Course Number
325
Credits
3
Area of Study & Practice
- Business Organization and Finance
Corporate Finance
This 2 credit course is designed to familiarize law students with the principles of corporate finance. In the world of corporate finance, the distinction between lawyers and investment bankers has become blurred. Whether negotiating a merger agreement, acquisition or divestiture, rendering a fairness opinion, preparing for an appraisal hearing, litigating securities class action or derivative suits, issuing new securities, taking a firm private via an LBO or public via an IPO, corporate lawyers and investment bankers work side-by-side, and lawyers without an appreciation of the basics of corporate finance are at a distinct disadvantage. Moreover, this course will provide important tools for litigators in identifying, preparing, and cross-examining financial expert witnesses. Even students who do not plan to venture into the corporate world will benefit from this course. The financial principles covered are essential for lawyers intending to do estate or tax planning, litigate divorces, or write the bylaws and compensation agreements for partnerships or closed corporations. In addition to the principles of finance, the course addresses the legal norms and economic constraints that affect a corporation’s choice of capital structure, including contemporary approaches to interpreting the scope of provisions commonly found in debt and preferred stock instruments. This course will serve as a prerequisite for Corporate Restructuring and Venture Capital and Private Equity, two courses offered at the Fuqua School of Business and cross-listed in the Law School.
Topics include: the time value of money; the relation between risk and return; the workings and efficiency of capital markets; behavioral finance; valuing perpetuities and annuities; valuing corporate securities (stocks, bonds, and options); optimal capital structure and dividend policies; basic financial accounting; assessing the value of going concerns, forensic finance, how these principles are applied in the practical practice of law, and the judicial interpretation of bond covenants. Although the materials will stress the intuition of these principles, students will be expected to acquire a working knowledge of how to apply the analytical tools of finance to real-world problems.
Materials
The materials for the course are contained in a course packet that students should pick up prior to the first class meeting. The packet contains class notes that students should bring to class. These notes are not self-contained in that they are not complete without the accompanying lecture. They are intended to complement (not replace) the classroom lectures.
The required text for the course is Corporate Finance, Principles and Practice, 2nd Edition, by William J. Carney, Foundation Press, 2010. This text does a nice job integrating principles of corporate finance and the practice of corporate law. Where appropriate the class notes will reference this text.
For students who want a more in depth treatment of corporate finance from a financial economics perspective, I recommend Principles of Corporate Finance by Richard A. Brealy and Stewart C. Myers, Irwin McGraw-Hill, editions 5 and later. Note that the latest edition, the 8th, includes a third author. The authors are Richard Brealy, Stewart Myers and Franklin Allen. This is the most popular (and expensive) corporate finance textbook and is used in all the top business schools in the country.
Grading in the course will be based on the performance on problem sets that will be done out of class in groups of up to four students throughout the term, and take-home final exam. The number and due dates for the problem sets will be provided at the first class.
Topics include: the time value of money; the relation between risk and return; the workings and efficiency of capital markets; behavioral finance; valuing perpetuities and annuities; valuing corporate securities (stocks, bonds, and options); optimal capital structure and dividend policies; basic financial accounting; assessing the value of going concerns, forensic finance, how these principles are applied in the practical practice of law, and the judicial interpretation of bond covenants. Although the materials will stress the intuition of these principles, students will be expected to acquire a working knowledge of how to apply the analytical tools of finance to real-world problems.
Materials
The materials for the course are contained in a course packet that students should pick up prior to the first class meeting. The packet contains class notes that students should bring to class. These notes are not self-contained in that they are not complete without the accompanying lecture. They are intended to complement (not replace) the classroom lectures.
The required text for the course is Corporate Finance, Principles and Practice, 2nd Edition, by William J. Carney, Foundation Press, 2010. This text does a nice job integrating principles of corporate finance and the practice of corporate law. Where appropriate the class notes will reference this text.
For students who want a more in depth treatment of corporate finance from a financial economics perspective, I recommend Principles of Corporate Finance by Richard A. Brealy and Stewart C. Myers, Irwin McGraw-Hill, editions 5 and later. Note that the latest edition, the 8th, includes a third author. The authors are Richard Brealy, Stewart Myers and Franklin Allen. This is the most popular (and expensive) corporate finance textbook and is used in all the top business schools in the country.
Grading in the course will be based on the performance on problem sets that will be done out of class in groups of up to four students throughout the term, and take-home final exam. The number and due dates for the problem sets will be provided at the first class.
Please note that course organization and content may vary substantially from semester to semester and descriptions are not necessarily professor specific. Please contact the instructor directly if you have particular course-related questions.
Sections/Instructors
Michael Bradley
Corporate Finance 325.01
Spring 2013
Sakai Site