Corporate Governance and Finance WS 2016
When the suppliers of finance (shareholders) are distinct from those who control and operate their assets (managers) - the necessity of corporate governance comes into play. Corporate governance tries to resolve the inherent problems related to the separation of ownership and control in corporations and to alleviate the consequent agency problems - when managers want to act for their own benefit and expropriate the shareholders. The conflict of interest is more acute the wider the ownership is spread and hence the collective action problems among shareholders arise. Shareholders of typical publicly held companies are so dispersed that it is not feasible for them to stay informed about the business operations of the company they own and/or to be resourceful enough to monitor the managers.
Corporate governance is trying to find ways in which small shareholders can get returns on their investments, find the balance between managerial discretion and shareholder protection. In this course we will cover the most widely used mechanisms to mitigate the agency problems between managers and shareholders: concentrated ownership, hostile takeovers, boards of directors, CEO incentives etc.; we are going to concentrate on shareholder rights and its violations in publicly held corporations mostly (though we will pay some attention to the other forms of ownership around the world).
The questions we are going to ask ourselves are: Is concentrated ownership substitute for effective corporate governance? Who will monitor the boards of directors? Are creditors better monitors of the management than shareholders? Are states efficient owners - what do numbers say? Are managers' interests well aligned with the shareholders': what do their compensation contracts tell us?
The more detailed description of the main topics we will cover is:
- Sources of conflicts of interests in corporations, the consequences of failures in corporate governance, what constitutes good corporate governance, corporate governance and firm value.
- Investor protection rules and the evolution of ownership around the world, the consequences of concentrated ownership, creditors as primary claimholders and their role in monitoring the managers, state as owner.
- Market for corporate control, the takeovers as substitute for corporate governance, hostile takeovers and shareholder value.
- The board of directors, the role of independent directors in firm performance.
- CEO compensation and incentives.
The course will be based on scientific articles. We are going to review and discuss classic research papers as well as recent interesting publications in the field. The list of required readings will be provided during the lectures.
Dr. Nino Papiashvili
Office Hours: Thursdays at 11:00-13:00 or by appointment
Room 1.21 - Helmholtzstraße 18
You can also contact me at firstname.lastname@example.org
Dates and Room
The classes will take place on the following dates:
Wednesdays at 16:00-18:00, Room E.20, Helmholtzstraße 18
Thursdays at 14:00-16:00, Room E.04, Helmholtzstraße 22
March 1, 2017 at 10:00-12:00 in H11
April 5, 2017 at 12:00-14:00 in Room 1.21, Helmholtzstraße 18
Evaluation. The grade will consist of 90% final exam and 10% presentation. The final exam will be essay based questions and the interpretation of results from the list of required readings provided at the end of the slides (which will be uploaded on moodle in due course). The sample exam questions will be distributed and discussed in class in the middle of the semester.
Practical classes will be dedicated to student presentations. The list of relevant academic articles will be provided throughout the course. Presentation of one paper is mandatory. Additional presentations are also encouraged - so that each additional presentation will contribute to 5 extra percent to the final grade (up to total 20%). The purpose of the presentations is that students get comfortable with working on academic papers which could be a useful starting point for their own piece of work in the future.