The aim of the course is to discuss how decision power is assigned inside the firm and how to handle the efficiency problems generated by the separation of ownership and control. Topics covered include optimal allocation of control rights, conflicts of interest between shareholders and debt-holders, conflicts of interest between shareholders and manager, concentrated versus dispersed ownership structures as a control mechanism, the design of managerial incentives, the use of M&A, leveraged buyouts and dividend policy as control mechanisms and the discussion of the stakeholders¿ society and Corporate Social Responsibility as alternatives to the prevailing shareholders¿ value maximization paradigm. These topics will be covered both at a theoretical and empirical level. The theory and empirical evidence will be covered in the lectures. But the exercises and the presentations of the cases and empirical papers are fundamental in order to grasp the practical applications of the theory.
After this course you should be able to:
-Understand the way in which formal control rights are allocated to the shareholders and debt-holders and why these formal rights are vulnerable to the exercise of real control rights by managers and other stakeholders.
-Comprehend how the interests of the shareholders differ from the interest of other stakeholders and how optimal investment and financial decisions may be distorted to suit some particular interest and how this in turn destroys firm value.
-Evaluate the alternative control mechanisms that can be used to prevent the value destruction caused by the conflicts of interest: choice of ownership structure, design of incentives for the managers, choice of financial structure, hostile takeovers, etc.
-Discover reasons behind the most recent alternative proposals of governance (the stakeholders society and CSR). Analyze the potential gains and costs associated to these alternative governance paradigms.
-Knowing the imoprtance of Ethics and Trust in the Investment Profession.
-Understanding the practical implications and applications of Standards of Professional Conduct of CFA Institute.