Financial Strategy (2215.YR.003405.2)

General information

Type:	OBL	Curs:	3	Period:	S semester
ECTS Credits:	4 ECTS

Teaching Staff:

Group	Teacher	Department	Language
Year 3	Carmen Ansotegui Olcoz	Economía, Finanzas y Contabilidad	CAT, ESP

Core and compulsory courses: Accounting and Financial Analysis, Foundations of Financial Markets, Micro and Macro Economics and Corporate Finance.

Analysis and appraisal tools used in Financial Mathematics and Analysis courses and their application to corporate finance evaluation models: IRR, DCF and multipliers.

In-class sessions: 30%
Independent study: 50%
Preparing case studies/practical exercises: 20%

Case study preparation
Unidentified industries.
Jet Blue IPO
Blaine Kitchenware Inc.
Facebook IPO
Prada IPO
Apple

Numerical exercise solutions
Exam

This course aims to frame corporate financial decisions and dividend policies as part of companies' global strategies, market conditions and types of stakeholders. Examining business reality is easier when using publicly-listed companies. Based on the Modigliani and Miller paradigm, this course introduces the concepts and situations which can harm market efficiency: asymmetric information, conflicts of interest and irrational economic agents. With these distortions, prices are not the result of objective valuations. In previous finance courses, students studied basic financial instruments: accounting, analysis, investment selection, financial planning, financial and corporate and financial instrument appraisal models, etc. We will use these instruments to analyse decision-making within firms.

We begin with the assumption that corporate financial decisions are closely linked to the type of business. On the other hand, the varying interests of the different agents involved in the companies and the general economic conditions are also important. Within this framework, the subject will focus on long-term financial decisions: capital structure, dividend policy, going public, M&As and start-ups. As part of these long-term decisions, we will study the dynamics between companies and financial markets and how asymmetric information and conflicts of interest condition the possibilities of surviving and creating value.

The economic-financial setting also conditions companies¿ possibilities and determines the relative importance of the different economic agents and institutions. In this course we will study to what extent various investor groups (private equity firms, venture capital firms, hedge funds, etc.) can influence the economic setting and the financial decisions of the companies in which they participate.

The objective of the Financing Strategy course is for students to acquire a global and comprehensive view of finance, specifically in terms of corporate strategy and the economic setting. Analysing financial operations requires participants to integrate the knowledge acquired in numerous programme courses: finance, accounting and analysis, markets and corporate finance.

We will study the implications that business structure and organic and inorganic growth have on a company's finances. We will also analyse market operations: buy-backs, dividends, stock increases, going public, etc. The results of these operations depend on technical factors, the relative position of the interveneing parties and their respective and often conflicting interests. Similarly, we cannot forget that companies make decisions within a given institutional framework and economic setting. Using case studies to analyse corporate operations allows us to see financial decisions within the specific corporate and economic context and understand the players involved.

6. Strategic thought, systematic thought

2. Application of knowledge to achieve results

3. Taking decisions / making judgments

1. Knowledge acquisition, comprehension and structuring

1. Financial classification of economic activities Balance sheets and profit and loss accounts according to the business. Representation of the balance sheet in terms of the total net investment and capital used. Analytical foundations: margins and turnover. ROE, operational and financial leverage.

2. Valuation using multiples Valuation using multiples: selecting comparables, determining the multiple that best suits the valuation objective, the valuation range and instance. Application to a specific case and practical exercises.

3. Going public. Capital increases and buy-backs Changes in companies¿ financial structure occur with capital increases or, alternatively, by paying dividends or buying back shares. We will analyse the reasons why companies decide to go public, the importance of this process and alternatives to the traditional process of using an investment bank as an underwriter. Buying back shares has frequently been used in the market. We¿ll see throughout the course why companies might opt for this. We will also study how this process works and compare it to paying extraordinary dividends.

4. Institutional investors Key institutional investors, their investment objectives and strategies. The investors¿ different objectives are going to influence company strategies. The different types of investors: investment funds, pension funds, insurance companies, private equity firms, venture capital firms, family offices, activist investors and hedge funds.

5. Capital structure implementation. From WACC to flexibility Capital structure policy and implementation. Share buy-back. Pros and cons of debt. "Pecking order". What do companies do?

6. Compensating shareholders Ordinary and extraordinary dividends. Share buy-back. Theories on giving out dividends: The irrelevance of clients.

The theoretical concepts are taught in class and complemented with numerical exercises and case studies. Students have to prepare the cases in order to complement the theoretical concepts.

ASSESSMENT BREAKDOWN

Short bibliography:
Berk, J.; De Marzo, P. Corporate Finance. Pearson, 2017. RECOMMENDED BOOK, AVAILABLE VIA THE CLASS WEBSITE.

Allen, Franklin; Myers, Stewart; Brealey, Richard. (2006). Principios de Finanzas Corporativas. 8th edition. Editorial
McGraw-Hill. ISBN: 8448146212 ISBN-13: 9788448146214

Ross, Stephen A.; Westerfield, Randolph W.; Jaffe, Jeffey. Finanzas corporativas. 7th edition. McGraw-Hill, 2005. ISBN: 9701046544 ISBN-13: 9789701046548

Group	Teacher	Department
Year 3	Carmen Ansotegui Olcoz	Economía, Finanzas y Contabilidad