Corporate Finance & Financial Intermediation - ECO00001D

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  • Department: Economics and Related Studies
  • Credit value: 10 credits
  • Credit level: D
  • Academic year of delivery: 2022-23

Module summary

The course will cover the following topics: 

·       Capital Budgeting 

·       The MM Propositions, the Effects of Taxes, Financial Distress/Bankruptcy Costs and the Static Trade-off Theory 

·       Capital Structure under Adverse Selection 

·       Capital Structure under Moral Hazard 

·       Payout Policy 

·       Mergers and Takeovers 

·       Theory of Financial Intermediation/Banking 

·       Regulation of Financial Intermediaries/Banks

Related modules

Asset Pricing, Microeconomics 

Module will run

Occurrence Teaching period
A Spring Term 2022-23

Module aims

The module aims are to: 

  • Provide the students with a solid theoretical foundation on Corporate Finance and Financial Intermediation. The module will offer a wide coverage of the existing literature with a focus on recent developments.  
  • Introduce the students to contract theory and mechanism design. We will use these techniques to explain the existence of some widely used financial securities and of financial intermediaries.  
  • Help students understand why bank regulation is necessary and what form it should take (e.g. bank capital regulation, interest rate regulation).  

Module learning outcomes

On successful completion of this module, students should be able to:

  • Explain the different theories in corporate finance and banking and derive their empirical and policy implications;

  • Critically assess the different theories in corporate finance and banking;

  • Solve agency models related to corporate finance and banking;

  • Describe the incentive problems that can occur due to asymmetric information and ways to solve them through contract/mechanism design.

Indicative assessment

Task % of module mark
University - project 100

Special assessment rules

None

Indicative reassessment

Task % of module mark
University - project 100

Module feedback

Written feedback within 20 working days be provided in accordance to the University Policy on Assessment Feedback and Turnaround Time.

Indicative reading

Bolton and Dewatripont (BD), Contract Theory, MIT Press, 2005.
Freixas and Rochet (FR), Microeconomics of Banking, MIT Press, 2008.
Tirole (T), The Theory of Corporate Finance, Princeton University Press, 2006.