Finance 434 - Advanced Topics in Corporate Finance
Tuesdays 18:00 to 21:00
Professor Randall Morck
Office location: Business 4-20G Phone: (780) 492-5683
Fax: (780) 492-3325
E-mail: [email protected]
Website: Randall Morck's University of Alberta website
Office hours: Wednesday 14:30 to 16:30 & by appointment (e-mail me!)
Teaching Assistants
Cassie Zhang [email protected] Parianen Veeren [email protected] Yusuke Tsujimoto [email protected]
Course Materials
No Textbook
All readings will be available on-line. Published articles are available on-line via the library website’s ABI Inform database. NBER working papers are available via the library’s NBER database.
To access these
1. Go to the library’s website: www.library.ualberta.ca/databases.
2. Enter either ABI Inform for published articles or NBER for NBER working papers and other NBER research studies
3. Search for the item you want by author or title 4. Follow the links to find the full text as a PDF file
Books, if available online, have links indicated below. Some books listed as optional readings remain under copyright & must be borrowed from the library or purchased.
Grading
Your grade depends on a mid-term (October 24th) & a final (Dec. 5, 18:30). Students’ scores on the two tests will be combined using the formula:
𝑐𝑜𝑢𝑟𝑠𝑒 𝑔𝑟𝑎𝑑𝑒 = 𝑚𝑎𝑥 [𝑚𝑖𝑑𝑡𝑒𝑟𝑚 𝑔𝑟𝑎𝑑𝑒 + 𝑓𝑖𝑛𝑎𝑙 𝑔𝑟𝑎𝑑𝑒
2 , 𝑓𝑖𝑛𝑎𝑙 𝑔𝑟𝑎𝑑𝑒]
where final grade is adjusted by applying the linear transformation 𝑓𝑖𝑛𝑎𝑙 𝑔𝑟𝑎𝑑𝑒 = 𝑎 + 𝑏 × 𝑟𝑎𝑤 𝑠𝑐𝑜𝑟𝑒 𝑜𝑛 𝑓𝑖𝑛𝑎𝑙
with a & bchosen so the 𝑓𝑖𝑛𝑎𝑙 𝑔𝑟𝑎𝑑𝑒 distribution has the same mean & standard deviation as the 𝑚𝑖𝑑𝑡𝑒𝑟𝑚 𝑔𝑟𝑎𝑑𝑒 distribution. This means doing well on the midterm helps you, but doing badly on the midterm can be forgotten totally if you do well on the final
Fine Print
This formula makes the midterm optional. Students who do not take the midterm automatically have 100%
weight on the final examination.
Learning Goals & Course Assessment
1. At the end of this course, you will have developed the following course specific skills or knowledge:
General understanding of a range of advanced concepts in finance
2. This course incorporates the Learning Goals of the BCom Program, in particular: critical thinking, ethical awareness, global awareness, quantitative skills & written Communications
3. Final grading in this class is done on the basis of individual student achievement of the course &
program outcomes. These outcomes are measured by the following assessments:
Midterm: Assesses qualitative & quantitative understanding of concepts in lectures & required readings in first part of course
Final exam: Assesses qualitative & quantitative understanding of concepts in lectures & required readings in entire course, with equal weighting over the entire semester.
University Policy Statement
"The University of Alberta is committed to the highest standards of academic integrity and honesty.
Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behaviour (online at www.governance.ualberta.ca) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an offence. Academic dishonesty is a serious offence and can result in suspension or expulsion from the University."
Topics
Note: Topics and/or their order of coverage may be altered somewhat to reflect current financial events
Part I: Corporate Finance & Economic Growth
Why Are Some Nations Rich & Others poor?
Optional Readings
Smith, Adam. 1776. An Inquiry into the Nature & Causes of the Wealth of Nations. Edinburgh.
Marx, Karl. 1867. Das Kapital. Esp. Vol. 3
Schumpeter, Joseph. 1911. Theorie der wirtschaftlichen Entwicklung (Translation (1934) as The Theory of Economic Development: An inquiry into profits, capital, credit, interest & the business cycle is still under copyright).
Deaton, Angus. 2003. Health, inequality, and economic development. Journal of Economic Literature 41(1)113-158.
Finance, Solow Residuals & Creative Destruction
Readings King, Robert G & Ross Levine. 1993. Finance & growth: Schumpeter might be right. Quarterly Journal of Economics. 108(3) 717-738.
Optional Readings
Mankiw, N. Gregory. 1998. Real business cycles: A New Keynesian perspective. Journal of Economic Perspectives 3(3)79-90.
Romer, Paul. 1986. Increasing returns & long-run growth. Journal of Political Economy 94(5)1002-37.
Romer, Paul. 1994. The origins of endogenous growth. Journal of Economic Perspectives 8(1)3-22
Solow, Robert. 1956. A contribution to the theory of economic growth. Quarterly Journal of Economics 70(1)65–94.
Solow, Robert. 1957. Technical change & the aggregate production function. Review of Economics &
Statistics 3(3)312–320
Intellectual Property Rights & Finance
Readings Boldrin, Michele & David K. Levine.2013. The case against patents. Journal of Economic Perspectives 27(1)3-22
Optional Readings
Moser, Petra.2013.Patents & Innovation: Evidence from economic history. Journal of Economic Perspectives 27(1)23-44
Posner, Richard. 2000. Intellectual property: The law & economics approach. Journal of Economic Perspectives 19(2) 57-73.
Oberholzer-Gee, Felix & Koleman; Strumpf. 2007. The effect of file sharing on record sales: An empirical analysis. Journal of Political Economy 115(1)1-42
Heller, Michael. 1998. The tragedy of the anti-commons: Property in the transition from marx to
markets. Harvard Law Review 111(3) 621-688.
Heller, Michael. 2008. The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation & Costs Lives. Basic Books.
The Political Economy of Capital Investment
Readings Krueger, Anne. 1974. The political economy of the rent-seeking society. American Economic Review 64 291-303.
Optional Readings
Buchanan, James. 1965. An Economic Theory of clubs. Economica 32 1-14.
Faccio, Mara. 2006. Politically connected firms. American Economic Review 96(1) 369-386.
Faccio, Mara, John J. McConnell & Ronald W. Masulis. 2006. Political connections & corporate bailouts. Journal of Finance 61(6) 2597-2635.
Djankov, Simeon, Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer. 2002. The regulation of entry. Quarterly Journal of Economics 117(1) 1-37.
Lenway, Stefanie, Morck, Randall & Yeung, Bernard. 1996. Rent-seeking, protectionism & innovation in the American steel industry. Economic Journal. March. 106(435) 410-21.
Corruption & Finance
Readings Baumol, William J. 1990. Entrepreneurship: productive, unproductive & destructive. Journal of Political Economy 98 893-921.
Optional Reading
Djankov, Simeon, Caralee McLiesh, Tatiana Nenova, Andrei Shleifer. 2003. Who owns the media?
Journal of Law & Economics 46(2) 341-82.
Easterly, William. 2006. The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill & So Little Good. Penguin.
Gentzkow, Matthew, Edward L. Glaeser & Claudia Goldin. 2006. The rise of the fourth estate: How newspapers became informative & why it mattered. Gentzkow M, Glaeser E, Goldin C. The Rise of the Fourth Estate: How Newspapers Became Informative and Why It Mattered. In: Corruption and Reform. University of Chicago Press, 187-230. Also NBER Working Paper No. 10791.
Glaezer, Edward & Andrei Shleifer. 2005. The Curley Effect: The economics of shaping the electorate. Journal of Law, Economics & organization 21(1)1-19.
Murphy, Kevin, Andrei Shleifer & Robert W. Vishny. 1991. The allocation of talent: Implications for growth. Quarterly Journal of Economics. May 106(2) 503-30.
Deniz Igan & Prachi Mishra & Thierry Tressel, 2012. A fistful of dollars: lobbying and the financial crisis. NBER Macroeconomics Annual 26(1)195 - 230. Also NBER working paper 17076.
Murphy, Kevin, Andrei Shleifer & Robert Vishny 1993. Why is rent-seeking costly to growth?
American Economic Review, May, 82(2) 409-414.
Shleifer, Andrei & Robert W. Vishny. 1998. The Grabbing Hand: Government Pathologies & their Cures. Harvard University Press.
Private Property Rights & Finance
Readings Olson, Mancur. 1993. Dictatorship, democracy & development. American Political Science Review 87(3) 567-576.
Optional Readings
Buchanan, James & Yong J. Yoon. 2000. Symmetric tragedies: Commons & anti-commons. Journal of Law & Economics 43 1-14.
R. H. Coase, Ronald. 1960. The Problem of Social Cost. Journal of Law & Economics 3 1-44.
De Soto, Hernando. 1990. The Other Path: The Economic Answer to Terrorism. Harper.
De Soto, Hernando. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West & Fails Everywhere Else. Basic Books.
Competitive Pressure for Good Government
Readings Tiebout, Charles. 1956. A pure theory of local expenditures. Journal of Political Economy 64 416-24.
Optional Readings
Banzhaf, Spencer & Randall Walsh. 2008. Do people vote with their feet? An empirical test of Tiebout's mechanism. American Economic Review 98(3)843-863.
Easterbrook, Frank H. 2009. The race for the bottom in corporate governance. Virginia Law Review (2009): 685-706.
Olson, Mancur. 1965. The Logic of Collective Action. Harvard University Press.
Sandler, Todd & John Tschirhart. 1997. Club theory: Thirty years later. Public Choice 93, 335–355
Stigler, George. 1971. The theory of economic regulation. Bell Journal of Economics & Management Science 2 Spring 3-21.
Tullock, Gordon. 1967. The welfare costs of tariffs, monopolies & theft. Western Economic Journal 5 224-232.
Part II: Market Inefficiency
Financial History & the Madness of Crowds Readings
Review (if necessary) your Finance 301 notes on Market Efficiency
Mackay, Charles. 1841. Extraordinary Popular Delusions & the Madness of Crowds. Richard Bentley:
London pp. 1-97 (chapters on Mississippi scheme, South Sea bubble & Tulipmania) Optional Readings
Balen, Malcolm. 2003. The Secret History of the South Sea Bubble: The World's First Great Financial Scandal. Fourth Estate.
Chopra, Navin, Lee, Charles, Shleifer, Andrei, Thaler, Richard. 1993. Yes, discounts on closed-end funds are a sentiment index. Journal of Finance 48(2) 801-808.
Garber, Peter. 1989. Tulipmania. Journal of Political Economy 97(3) 535-560.
Lee, Charles, Andrei Shleifer & Richard Thaler. 1991. Investor sentiment & the closed-end fund puzzle. Journal of Finance 46(1)75-110.
Finance Theory & the Wisdom of Crowds
Readings Wolfers, Justin & Eric Zitzewitz. 2004. Prediction markets. Journal of Economic Perspectives 18(2)107-26
Optional Reading
Fama, Eugene. 1970. Efficient capital markets: A review of theory & empirical work. Journal of
Finance 25 383–417
Malkiel, Burton. 2003. A Random Walk Down Wall Street. Norton.
Surowiecki, James 2004. The Wisdom of Crowds: Why the Many Are Smarter Than the Few & How Collective Wisdom Shapes Business, Economies, Societies & Nations .Little, Brown
Chan, Su-han., John Martin & John Kensinger. 1990. Corporate research & development expenditures & share value. Journal of Financial Economics 26 255-276.
McConnell, John & Chris J. Muscarella. 1985. Corporate capital expenditure decisions & the market value of the firm. Journal of Financial Economics. Sept. 14(3) 399 422.
Hall, Bronwyn. 1993. Industrial research during the 1980s: Did the rate of return fall? Brookings Papers on Economic Activity 1993(2) 289-343.
Manias, Panics and Crashes
ReadingsCharles Kindleberger: Anatomy of a Typical Financial Crisis.
Optional reading
Jung, Jeeman & Robert J Shiller. 2005. Samuelson's Dictum & the Stock Market. Economic Inquiry 43(2) 221-228.
Kindleberger, Charles, Robert Alibur & Robert Solow. 2005. Manias, Panics & Crashes: A History of Financial Crises. Wiley
Minsky, Hyman. 1986. Stabilizing an Unstable Economy. Yale University Press.
Roll, Richard. 1988. R2. Journal of Finance 43(2) 541-566.
Samuelson, Paul. 1998. Summing upon Business Cycles: Opening Address. In Jeffrey Fuhrer & Scott Schuh, eds. Beyond Shocks: What Causes Business Cycles. Federal Reserve Bank of Boston.
Markets as Information Processors
Readings Shleifer, Andrei & Lawrence Summers. 1990. The noise trader approach to finance. Journal of Economic Perspectives. Spring.
Optional Reading
Hayek, Friedrich August. 1945. The use of knowledge in society. American Economic Review.
Grossman, Sanford. 1976. On the efficiency of competitive stock markets where traders have diverse information. Journal of Finance 31(2) 573-585.
Grossman, Sanford & Joseph Stiglitz. 1980. On the impossibility of informationally efficient markets.
American Economic Review 70(3) 393-408
Partially efficient markets
Readings
Morck, Randall, Bernard Yeung & Wayne Yu. 2013. R2 & the economy. Annual Review of Financial Economics 5, 143-166
Optional readings
Chun, Hyunbae, Jung-Wook Kim, Randall Morck & Bernard Yeung. 2008. Creative destruction & firm- specific performance heterogeneity. Journal of Financial Economics, forthcoming.
Durnev, Artyom, Randall Morck, Bernard Yeung & Paul Zarowin. 2003. Does greater firm-specific return variation mean more or less informed stock pricing? Journal of Accounting Research 41(5) 797-836.
Fama, Eugene & Kenneth French. 2004. New lists: Fundamentals & survival rates. Journal of
Financial Economics 72, 229-269.
Fernandes, Nuno & Miguel Ferreira. 2008. Does international cross-listing improve the information environment. Journal of Financial Economics 88(2) 216-244.
Fernandes, Nuno & Miguel Ferreira. 2009. Insider trading laws & stock price informativeness. Review of Financial Studies 22(5) 1845-1887.
Ferreira, Miguel & Paul Laux. 2007. Corporate Governance, idiosyncratic risk & information flow.
Journal of Finance 62(2) 951-989
Goetzmann, William N., Ning Zhu & Arturo Bris. 2007. Efficiency & the bear: Short sales & markets around the world. Journal of Finance 62(3) 1029-1079.
Jin, Li & Stewart C. Myers. 2006. R2 around the world: New theory & new tests. Journal of Financial.
Economics 79(2) 257–292
Khanna, Tarun & Catherine Thomas. 2009. Synchronicity & firm interlocks in an emerging market.
Journal of Financial Economics 92(2) 182-204
Li, Kan, Randall Morck, Fan Yang & Bernard Yeung. 2004. Firm-specific variation & openness in emerging markets. Review of Economics & Statistics 86(3) 658-669.
Morck, Randall, Bernard Yeung & Wayne Yu. 2000. The information content of stock markets: Why do emerging markets have synchronous stock price movements? Journal of Financial Economics 58 215-260.
Wei, S.X. & Chi Zhang. 2006. Why did individual stocks become more volatile? Journal of Business 79 259-292.
Xu, Y. Anbd Burton G. Malkiel. 2003. Investigating the behavior of idiosyncratic volatility. Journal of Business 76 613-644.
Speculative Bubbles outside Finance
Readings Willer, Robb, Ko Kuwabara & Michael W. Macy. 2009. The False Enforcement of Unpopular Norms.
American Journal of Sociology 115(2)451-90 Optional Reading
Barnett, Vincent, Warren Samuels & Natalia Makashava, eds, Translated by Stephen S. Wilson, Collected Works of Nikolai Kondratiev. Pickering & Catto.
Bikhchandani, Sushil, David Hirshleifer & Ivo Welch. 1998. Learning from the Behavior of Others:
Conformity, Fads & Informational Cascades. Journal of Economic Perspectives 12(3)151-170
Centola, Damon, Robb Willer & Michael Macy The Emperor’s dilemma: A computational model of self-enforcing norms. American Journal of Sociology 110(4)1009–1040
Crossland, Philip & Faye l. Smith. 2002. Value creation in fine arts: a system dynamics model of inverse demand & information cascades. Strategic Management Journal 23(5)417–434.
Henrich, Joseph; Richard McElreath, Abigail Barr, Jean Ensminger, Clark Barrett, Alexander Bolyanatz, Juan Camilo Cardenas, Michael Gurven, Edwins Gwako, Natalie Henrich, Carolyn Lesorogol, Frank Marlowe, David Tracer & John Ziker 2006. Costly punishment across human societies. Science 312 (5781)1767–1770.
Kuhn, Thomas. 1963. The Function of Dogma in Scientific Research. InA. C. Crombie, ed. Scientific Change. Basic Books, pp. 347–69.
Kuhn, Thomas. 1962. The Structure of Scientific Revolutions. University of Chicago Press.
McCloskey, Deirdre. 1998. The Rhetoric of Economics. University of Wisconsin Press.
Rosenberg, Nathan & Claudio R. Frischtak. 1984. Technological innovation & long waves. Cambridge Journal of Economics 8(1)7-24
Schumpeter, Joseph. 1939. Business Cycles: A Theoretical, Historical & Statistical Analysis of the Capitalist Process. McGraw-Hill
Part III: Finance Foundations of Macroeconomics
How Good are Firms at Capital Budgeting?
Readings
Keynes, John Maynard. 1936. The General Theory of Employment, Interest & Money. Royal Economic Society (chapter 12)
Optional readings
Bernardo, Antonio & Ivo Welch. 2001. On the evolution of overconfidence & entrepreneurs. Journal of Economics & Management Strategy 10:3, 301-330.
Bhattacharya, Sudipto. 1978. Project valuation with mean-reverting cash flow streams. Journal of Finance 33(5) 1317-1331
Bikhchandaqni, Sahil, David Hirschleifer & Ivo Welch. 1992. A theory of fashion, custom & cultural change. Journal of Political Economy 100:5, 992-1026.
Blanchard, Olivier, Changyong Rhee & Lawrence Summers. 1993. The stock market, profit &
investment. Quarterly Journal of Economics 108 115–136.
Camerer, Colin, Teck-Hua Ho, Juin-Kuan Chong. 2004. A cognitive hierarchy model of games.
Quarterly Journal of Economics 119(3)861-898
Harvey, Campbell & John Graham. 2001. The theory & practice of corporate finance: Evidence from the field. Journal of Financial Economics 60 187-243.
Morck, Randall, Eduardo Schwartz & David Stangeland. 1989. The valuation of forestry resources under stochastic prices & inventories. Journal of Financial & Quantitative Analysis 24(4) 473-487.
Measuring Capital Budgeting Quality
Readings Wurgler, Jeffrey. 2000. Financial Markets & the Allocation of Capital. Journal of Financial Economics.
58(1) (Oct.).
Optional readings
Choe, Hyuk, Bong-Chan Kho & René Stulz. 1999. Do foreign investors destabilize stock markets? The Korean experience in 1997. Journal of Financial Economics 54(2) 227-264
Diamond, Douglas & Raghuram G Rajan. 2001 Liquidity risk, liquidity creation & financial fragility: A theory of banking. Journal of Political Economy 109(2) 287-328.
Diamond, Douglas & Raghuram G Rajan. 2002. Bank bailouts & aggregate liquidity. American Economic Review 92(2) 38-42.
Diamond, Douglas & Raghuram G Rajan. 2005. Liquidity shortages & banking crises. Journal of Finance 60(2) 615-647.
Durnev, Artyom, Randall Morck & Bernard Yeung. 2004. Value enhancing capital budgeting & firm- specific stock returns variation. Journal of Finance 59(1)
Leitner. Yaron. 2005. Financial networks: Contagion, commitment & private sector bailouts. Journal of Finance 60(6) 2925-2953
Tobin, James. 1982. On the efficiency of the financial system. Lloyd’s Banking Review. July
Animal Spirits & Trust
Readings
Krishnamurthy, Arvind. 2010. How debt markets have malfunctioned in the crisis. Journal of Economic Perspectives 24(1) 3–28.
Optional Reading
Akerlof, George & Robert Shiler. 2009. Animal Spirits – How Human Psychology Drives the Economy
& Why It Matters for Global Capitalism. Princeton University Press.
Duffie, Darrell. 2010. The failure mechanics of dealer banks. Journal of Economic Perspectives 24(1)51–72.
Krugman, Paul. 2009. The Return of Depression Economics & the Crisis of 2008. Norton.
Morck, Randall, Andrei Shleifer & Robert Vishny. 1990. The stock market & investment: Is the market a sideshow? Brookings Papers on Economic Activity 1990(2)157-215.
Stulz, Rene M. 2010. Credit default swaps & the credit crisis. Journal of Economic Perspectives 24(1)73–92.
White, Lawrence. 2010. Markets: The credit rating agencies. Journal of Economic Perspectives 24(2) 211–226.
Part IV: Corporate Governance
Interests, Entrenchment & Corporate Empires
Readings Morck, Randall, Andrei Shleifer & Robert W. Vishny. 1988. Management ownership & market valuation: An empirical analysis. Journal of Financial Economics 20(1,2) 293-315.
Optional Readings
Berle, Adolf & Gardiner Means. 1932. The Modern Corporation & Private Property. Macmillan, New York.
Jensen, Michael. 1986. Agency Costs of Free Cash Flow, Corporate Finance & Takeovers. American Economic Review. May. 76(2) 323-30.
Jensen, Michael & William Meckling. 1976. Theory of the firm: managerial behavior, agency costs &
ownership structure. Journal of Financial Economics 3 305–360
Slovin, Myron & Marie Sushka. 1993. Ownership Concentration, corporate-Control Activity & Firm Value - Evidence from the Death of Inside Blockholders. Journal of Finance 48(4) 1293-1321.
Johnson, W. Bruce, Robert P. Magee, Nandu J. Nagarajan & Henry A. Newman. 1985. An analysis of the stock price reaction to sudden executive deaths: Implications for the management labor model.
Journal of Accounting & Economics. 7(1-3) April.151-174.
Lang, Larry, Rene Stultz & Ralph Walkling. 1991. A test of the free cash flow hypothesis: The case of bidder returns. Journal of Financial Economics 29 315-35.
Yermack, David. 2006. Flights of fancy: Corporate jets, CEO perquisites & inferior shareholder returns. Journal of Financial Economics 80(1)211-242
Corporate Governance & Behavioral Economics
Readings Morck, Randall. 2009. Generalized agency problems. NBER working paper 15051.
Optional Readings
Festinger, Leon. 1957. A Theory of Cognitive Dissonance. Row, Peterson.
Janis, Irving. 1972. Victims of Groupthink. Boston. Houghton Mifflin.
Milgram, Stanley. 1974. Obedience to Authority. Harper & Row.
Morck, Randall. 2004. Behavioral finance in corporate governance - independent directors, non- executive chairs & the importance of the devil’s advocate. NBER working paper 10644
Corporate Takeovers
Readings Morck, Randall, Andrei Shleifer & Robert W. Vishny. 1989. Alternative mechanisms for corporate control. American Economic Review 79(4) 842-52.
Morck, Randall, Andrei Shleifer & Robert W. Vishny. 1990. Do managerial objectives drive bad acquisitions? Journal of Finance 45(1) 31-48.
Optional Readings
Coase, Ronald. 1937. The nature of the firm. Economica Nov. 386-405.
Grossman, Sanford & Oliver Hart. 1980. Take-over bids, the free rider problem & the theory of the corporation. Bell Journal of Economics 11 42-64.
Jensen, Michael C. 1986. Agency costs of free cash flow, corporate finance & takeovers. American Economic Review 76(2) 323–29.
Lang, Larry & Robert Litzenberger. 1989. Dividend announcements: Cash flow signalling vs. free cash flow hypothesis? Journal of Financial Economics 24(1) 181–92.
Lang, Larry, Stulz, Rene, Walkling, Ralph. 1991. A test of the free cash flow hypothesis: The case of bidder returns. Journal of Financial Economics 29(2) 315-36.
Lichtenberg, Frank. 1992. Corporate Takeovers & Productivity. MIT Press.
Mitchell, Mark & Kenneth Lehn. 1990. Do bad bidders make good targets? Journal of Political Economy 98 372-398.
Moeller, Sara, Frederik Schlingemann & René Stulz, 2005. Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. Journal of Finance 60(2)757-782.
Shleifer, Andrei & Lawrence Summers. 1988. Breach of trust in hostile takeovers. In Allan Auerbach, ed. Corporate Takeovers: Causes & Consequences. University of Chicago Press.
Private Equity, LBOs & Junk Bonds
Readings Review (if necessary) your Finance 301 notes on Capital Structure & Dividends
Kaplan, Steven & Per Stromberg. 2008. Leveraged buyouts & private equity. Journal of Economic Perspectives 23(1) 121-146
Optional Readings
Baker, George & George Smith. 1998. The New Financial Capitalists: Kohlberg Kravis Roberts & the Creation of Corporate Value. Cambridge University Press.
Bartlett, Sarah. 2000. The Money Machine: How KKR Manufactured Power & Profits. Replica Books.
Bruck, Connie. The Predators' Ball: The Inside Story of Drexel Burnham & the Rise of the Junk Bond Raiders.
Fischel, Daniel. Payback: The Conspiracy to Destroy Michael Milken & His Financial Revolution.
La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer & Robert Vishny. 2000. Agency problems & dividend policies around the world. Journal of Finance 55 1-33.
Yago, Glenn. 1990. Junk Bonds - How High Yield Securities Restructured Corporate America. Oxford University Press.
Financial Nationalism & Multinational Firms
Readings
Morck, Randall & Bernard Yeung. 1991. Why investors value multinationality. Journal of Business 64(2) 165-87.
Optional Readings
Bekaert, Geert, Campbell R. Harvey & Christian Lundblad. 2005. Does financial liberalization spur growth? Journal of Financial Economics 77 3-55.
Harris, David, Randall Morck, Joel Slemrod & Bernard Yeung. 1993. Income shifting in U.S.
multinational corporations. In J. Slemrod et al., eds. International Aspects of Taxation. University of Chicago Press.
Henry, Peter Blair. 2000. Do stock market liberalizations cause investment booms? Journal of Financial Economics 58(1/2) 301
Henry, Peter Blair. 2000. Stock market liberalization, economic reform & emerging market equity prices. Journal of Finance 55(2) 529-564.
Henry, Peter Blair. 2003. Capital-account liberalization, the cost of capital & economic growth.
American Economic Review 93(2) 91-96.
Prebisch, Raúl. 1950. The Economic Development of Latin America & Its Principal Problems. United Nations Press.
Takeover Defenses
Readings Shleifer, Andrei & Robert Vishny. 1997. A survey of corporate governance. Journal of Finance 52 737-783.
Optional Readings
Bebchuk, Lucian, Alma Cohen, Allen Ferrell. 2009. What matters in corporate governance? Review of Financial Studies 22(2) 783-827
Bebchuk, Lucien & Allen Ferrell. 1999. Federalism & Corporate Law: The race to protect managers from takeovers. Columbia Law Review 99
Daines, Robert. 2001. Does Delaware law improve firm values? Journal of Financial Economics 62
Hartzell, Jay, Eli Ofek & David Yermak. 2004. What's In It for Me? CEOs Whose Firms Are Acquired.
Review of Financial Studies 17(1)37-61
Karpoff, Jonathan & Paul Malatesta. 1995. State takeover legislation & share values: The wealth effects of Pennsylvania's Act 36. Journal of Corporate Finance 1(3/4)367-382.
Shareholder Democracy
Readings Gompers, Paul, Joy Ishii & Andrew Metrick. 2003. Corporate governance & equity prices. Quarterly Journal of Economics 118 107-55.
Optional Readings
Bebchuk, Lucien & Alma Cohen. 2003. Firms' decisions where to incorporate. Journal of Law &
Economics 46 383-425.
Bebchuk, Lucien & Alma Cohen. 2005. The costs of entrenched boards. Journal of Financial Economics 78 409-433.
Bebchuk, Lucien & Jesse Fried. 2004. Pay without Performance: The Unfulfilled Promise of Executive Compensation. Harvard University Press.
Bebchuk, Lucien, Yaniv Grinstein & Urs Peyer. 2006. Lucky CEOs. Harvard Law School Olin Discussion Paper No. 566.
Bebchuk, Lucien. 2007. The myth of the shareholder franchise. Virginia Law Review 93 675-732.
Faleye, Olubunmi. 2007. Classified boards, firm value & managerial entrenchment. Journal of Financial Economics 83 501-529.
Del Guercio, Diane, Laura Seery & Tracie Woidtk. 2008. Do boards pay attention when institutional investor activists "just vote no"? Journal of Financial Economics 90(1)84-103.
Bankruptcy
Readings Djankov, Simeon, Caralee McLiesh, Andrei Shleifer. 2007. Private credit in 129 countries. Journal of Financial Economics 84(2) 299-329
Optional Readings
Bebchuk, Lucian. 2000. Using options to divide value in corporate bankruptcy. European Economic Review 44 829-843. Link: Harvard Law & Economics Discussion Paper No. 271.
Canadian bankruptcy law. link
Weiss, Lawrence & Karen Wruck. 1998. Information problems, conflicts of interest & asset stripping:
Chapter 11's failure in the case of Eastern Airlines. Journal of Financial Economics 48(1) 55-97.
Corporate Governance around the World
Readings Morck, Randall & Bernard Yeung. 2009. Never waste a good crisis: An historical perspective on comparative corporate governance. Annual Review of Financial Economics 1, 145-179. Also NBER working paper 15042
Optional Readings
Morck, Randall & Lloyd Steier. 2005. The global history of corporate governance: An introduction. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press. 1-64.
Morck, Randall, Daniel Wolfenzon & Bernard Yeung. 2005. Corporate governance, economic entrenchment & growth. Journal of Economic Literature. Also NBER working paper 10692
TIME PERMITTING, THE FOLLOWING TOPICS MAY OR MAY NOT BE COVERED
Corporate Governance in Canada
Readings
Morck, Randall K., David A. Stangeland & Bernard Yeung. 2000. Inherited wealth, corporate control
& economic growth: The Canadian disease. In R. Morck, ed. Concentrated Corporate Ownership.
University of Chicago Press.
Optional readings
Khorana, Ajay, Henri Servaes & Peter Tufano. Mutual fund fees around the world. Review of Financial Studies 22(3) 1279-1310
Bris. Arturo. 2005. Do insider trading laws work? European Financial Management 11(3) 267-312
Eckbo, B. Espen. 1986. Mergers & the market for corporate control: The Canadian evidence.
Canadian Journal of Economics 19 236-260.
Morck, Randall, Michael Percy, Gloria Y. Tian & Bernard Yeung. 2005. The rise & fall of the widely held firm: A history of corporate ownership in Canada. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press. 65-140. Also available as a NBER working paper.
Smith, Brian & Amoako-Adu, Ben. 1999. Management succession & financial performance of family controlled firms. Journal of Corporate Finance 5(4) 341-368
Francis, Diane. 1988. Contrepreneurs. Macmillan.
Corporate Governance in Britain
Readings Black, Bernard & John Coffee. 1997. Hail Britannia? Institutional investor behavior under limited regulation. Michigan Law Review 92(7) 1997-2087.
Optional Readings
Cheffins, Brian. 2001. Does Law Matter? The Separation of Ownership & Control in the United Kingdom. Journal of Legal Studies 459-484.
Cheffins, Brian. 2008. Corporate Ownership & Control: British Business Transformed. Oxford University Press.
Franks, Julian, Colin Mayer, Stefano Rossi. 2005. Spending less time with the family: The decline of family ownership in the United Kingdom. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press.
581 – 612.
Gompers, Paul & Andrew Metrick. 2001. Institutional investors & equity prices. Quarterly Journal of Economics 114 229-260.
Lakonishok, Josef, Andrei Shleifer, Richard Thaler & Robert Vishny. 1991. Window dressing by pension fund managers. American Economic Review 81(2) 227-231.
Lakonishok, Josef, Andrei Shleifer, Richard Thaler & Robert Vishny. 1992. The structure &
performance of the money management industry. Brookings Papers on Economic Activity 1992(1) 339-391.
Romano, Roberta. 1995. The politics of public pension funds. The Public Interest 119 42 53.
Corporate Governance in the United States
Readings Morck, Randall. 2005. How to eliminate pyramidal business groups: The double-taxation of
intercorporate dividends & other incisive uses of tax policy. Tax Policy & the Economy 19 135-179.
Optional Readings
Bebchuk, Lucien & Alma Cohen. 2003. Firms' decisions where to incorporate. Journal of Law &
Economics 46 383-425.
Becht, Marco & J. Bradford DeLong. 2005. Why has there been so little block holding in America? In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press. 613 - 666.
Black, Conrad. 2003. Franklin Delano Roosevelt: Champion of Freedom. Public Affairs.
Doidge, Craig, Andrew Karolyi & Ren Stulz. 2009. Has New York become less competitive than London in global markets? Evaluating foreign listing choices over time. Journal of Financial Economics 91(3)253-277.
Romano, Roberta. 1993. The Genius of American Corporate Law. American Enterprise Institute Press.
Finance & the Common Law
Readings La Porta, Rafael; Florencio Lopez-De-Silanes & Andrei Shleifer. 1999. Corporate ownership around
the world. Journal of Finance. April. 54(2) 471-517.
Optional Readings
Commons, John R., 1924. Legal foundations of capitalism. University of Wisconsin Press, Madison.
Glaezer, Edward & Andrei Shleifer. 2002. Legal Origins. Quarterly Journal of Economics 117(4) 1193- 1250.
La Porta, Rafael, Florencio Lopez-De-Silanes, Andrei Shleifer, Robert Vishny. 2002. Investor protection & corporate valuation. Journal of Finance 57(3) 1147-1170.
La Porta, Rafael, Florencio Lopez-de-Silanes, Cristian Pop-Eleches, Andrei Shleifer. 2004. Judicial checks & balances. Journal of Political Economy 112(2) 445-470.
La Porta, Rafael, Florencio Lopez-de-Salinas, Andrei Shleifer & Robert Vishny. 1997. Legal determinants of external finance. Journal of Finance. July, 52(3) 1131 1150
La Porta, Rafael, Florencio Lopez-de-Salinas, Andrei Shleifer & Robert Vishny 1998. Law & finance.
Journal of Political Economy. Dec 106(6) 1113-57.
La Porta, Rafael, Florencio Lopez-de-Silanes & Andrei Shleifer 2006. What works in securities laws.
Journal of Finance 61 1-32.
La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer & Robert Vishny. 2000. Investor protection & corporate governance. Journal of Financial Economics 58: 3-27.
Levine, Ross, Asli Demirguc-Kunt & Thorsten Beck. 2003. Law & finance: Why does legal origin matter? Journal of Comparative Economics 31(4) 653-676.
Mahoney, Paul. 2001. The common law & economic growth: Hayek might be right. Journal of Legal Studies 30, 503.
Pistor, Katharina, Yoram Keinan, Ja n Kleinheisterkamp & Mark West. 2003. Evolution of corporate law & the transplant effect: Lessons from six countries. World Bank Research Observer 18(1) 89-112.
Posner, Richard. 1996. Law & Legal Theory in England & America. Oxford Clarendon Press.
Corporate Governance in Italy
Readings Aganin, Alexander & Paolo Volpin. 2005. The history of corporate ownership in Italy. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press, 325 – 366.
Optional Readings
Rerum Novarum: encyclical of Pope Leo XIII on capital & labor
Quadragesimo Anno: encyclical of Pope Pius XI on reconstruction of the social order
Mussolini, Benito. 1932. The Doctrine of Fascism Enciclopedia Italiana. Link: Doctrine of Fascism.
Corporate Governance in France
Readings Murphy, Antoin. 2005. Corporate ownership in France: The importance of history. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press, 185 – 222.
Optional Readings
Smith, Timothy. 2004. France in Crisis: Welfare, Inequality & Globalization since 1980. Cambridge University Press.
Bertrand, Marianne, Francis Kramarz, Antoinette Schoar & David Thesmar. Politically Connected CEOs and Corporate Outcomes: Evidence from France. University of Chicago working paper.
Kramarz, Francis & David Thesmar. 2006. Social Networks in the Boardroom. HEC Paris working
paper.
Corporate Governance in Germany
Readings Fohlin, Caroline. 2005. The history of corporate ownership & control in Germany. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press, 223 – 282.
Optional Readings
Baums, Theodor. 1996. Universal banks & investment companies in Germany. In Anthony Saunders
& Ingo Walter, eds. Universal Banking: Financial System Design Reconsidered. Irwin, 124-160.
Beck, Thorsten & Ross Levine. 2002. Industry growth & capital allocation: Does having a market- or bank-based system matter? Journal of Financial Economics 64(2) 147-180.
Faleye, Olubunmi, Vikas Mehrotra & Randall Morck. 2006. When labor has a voice in corporate governance. Journal of Financial & Quantitative Analysis 41 489-510
Jensen, Michael & William Meckling. 1979. Rights & production functions: An application to labor- managed firms & co-determination. Journal of Business 52 469-506.
Roe, Mark. 2003. Political Determinants of Corporate Governance. Oxford: Oxford University Press.
Weitz, John. 1997. Hitler's Banker: Hjalmar Horace Greeley Schacht. Little Brown.
Corporate Governance in Sweden
Readings Högfeldt, Peter. 2005. The history & politics of corporate ownership in Sweden. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press, 517 – 580.
Optional Readings
Chernow, Ron. 1994. The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family.
Vintage.
Steinhouse, Carl. 2002. Wallenberg Is Here! The True Story About How Raoul Wallenberg Faced Down the Nazi War Machine & the Infamous Eichmann & Saved Tens of Thousands of Budapest Jews. 1st Books Library.
Corporate Governance in Japan
Readings Morck, Randall & Masao Nakamura. 2005. A frog in a well knows nothing of the ocean: A history of corporate ownership in Japan. In Randall Morck, ed. A History of Corporate Governance around the World: Family Business Groups to Professional Managers. University of Chicago Press. 367-459. Link:
Optional Readings
Beason, Richard & David E. Weinstein. 1996. Growth, economies of scale & targeting in Japan (1955- 1990). Review of Economics & Statistics. May 78(2) 286-96.
Morck, Randall & Masao Nakamura. 1999. Banks & corporate control in Japan. Journal of Finance.
Feb 54(1) 319-40.
Beason, Dick & Dennis Patrick Patterson. 2004. The Japan That Never Was: Explaining the Rise &
Decline of a Misunderstood Country. State University of New York Press.
Corporate Governance in the Soviet Union & People’s Republic of China
Readings Fan, Joseph, Randall Morck & Bernard Yeung. 2012. Translating Market Socialism with Chinese Characteristics into sustained prosperity, chapter 1 in Joseph Fan & Randall Morck, eds. Capitalizing China. University of Chicago Press. Also NBER working paper 17687.
Optional Readings
Fan, Joseph & Randall Morck, eds. Capitalizing China. University of Chicago Press. All other chapters.
Holmes, Leslie. 2009. Communism: A Very Short Introduction. Oxford University Press
McGregor, Richard. 2010. The Party: The Secret World of China's Communist Rulers. Harper Collins
Corporate Governance in Emerging & Less Developed Economies
Readings
Morck, Randall. 2009. The riddle of the great pyramids. Also NBER working paper 14858
Morck, Randall & Bernard Yeung. 2010. Corporatism & the ghost of the Third Way. Capitalism &
Society 5(3)a2 Optional Readings
Morck, Randall & Masao Nakamura. 2007. Business groups & the Big Push: Meiji Japan's mass privatization & subsequent growth. Enterprise & Society 8(3) 543-601.
Murphy, Kevin, Andrei Shleifer & Robert Vishny. 1989. Industrialization & the Big Push. Journal of Political Economy 97 1003-1026.
Rodrik, Dani. 2008. One Economics, Many Recipes: Globalization, Institutions & Economic Growth.
Princeton University Press.
Rosenstein-Rodan, Paul. 1943. Problems of industrialization of Eastern & South- Eastern Europe.
Economic Journal 53(210/211) 202-11.
Rostow, Walt Whitman. 1960. The Stages of Economic Growth: A Non-Communist Manifesto.
Cambridge University Press.
Part V: Finance & Ethics
Optional Readings
Hayek, Friedrich. 1944. The Road to Serfdom. University of Chicago Press. [Reader’s Digest
“condensed” version (Apr. 1945) Mises Institute reprint.
Fukuyama, Francis. 1992. The End of History & the Last Man. Free Press.
Klein, Naomi . 2015. This Changes Everything: Capitalism v. the Climate. Simon & Schuster.
McCloskey, Deirdre N. 2006. Bourgeois Virtue. John Wiley & Sons
Schumpeter Joseph. 1942. Capitalism, Socialism & Democracy. Harper & Row.
Smith, Adam. 1759. The Theory of the Moral Sentiments. Edinburgh. Library of Congress archive
Van Beurden, Pieter & Tobias Gössling. 2008. The worth of values–a literature review on the relation between corporate social and financial performance." Journal of business ethics 82(2)407-424.
