CORPORATE FINANCIAL POLICIES

“Corporate Financial Policies” is an elective course in the second-year program of the Second Level Degree in Economics and Finance. The goal of the course is to provide students with theories and methods to understand the principles that guide the financial function when raising money for the company activities.
The main educational goal is to make students understand that the value of a company depends on its ability to generate free cash flows to the firm and, consequently, returns proportioned to the company risk and adequate to all stakeholders’ expectations.
The course contents will be presented both on a theoretical and practical basis, allowing students to develop the quantitative skills necessary to cope with the main financing decisions. Accordingly, exercises and real cases will be presented and solved in class.
More specifically, the course analyses the policies designed to distribute among the different classes of lenders the cash flows available for the company in terms of: 1) mix of liabilities (equity vs debt), 2) contractual arrangements for funding (minimization of agency costs), 3) term structure of liabilities (time diversification). Specific insights are focused on the dividend policy and the equity management for both listed and not listed companies.

The participation to the activities proposed for the course (frontal classes, exercises and real cases) and the personal workload will allow students to:
1. Knowledge and understanding
• understand the key mechanisms underlying the company financial choices, the decisions on how to remunerate the capital lenders and the risk management policies
2. Applying knowledge and understanding
• be able to evaluate the different financing alternatives available fot the company, in order to maximize the company market value
• be able to identify the remuneration policies for the capital providers
• be able to identify the best risk management solutions
3. Judgmental capabilities
• evaluate the sustainability of the capital structure and the possible decisions to bring it to the desired levels
• assess the appropriateness and costs of the possible risk management solutions
4. Communication abilities
The course will allow students to enhance their communication abilities through the knowledge of the technical language in the corporate finance field.
5. Learning abilities
The course will increase the students’ ability to integrate the study of the book with practical exercises and real cases. The aim is to show how theoretical models reconcile with real life and real corporate decisions.

Students are expected to have achieved the learning objectives and to have passed (propaedeutic subjects) the exam of "Economia Aziendale 1 & 2". In particular, students should be familiar with balance sheet and income statement and their reclassification schemes. Moreover, students should know mathematical concepts like “present/future value”, the rules of interest compounding and statistical concepts like mean, variance and standard deviation and the characterization of the normal distribution.

Lectures are conducted on the basis of the following weekly topics:
1. Company value and debt relationship
2. The drivers of the corporate debt value & the policies to fix the optimal maturity of corporate debts
3. The equity raising policies
4. The dividend policy
5. The Finance of Capital and the Finance of Risk (derivatives institutions)

WATSON D.; HEAD A.; MANTOVANI G.M.; ROSSI E., Corporate Finance. Principles and Practices in Europe. Pearson, 2016/2017. (epub in English language)

Additional readings:
Other readings will be communicated during the course.

The exam is a written and lasts 60 minutes.
The exam consists of 3 parts: 1 exercise, 10 multiple choice questions and 1 open question.

The course is mainly based on frontal lectures. All the materials discusses in class will be available on the Moodle platform.
The course consists of 6 hours per week, meaning 30 hours for the whole course. Each topic will be covered within 3 lectures: a theoretical one, an empirical one and finally, the last one will be an application (case study or tutorial). Lectures focusing on empirical evidence could require specific references to be read in advance.

Italian

written