Corporate Finance and Responsible Investing
Full course description
Today’s business environment is more complicated than ever. This is illustrated by the recent financial crisis and its aftermath and emerging topics like climate change and corporate social responsibility increasingly affecting corporate decision making. The field of corporate finance deals with the financing and investment decisions made by the management of companies in the pursuit of shareholder wealth maximization and dealing with the preferences of other stakeholders. This course gives a broad overview of important issues in corporate finance and combines insights from (behavioral) economics and sustainable finance. The economic side of corporate finance deals with the maximization of shareholder wealth. Managers aim at securing the greatest possible return in exchange for accepting the smallest amount of risk. For instance, a company can finance itself by borrowing money from banks, by issuing bonds or through issuing equity at the stock market. These types of decisions influence the expected return and risk of the company.
Traditional economics assumes that managers and investors are rational, self-interested people. However, there is a large body of evidence from social psychology and behavioral economics that people often act irrationally and behave pro-socially by taking the social impact of (investment) decisions into account. This course also shows how decision making biases managers and investors in their financial decisions and how social preferences of shareholders and stakeholders impact corporate social responsibility. Investors in both equity and debt claims of these companies have (heterogeneous) social preferences. Increasingly, large institutional asset owners such as public pension funds exert pressure on the management of companies with the purpose to increase the governance quality, and the environmental and social performance of their investments.
- You get a broad overview of the field of corporate finance and responsible investing.
- You will be able to better understand financial articles in newspapers like the Financial Times, the Wall Street Journal and the Economist.
- You will be able to apply your knowledge to understand basic financial information of the firm or institutions you will work for.
- You will deepen your financial knowledge by applying theoretical financial concepts to a chosen listed company throughout the course period.
Students should have taken one or more of the following three courses: SSC1027 Principles of economics, SSC2022 Accounting and accountability or SSC2036 / SSC1030 Introduction to Business Administration.
- Berk, J. and P. DeMarzo, Corporate Finance - Pearson International Edition, Latest Edition, Pearson Education, Inc.
- Edmans, A. (2021). Grow the pie: How great companies deliver both purpose and profit–updated and revised. Cambridge University Press.Scientific articles.