence of adequate ability to fulfill the intended
60%-69% learning outcomes of the course at low levels of
learning such as describe and apply but not at high
levels of learning such as evaluate and synthesis
D Pass Evidence of basic familiarity with the subject
50%-59%
F Fail Little evidence of basic familiarity with the
<50% subject

VI. Academic and Class Conduct

1. Attendance
Attendance is required but not recorded. However, I might occasionally call your name to
answer some questions and you are responsible for your absence. If you attend classes, you
should behave well in class (e.g., no noise, but participation into class discussion is greatly
encouraged). Moreover, you are responsible for all material covered in class, including any
announcements pertaining to the class, which may not be included in other materials.

2. Plagiarism
Plagiarism and copying of copyright materials are serious offences and may lead to disciplinary
actions. You should read the chapters on and "Plagiarism" and "Copyright" in the
Undergraduate/Postgraduate Handbook for details. You are strongly advised to read the booklet
entitled "What is Plagiarism?" which was distributed to you upon your admission into the
University, a copy of which can be found at www.hku.hk/plagiarism. A booklet entitled
"Plagiarism and How to Avoid it" is also available from the Main Library.