Not available in 2017/18
FM302      Half Unit
Theories of Corporate Finance

This information is for the 2017/18 session.

Teacher responsible

Dr Michela Verardo


This course is compulsory on the BSc in Finance. This course is not available as an outside option nor to General Course students.


Students must have completed FM212 Principles of Finance.

Course content

This course examines theory and evidence concerning major corporate financial policy decisions. It will focus particularly on the firm's decision to finance with debt vs. equity, the impact of taxes on such decisions, and the role of dividends. We will begin with the Modigliani and Miller proposition and discuss the firm's choice to raise capital using debt versus equity and the firm's choice to payout earnings using dividends versus repurchases. We will analyze the impact of taxes, financial distress, and asymmetric information on such decisions. We will also cover optimal managerial compensation, take on the role of the policy maker to learn about corporate governance mechanisms and discuss some recent corporate scandals. Finally, we will review empirical evidence from a wide range of international sources to support or refute the theories we discussed.


20 hours of lectures and 10 hours of lectures in the LT.

Formative coursework

Students will be expected to produce 10 problem sets in the LT.

Indicative reading

Detailed course programmes and reading lists are distributed at the start of the course. Illustrative texts include: Bodie, Kane & Marcus, Investments (Irwin) and Grinblatt & Titman, Financial Markets and Corporate Strategy (Irwin, McGraw-Hill).


Exam (100%, duration: 1 hour and 30 minutes) in the main exam period.

Key facts

Department: Finance

Total students 2016/17: Unavailable

Average class size 2016/17: Unavailable

Capped 2016/17: No

Value: Half Unit

Guidelines for interpreting course guide information

PDAM skills

  • Problem solving
  • Application of information skills
  • Application of numeracy skills
  • Commercial awareness