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Readings and Discussion Topics: Corporate Finance

 


On the off chance that you have leisure time to spend, try the readings listed below. Most of them are short articles from the financial press and should be easy reads.

The Objective Function
Derivations, In-Practice Questions and Discussion
  1. What is the difference between stock price maximization, firm value maximization and stockholder wealth maximization?
  2. What is the objective function in corporate finance for a private firm?
  3. What is the objective function for a non-profit organization?
  4. Are markets short term?
  5. What is the German/Japanese alternative to stockholder wealth maximization and does it work?
Readings

General Readings

  1. Business Week's Best and Worst Boards: 1997
  2. The Importance of Shareholder Wealth Maximization
  3. Who regulates what? (A short primer on regulatory authorities in the United States)
  4. Stop whining about Wall Street
  5. Bull Market Charges Ahead, lead by Activist Investors
  6. The Civilized Hostile Takeover
  7. More on hostile acquisitions
  8. Charity and Markets
  9. Steady Safe
  10. Comparing shareholder, employee and creditor protection: US versus Europe
  11. Corporate Governance in Europe
  12. How to be a good director
  13. The Annual Meeting: Revolt of the Stockholders
  14. Proxy fights
  15. Activist Investing
  16. Corporate Governance at Gunpoint
  17. CEOs in LBOs: Conflicts of Interest?
  18. Firing the CEO
  19. Sarbanes-Oxley: Read it for yourself and read about the cost of complying with it's rules. More on living with Sarbanes-Oxley.
  20. Better Corporate Governance = Higher Stock Prices? (Evidence from the US and Korea)
  21. A Global Agenda for Corporate Governance
  22. Do managers tailor their decisions to meet short term earnings considerations?
  23. Dare to keep your stock price low
  24. Mutual Funds and Corporate Governance
  25. Socially Responsible Investing
  26. Virtuous Companies
  27. Whom to you trust- markets or managers?

On Disney

  1. Michael Eisner's difficult year at Disney
  2. Disney's corporate governance principles (in response to Eisner's bad year)
  3. Roy Disney's letter to Michael Eisner (on resignation)
  4. Stanley Gold's resignation letter
  5. Eisner's bonus and backlash
  6. The Board strikes back at Disney and Gold
  7. Comcast's hostile acquisition bid for Disney
  8. Eisner's decision to step down
  9. The Ovitz Trial
  10. Bob Iger - The good news
  11. Bob Iger - The bad news

The Investment Decision: Measuring Hurdle Rates
Derivations, In-Practice Questions and Discussion
  1. A Derivation of the Capital Asset Pricing Model
  2. Variants of the Capital Asset Pricing Model
  3. Testing the CAPM: Issues and Discussion
  4. More on the Arbitrage Pricing Model
  5. Estimating the Macro Economic Factors in a Multi-Factor Model
  6. Building a Regression Model
  7. Why not use bond betas to arrive at the cost of debt?
  8. Credit Scores as Alternatives to Bond Ratings
Readings
  1. Operating Risk as a Measure of Risk
  2. Market Risk and Time Horizon
  3. Investors must recall risk
  4. Historical Risk Premiums: A Re-examination
  5. Goldman's view of equity risk premium
  6. Risk Premium in Emerging Markets
  7. Classic Rule of Risk Premium under Attack
  8. Are risk premiums too low? (Greenspan testimony)
  9. A Contrary View on Betas
  10. Margin for Safety.. An alternative to beta?
  11. Modified Capital Asset Pricing Model
  12. Diversification Rediscovered
  13. Can you diversify and pick stocks at the same time?
  14. What makes your stock price go up or down?

The Investment Decision: Measuring Returns on Investments
Derivations, In-Practice Questions and Discussion
  1. Working Capital, Net Working Capital and Non-Cash Working Capital
  2. Operating versus Capital Expenditures
  3. Depreciation, Amortization and Other Non-cash Charges
  4. Capital Expenditures and Depreciation
  5. ROC, Cost of Capital, NPV and EVA
  6. ROE, Cost of Equity and Equity EVA
  7. Equity Analysis versus Firm Analysis
  8. Currency Effects on Investment Analysis
  9. Real versus Nominal Investment Analysis
  10. Net Present Value, IRR or Modified IRR
  11. Corporate Strategy and Project Quality
  12. What is the cost of using excess capacity?
  13. How should we treat product cannibalization in capital budgeting?
  14. When is the option to delay a project a valuable option?
  15. When is the option to expand a project a valuable option?
  16. The Right Option Pricing Model to Use in Valuing Real Options
  17. Are strategic considerations valuable options?
Readings
  1. Measuring Earnings
  2. Operating Leases as Debt
  3. The Effect of Working Capital on Cash Flows
  4. The Content of an Annual Report
  5. EVA as elixir
  6. Synergy in Mergers
  7. ROIC rules

The Financing Decision
Derivations, In-Practice Questions and Discussion
  1. A Simple Test of Debt
  2. The Treatment of Hybrid Securities
  3. The Treatment of Warrants and Convertibles
  4. Valuing Flexibility
  5. Dilution as a Bogey
  6. Extensions on the WACC Approach
  7. Building in Constraints
  8. Applying Cost of Capital Approach to Financial Service Firms
  9. Normalizing Earnings: Some Simple Approaches
  10. Getting Inputs for Present Value Approach
  11. Minimizing WACC versus Adjusted Present Value Approaches
  12. Building a Cross-Sectional Regression
  13. Determinants of whether a firm is a takeover target
  14. Determinants of whether a firm is under risk of bankruptcy
  15. Determinants of project quality
  16. Duration: Traditional Measure versus Regression
  17. Simple versus Multi-variate regression
Readings
  1. Stock Buybacks are not always good news
  2. Catastrophe Bonds
  3. Mismatching Financing: The Indonesian Experience
  4. Bowie Bonds... anyone?
  5. MIPs: Debt or Equity
  6. Is this kosher? (Income Trusts)
  7. Miller-Modigliani - Forty years later...
  8. Death bonds
  9. Toggle Notes

The Dividend Decision
Derivations, In-Practice Questions and Discussion
  1. Dividends versus Stock Buybacks: The Determinants
  2. Spin-offs, Split-offs and Divestitures: The Determinants
  3. Stock Dividends and Stock Splits
  4. An Intuitive Explanation of FCFE
  5. Estimating FCFE for a financial service firm
  6. Analyzing Project Quality for a Firm
  7. An Intuitive Explanation of FCFE
  8. Estimating FCFE for a financial service firm
  9. Analyzing Project Quality for a Firm
Readings
  1. Stock Buybacks: Out of Control?
  2. Time for Dividends?
  3. Microsoft: Pressure for Dividends?
  4. AT & T cuts dividends
  5. Why tech firms do not pay dividends
  6. One-time Dividends: Effect of tax law change
  7. BP's dividend/buyback strategy
  8. MGM's special dividends
  9. Investors rediscover dividends
  10. Microsoft's Special Dividend (The $32 billion deal)
  11. Buybacks in Europe: A Trend
  12. Surge in Dividends
  13. Stock buybacks in 2005
  14. Dividend and Buyback trends
  15. Capital Pains
  16. Buybacks are not always good news

Valuation
Derivations, In-Practice Questions and Discussion
  1. How do you choose between firm and equity valuation?
  2. How do you estimate an expected growth rate?
  3. How do you estimate how long expected growth will last?
  4. What is terminal value and how is it estimated?
  5. What is a stable growth rate and why can it not be greater than the discount rate?
  6. What is an exit multiple andhow is it used in DCF valuation?
  7. What are the most common errors in dividend discount model valuation?
  8. What are the most common errors in FCFE/FCFF model valuation?
  9. How do you value a firm that is losing money?
  10. How do you value a financial service firm?
  11. How do you value a private firm?
Readings
  1. Estimating Earnings Growth
  2. Top-down versus Bottom-up Growth
  3. Revamping the Earnings Statement
  4. For more readings on valuation go here