GRA 6542 Corporate Governance

GRA 6542 Corporate Governance

Course code: 
GRA 6542
Department: 
Finance
Credits: 
6
Program of study: 
Master of Science in Finance
Course coordinator: 
Leon Bogdan Stacescu
Product category: 
Master
Portfolio: 
MSc in Finance
Semester: 
2018 Autumn
Active status: 
Active
Teaching language: 
English
Course type: 
One semester
Introduction

This course addresses the situation where the firm’s stakeholders (such as its owners, creditors, management, employees, and society at large) disagree on how to use the firm’'s resources. The potential conflicts of interest between stakeholders create a corporate governance problem and can produce welfare losses for the firm and for society as a whole. We will primarily study the corporate governance problem in terms of principal-agent relationships between the owners, the creditors, the board, the management team and other stakeholders. We revise theoretical models about corporate governance and examine the ways in which they can be tested using available data. Empirical findings on corporate governance problems and their solutions in various parts of the world will be an important part of the course. We use this empirical focus both to motivate the real-world relevance of corporate governance and to help the student see the link between theory and practice.

Learning outcomes - Knowledge

The major objective of the course is to train the student in understanding what a corporate governance problem is, how it can be discovered, how serious it is, and how it can be handled. Students should become familiar with the main theoretical insights and the empirical evidence concerning corporate governance issues.

Learning outcomes - Skills

A key learning outcome is to successfully use the theoretical and empirical insights gained during the course to reduce the value drain caused by weak governance. It is important to predict and prevent potential issues that can affect the firm, its owners and other economic agents. Understanding the mechanisms that generate welfare gains or losses and value transfers between economic agents can be useful in the valuation of companies and projects. 

 The course also aims to enhance students' ability to analyze complex problems and to organize information efficiently in real-life situations. 

Learning Outcome - Reflection

An important goal is to help students reflect on the financial and ethical implications of decisions made by firm insiders and outsiders. Those decisions can affect both individual wealth and social welfare.

Course content
  1. The corporate governance problem: What is it, where does it come from and how serious is it? How do firms convey information to outsiders - and why do we still have asymmetric information issues in spite of that? What is the link between corporate governance and corporate finance?
  2. Endogeneity issues in the study of corporate governance issues. How do we measure the effect of corporate governance - and how do we make sure the relationship is causal?
  3. Ownership structure: Does it matter if owners are small or large, whether they are individuals or institutions, and whether they are long-term or short-term? Why are large owners both a problem and a blessing for small owners and vice versa? Can firms survive without owners? How does the ownership structure interact with the firm's Corporate Social Responsibility (CSR)?
  4. The market for corporate control: : Do takeover threats reduce the corporate governance problem? Do mergers reduce agency costs, or are they just driven by them?
  5. Fund activism: Do private equity funds, mutual funds, hedge funds, and pension funds influence the governance of the firms they invest in, or are they too small and incompetent to matter?
  6. Board composition: Should boards be large or small, dominated by owners or managers, homogenous or heterogenous?
  7. Compensation: How does fixed pay vs. performance pay influence the corporate governance problem? Are CEOs paid excessively?
  8. Owners and creditors: How can owners hurt the creditors’ best interests? What will creditors do to prevent this from happening? Who pays for this agency problem?
  9. Shareholders vs. stakeholders: Should the company focus narrowly on "shareholder value" or should other stakeholders also be explicitly considered? How important are corporate social responsibility and socially responsible investing?
  10. Private firms: How does the nature of the corporate governance problem differ between public (listed) and private (nonlisted) firms? Why do firms choose to stay private rather than go public?
  11. Family firms: What is the major governance problem for firms controlled by a family?
  12. Regulation: Should politicians interfere with corporate governance? For instance, does it make sense to have the Norwegian system of mandating at least 40% of each gender in the boardroom, and to ensure that 1/3 of the directors are employees? Why have more than 50 stock exchanges around the world issued recommendations for how to execute corporate governance?
Learning process and requirements to students

The instruction consists primarily of discussions of the readings assigned to the topics listed above. Each topic is assigned chapters from the textbook, theoretical and empirical articles, as well as real-life cases and examples. Exercises based on articles are associated with several topics. Students are expected to have read the material before each class meeting.

Please note that while attendance is not compulsory in all courses, it is the student’s own responsibility to obtain any information provided in class that is not included on the course homepage/It's learning or text book.

This is a course with continuous assessment (several exam components) and one final exam code. Each exam component is graded by using points on a scale from 0-100. The components will be weighted together according to the information in the course description in order to calculate the final letter grade for the examination code (course). Students who fail to participate in one/some/all exam elements will get a lower grade or may fail the course. You will find detailed information about the point system and the cut off points with reference to the letter grades when the course start.

At resit, all exam components must, as a main rule, be retaken during next scheduled course.

Software tools
No specified computer-based tools are required.
Additional information

Honour Code

Academic honesty and trust are important to all of us as individuals, and represent values that are encouraged and promoted by the honour code system. This is a most significant university tradition. Students are responsible for familiarizing themselves with the ideals of the honour code system, to which the faculty are also deeply committed. The expected behaviour and honour code is outlined here.

Any violation of the honour code will be dealt with in accordance with BI’s procedures for cheating. These issues are a serious matter to everyone associated with the programs at BI and are at the heart of the honour code and academic integrity. If you have any questions about your responsibilities under the honour code, please ask.

Qualifications

All courses in the Masters programme will assume that students have fulfilled the admission requirements for the programme. In addition, courses in second, third and/or fourth semester can have specific prerequisites and will assume that students have followed normal study progression. For double degree and exchange students, please note that equivalent courses are accepted.

Exam categoryWeightInvigilationDurationSupport materialsGroupingComment exam
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65421
Grading scale:
Point scale
Grading rules:
Internal examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
20No 1 Semester(s)Group/Individual ( 1 - 4) Group write-ups based on given topics
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65421
Grading scale:
Point scale
Grading rules:
Internal examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
20Yes2 Hour(s)
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Individual Mid-term written examination under supervision.
Exam category:
Submission
Form of assessment:
Written submission
Exam code:
GRA65421
Grading scale:
Point scale
Grading rules:
Internal and external examiner
Resit:
All components must, as a main rule, be retaken during next scheduled course
60Yes3 Hour(s)
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Individual Final written examination under supervision.
Exams:
Exam category:Submission
Form of assessment:Written submission
Weight:20
Invigilation:No
Grouping (size):Group/Individual (1-4)
Support materials:
Duration: 1 Semester(s)
Comment: Group write-ups based on given topics
Exam code:GRA65421
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam category:Submission
Form of assessment:Written submission
Weight:20
Invigilation:Yes
Grouping (size):Individual
Support materials:
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Duration:2 Hour(s)
Comment:Mid-term written examination under supervision.
Exam code:GRA65421
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam category:Submission
Form of assessment:Written submission
Weight:60
Invigilation:Yes
Grouping (size):Individual
Support materials:
  • BI-approved exam calculator
  • Simple calculator
  • Bilingual dictionary
Duration:3 Hour(s)
Comment:Final written examination under supervision.
Exam code:GRA65421
Grading scale:Point scale
Resit:All components must, as a main rule, be retaken during next scheduled course
Exam organisation: 
Continuous assessment
Grading scale: 
ECTS
Total weight: 
100
Talis literature

Obligatorisk/Compulsory

Book
Authors/Editors År Tittel Edition Publisher StudentNote
Goergen, Marc cop. 2018 Corporate governance: a global perspective Cengage
Document
Authors/Editors År Tittel Edition Publisher StudentNote
During the course there may be hand-outs and other material on additional topics relevant for the course and the examination.
Collection of articles A list of compulsory readings will be provided on It's learning or in class.