Description du cours
Intitulé de l'Unité d'Enseignement
Code de l'Unité d'Enseignement
2020 - 2021
Nombre de crédits
Objectifs et contribution de l'Unité d'Enseignement au programme
1. Learning Goals
• Provide students with a first appreciation of the role of a financial manager within a firm
• Train future managers to understand the tools and the nature of the decisions that financial managers must make.
• Enable future managers to use financial tools in order to make financial decisions based on these rather than on intuition.
• Develop future managers’ global perspective of the corporate finance by presenting the underlying principles of financial valuation (bonds and equity) as well as the concepts of return and risk and the firm’s financial structure.
• Develop a critical perspective on Financial Management and understand the operational ambiguities inherent to its underlying hypotheses and its tools, without being naive and/or cynical.
2. Learning outcomes:
The courses’ learning goals are divided in 3 levels: enduring understanding, important to know and do, and worth being familiar with. This year’s exam will only cover the enduring understanding.
2.1 Enduring understanding (these are the learning outcomes tested during the final exam)
- Define, describe and differentiate the investment decision rules (Pay-back period, NPV, IRR)
- Define the conditions for the appropriate use of these decision rules, and their limitations
- Analyze the link between risk and return of financial assets, with reference to the CAPM.
- Model: students must be able to apply financial decision tools to cases.
- Solve and justify: students must be able to solve financial investment problems and financial decision problems and justify their solution.
- Interpret and justify: students must be able to interpret their results and decisions, and justify their interpretation.
2.2 Important to know and do (not tested during the final exam)
- Analyze and justify the financing decision based on dividend policy and financial structure of the firm
- Valuate : students must be able to valuate bonds and shares
2.3. Worth being familiar with (not tested during the final exam)
- Define, describe and differentiate the components of financial markets, based on contexts relayed in the financial press.
Prérequis et corequis
This course is accessible to students who have followed the basic training in management, expected at the end of two years in a business school, including basic math skills (algebra) and a good (passive) level in English.
Description du contenu
1. The first part presents an introduction to financial markets. This part aims to develop an understanding of the functioning of financial markets in terms of market constituents and the language and tools of finance. (Berk & Demarzo chapters 1 to 3)
2. The second part focuses on valuation of financial assets. After studying the investment decision rules, we study the valuation of bonds and equity (Berk & Demarzo chapters 5 to 9)
3. The third part addresses the notions of risk and return. It presents the traditional measures of risk and return, as well as portfolio theory and cost of capital (Berk & Demarzo chapters 10 to 13)
4. The fourth part of this course analyses the financial structure of the firm as well as its value, including in terms of corporate governance. (Berk & Demarzo chapters 14, 15, 17, 18, 29)
The course consists in lectures. During these lectures, I develop the concepts and theories, stimulate questioning and answer questions raised by students. The lectures illustrate concepts with practical cases and real data. They are also an opportunity to interact, with questions and answers, using online technology such as Socrative.com to test understanding and raise critical thinking. While some of the lecture time is dedicated to drill exercises, additional, more complex exercises are provided for students to practice finance management tools on their own study time.
(1) Bonus assignments:
Exercises and data cases are available, allowing students to test their level of understanding. Students who validate 3 bonus assignment among those proposed during the course receive extra credit (with a maximum of 2 bonus points per student, for 6 validated assignments).
(2) Weekly homework:
In addition, students (in group of 2, maximum 3) must post a weekly homework before each Thursday class, made of three slides. One slides will summarize the last class, one slides will propose an exam question based on the last class, and one will propose a new academic reference (title, author and abstract) that participates in academic conversation on the topic of the last class. Before each class, I will call upon some groups to present their slides. This work will count for 20% of the grade (10% for all the slides, and 10% for the presentation).
The weekly homework and bonus assignments test your reflection and comprehension. The grades are attributed for the structure of the reasoning developed by the students rather than for the final results or accuracy of the conclusion. For weekly homework and bonus assignments, a student is graded on his or her:
• Ability to justify an answer
• Coherence in the arguments put forth
• Ability to develop an argued interpretation or critical view.
(3) Final Exam :
The final formal evaluation consists in a 1 hour written distance exam without notebook, using an online platform provided by the institution. Students will sit the exam off campus, with their own devices, during the exam slot foreseen in their schedule. Questions are multiple choice type questions (MCQs). While students may not use their notebooks (and will have no time for that), they can have a summary of formulas which they will have prepared beforehand.
The exam is structured to avoid cheating.
a. For the MCQ, each student will receive 15 questions in a random order from a question-bank of 20 questions. The proposed answers will come in a random order. Students cannot navigate through the questions (it is a one-way path).
b. Behind each of these 20 questions, there are 12 different sets of data, hence 240 different possibilities;
Restitution will be tested in the final exam using the following criteria:
• The ability to understand concepts and know their precise meaning.
• The ability to identify a correct formula to solve a given problem
• The ability to identify the appropriate data and solve formulas using this data.
There are no negative points. In case of multiple possible answers, each correct answer will share an equal weight in the full point of the question.
• Slides projected during the lectures, available on the « Financial Management » course on sur www.icheccampus.ichec.be.
• Reference book : Corporate Finance, 3rd Edition, by Jonathan Berk and Peter DeMarzo (Pearson / Addison Wesley, 2013)
Arrow, K., Cropper, M., Gollier, C., Groom, B., Heal, G., Newell, R., & Sterner, T. (2013). Determining benefits and costs for future generations. Science, 341(6144), 349-350.
Brealey, R., S. Myers, and F. Allen, Principles of Corporate Finance, 10th Edition, McGraw-Hill Irwin, 2011.
Brav, Graham, Harvey, and Michaely (2005) “Payout policy in the 21st century”.
Brounen, Dirk, Abe De Jong, and Kees CG Koedijk. "Corporate finance in Europe confronting theory with practice." EFA 2004 Maastricht Meetings Paper. No. 2769. 2004.
Copeland, T., Koller, T., Murrin, J., Valuation – Measuring and managing the value of companies, 5th edition, Wiley Editions, USA, 2010, 550 pages
Damodoran, A., Applied Corporate Finance, 3rd edition, Wiley Editions, USA, 2011, 738 pages
Devolder, P., Mathilde Fox, Francis Vaguener, Mathématique Financière, Pearson Education, 2012, as a review on discounting methods.
Graham, Harvey, and Rajgopal (2006), “Value Destruction and Financial Reporting Decisions”
Graham and Harvey (2001) “The theory and practice of corporate finance: evidence from the field” (particularly pages 187-209).
Heude, X. (2006). La notion de risque dans une approche éthique de la finance. Conditions et implications. Finance & bien commun, (1), 47–53.
Jensen, Michael, “Value Maximization, Stakeholder Theory, and the Corporate Objective Function”
McKinsey article “Assessing the Impact of Societal Issues: A McKinsey Global Survey”
Ross, S., R. Westerfield and J. Jaffe, Corporate Finance, 9th Edition, McGraw-Hill Irwin, 2010.
Stout, Lynn, 2002, “Bad and not-so-bad arguments for stakeholder primacy”.
Walter, C. (1996). Une histoire du concept d’efficience sur les marchés financiers. In Annales. Histoire, Sciences Sociales (Vol. 51, pp. 873–905).
Vernimmen, P., QUIRY, P., LE FUR, Y., Finance d’entreprise, Editions Dalloz, Paris, 2011, 1191 pages
• Recommended press: daily financial press : Financial Times or Wall Street Journal
• Stock exchange website (www.euronext.com)