COURSE NUMBER: EWMBA 237-12

COURSE TITLE: Corporate Financial Decisions: Principal-Agent Dilemmas

UNITS OF CREDIT: 1 Unit

INSTRUCTOR: Rau

E-MAIL ADDRESS:raghu@haas.berkeley.edu

CLASS WEB PAGE LOCATION (HTTP URL): TBD

MEETING DAY(S)/TIME: Saturday, 8/21-9/25, 9:00am-12:00pm (no meeting on 9/4)

PREREQUISITE(S): EWMBA Core

CLASS FORMAT: Mixture of lectures and case discussions

REQUIRED READINGS: A study packet will be assigned

BASIS FOR FINAL GRADE: Class participation + a project

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES: PODCAST
Traditional finance theory (as taught in 203 and 231) discusses what is optimal firm behavior in healthy firms. What happens when firms go into financial distress or when they compete in situations with extreme asymmetric information? It turns out that much of traditional finance theory falls apart (firms no longer choose to maximize NPV, take up negative NPV projects, give up positive NPV projects and so on). This course discusses the roles that asymmetric information and agency conflicts play in traditional corporate finance decisions (capital structure, stock splits, dividend policy, executive compensation) and explains how many of the structures we see in firms today are driven by responses to agency conflicts and asymmetric information.

BIOGRAPHICAL SKETCH:
Professor Rau currently holds the Sir Evelyn de Rothschild Professorship of Finance at Cambridge University. His primary research interest is centered on how participants in markets acquire and use information. His most recent major publications investigated why mutual funds close their doors to new investors and whether analysts change their opinions of their covered firms depending on the firm they are employed at. His research won the 1996 Competitive Award for Business Finance and the Best of the Best Award from the Financial Management Association for the paper “Glamour, Value and Post-Acquisition Performance of Acquiring Firms.” He has also won the 2000 Barclays Global Investors Award from the European Finance Association for the paper “A Rose.com by any other name” and the 2008 Chinese Finance Association Best Paper in Corporate Finance award for the paper “The helping hand, the lazy hand, or the grabbing hand? Central vs. local government shareholders in publicly listed firms in China”.

Professor Rau has taught corporate finance at UCLA, Purdue University, and the Institut d’Etudes Politiques de Paris, among other schools. He received the Outstanding Undergraduate Teaching Award in 2001 and the Dean’s Outstanding MBA Core Teaching Award in 2005 and 2007 from Purdue University. In 2008-2009, Professor Rau worked as a researcher at Barclays Global Investors, the largest money manager in the world, and held a ring-side seat during the quant fund meltdown, getting personal experience of how a firm engages in corporate restructuring, conducts layoffs, mergers or a split-off. He is a member of the American Finance Association, European Finance Association, European Financial Management Association, the Financial Management Association, the French Finance Association, and the Western Finance Association.