ECO420 Corporate Governance

• Topics

  For investors to be willing to provide financing, some mechanisms protecting their interests must be in place. Such mechanisms can involve incentive contracts for company executives, legal protection of owner rights, ownership concentration and voting power, membership on the corporate board, or the discipline of product market competition. The purpose of this course is to get a thorough understanding of how these mechanisms work in theory and in practice.

• Learning outcome

  Upon completion of the course students have

  - Knowledge:

  • a thorough understanding of how financial contracts and CEO remuneration should be designed in order to provide efficient incentives and maximize firm value.
  • a thorough understanding of how firm´s optimal governance structure depends on firm and industry characteristics.
  • knowledge of how legal protection investor rights differ across time and across countries and how these differences shape financial markets and regularities in firm financing.
  • knowledge of common investors rights and how they are used and enforced.

  - Skills

  • ability to investigate and assess strengths and weaknesses in a firm´s governance structure.
  • ability to assess how decision rights and cash flow rights of financial instruments should be bundled together.
  • ability to asses political forces behind regulation and development of financial markets
  • some experience and skills in research through research-oriented group projects that are to be presented in class (student presentations)

  - General competence

  • ability to utilise knowledge and skills from corporate governance analysis in an independent manner

• Teaching

  Mainly lectures and some student presentations.

  It will be possible to follow the course digitally.

• Required prerequisites

  From Fall 2015 the following prerequisites will apply:

  The course builds on some analytic skills in using, understanding, developing, testing and interpreting economic models. Knowledge corresponding to one (or several) of the courses ECO400, ECO401, ECO403 or ENE420 is adequate for this. Such a course (or courses) may be taken in parallel to this course.

• Requirements for course approval

  Two assignments and student presentation of project.

• Assessment

  4 hour written individual home exam (in English).

• Grading Scale

  A - F.

• Computer tools

  None.

• Literature

  Tirole (2006) The theory of corporate finance, Princeton University Press.

  A list of journal articles.