final web presentation

8/8/2019 Final Web Presentation

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Rethinking MBA Curriculum in the Finance Discipline

Supported by the Alfred P. Sloan Foundation

Presented by: John R. Becker-Blease, Ph.D.Assistant Professor Finance

Washington State University, Vancouver

Moderated by

Maureen Scully, Professor of Management, University of Massachusetts,Boston and Consultant to the Aspen Institute CGA Project,

The Aspen Institute CorporateGovernance and Accountability Project:


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Incorporating Stakeholders into theCorporate Finance Curriculum


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Goals of WSUVsStakeholder-Engagement Model

Stakeholder-focused leadership requires:

Understanding the vital interdependence betweenbusinesses and critical stakeholders such as employees,investors, customers, suppliers, and public constituencies

Adopting an executive level perspective in making decisionsand taking actions that build strong long-term relationships

with stakeholders

And applying theory to solve practical problems.


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WSU MBA Curriculum

Mktg 565 Managing for Long-Term Performance

Acct 533 Administrative Control and Managerial Accounting

MgtOp 590 Strategy Formulation and Organizational Design

MgtOp 591 Statistical Analysis for Business Decisions MIS 580 Information Systems Management

FIN 526 Problems in Financial Management

MgtOp 593 Managerial Leadership and Productivity

Mktg 506 Marketing Management and Administrative Policy

MgtOp 589 Managing Value-Chain Partnerships

MgtOp 585 Negotiations

MgtOp 587 Business Ethics

MgtOp 702 Final Oral Exam


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Financial Intermediation ResearchSociety

Teaching business ethics, always something of anembarrassment, may simply come to be teaching

Finance well!

Teaching Finance correctly integrates ethics intothe business curriculum naturally, without self-

consciousness or embarrassment

- Stuart Greenbaum Corporate Governance and theReinvention of Finance


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Objective Function

We cannot maximize the long-term marketvalue of an organization if we ignore or

mistreat any important constituency

- Michael Jensen Value Maximization, Stakeholder Theory,and the Corporate Objective Function


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Course Modules

Module 1: Review

Module 2: Goal of the Corporation

Module 3: Valuation Module 4: Capital Structure

Module 5: Agency Theory & Governance

Module 6: Payout Policy

Module 7: M&A and Corporate Structure


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Teachable Questions

I. Under what conditions is short-term stockperformance the equivalent to maximizingshareholder value?

II. Who are shareholders and what are theirinterests?

III. How can markets perform efficiently ifinformation is intentionally distorted?

IV. What role should businesses play in determininggovernments protection of the commons?


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Module Contents

Learning Goals

Required and Optional Readings

Additional Materials

Pedagogical Purpose & Notes

Additional Talking Points

References


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Module 1: Review

Learning Goals Review basic concepts of time value, project and firm valuation,

capital budgeting, risk-reward, market efficiency.

Review market structures, short and long-term equilibrium,competition, normal and excess profit, barriers to entry,monopolies and monopsonies.

Readings

BMA CHs 1-12. (review of intro finance course)

Goodwin, Neva. The limitations of markets: background essay.

Graham and Harvey (2001) The theory and practice of corporatefinance: evidence from the field (particularly pages 187-209).


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Module 2: Goal of the Corporation

Learning Goals

Describe shareholder/stakeholder models

Describe perfect market assumptions

Long-term vs. Short-term view of the firm.

Legal framework for managerial decision making.

Readings

Winkler, Adam, Corporate laws or the law of business?: Stakeholders and corporategovernance at the end of history .

Stout, Lynn, 2002, Bad and not-so-bad arguments for stakeholder primacy .

Clement (2005). The lessons from stakeholder theory for U.S. business leaders

Barry, Norman, 2002. The stakeholder concept of corporate control is illogical and

impractical. Jensen, Michael, Value Maximization, Stakeholder Theory, and the Corporate

Objective Function.

Bird, Ron, A.D. Hall, F. Momente, and F. Reggiani What corporate social

responsibility activities are valued by the market?


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Module 3: Valuation

Learning Goals

Cover assumptions of adjusted weighted average cost of capital

Introduce APV

Internalization of externalities.

Overview of financial options including binomial and Black-Scholesvaluation techniques.

Fundamentals of Real Option Valuation

RequiredReadings

BMA CH 19-22.

Luehrman, Timothy A., Using APV: A better tool for valuing operations.

Luehrman, Timothy A., Investment Opportunities as real options: gettingstarted with the numbers.

Luehrman, Timothy A., Strategy as a portfolio of real options


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Module 4: Capital Structure

Learning Goals

Understand how the choice of capital structure can affect the value of assets.

Begin to identify the pervasive nature of information asymmetries and their impact ondecision-making.

Trade-Off and Pecking Order theories of capital structure

Identify how choice of capital structure can affect various stakeholders and these

stakeholders response.

Readings

BMA Chs 17-18.

Graham and Harvey (2001) The theory and practice of corporate finance: evidenceform the field (pages 209-243).

Wruck (1990) Financial distress, reorganization, and organizational efficiency .

Patrick, Steven C. Three pieces to the capital structure puzzle: The cases of AlcoStandard, Comdisco, and Revco.

Bronars, S. and D. Deere, 1991. The threat of unionization, the use of debt, and thepreservation of shareholder wealth

Noronha and Singal (2004) Financial Health and Airline Safety


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Module 5: Agency & Governance

Learning Goals

Understanding the nature of a principal-agent conflict and identify the various conflictsthat exist among the stakeholder of a firm.

Understand the role of contracting and monitoring in addressing the agency issue and

the challenges that exist for efficient contracting.

Readings

BMA Ch 12.

Jensen (1986), Agency costs of free cash flow, corporate finance, and takeovers.

Brewer, Chandra, and Hock (1999) Economic Value Added (EVA): Its uses andlimitations

Hall (2003), Six challenges in designing equity-based pay .

Jensen (2003) Paying people to lie: the truth about the budgeting process.

Bryne, John The best and worst boardsBusinessweek Dec, 1997.

McCafferty, Joseph 2008 Building an exceptional boardBusinessWeek 4-17-2008.

Stout, Lynn. 2007. The mythical benefits of shareholder control


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Module 6: Payout Policy

Learning Goals

Payout Policy relevance and irrelevance

Readings

BMA: CH 16.

Brav, Graham, Harvey, and Michaely (2005) Payout policy

in the 21st century .


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Module 7: M&A and CorporateControl

Learning Goals Description of the various forms of restructuring and the importance of the market for

corporate control. Coverage of traditional economic rationales for M&As, both compelling and not so

compelling. Understand the motivations for corporate diversification and the nature of the

evidence surrounding this issue. Understand the term managerial entrenchment, how this is accomplished, and good

and bad economic rationales for entrenchment.

Readings BMA Ch 32-34. Holmstrom and Kaplan (2001) Corporate governance and merger activity in the

United States: Making sense of the 1980s and 1990s.

Jensen (1986), Agency costs of free cash flow, corporate finance, and takeovers

Fee and Thomas (2004) Sources of gains in horizontal mergers: evidence fromcustomer, supplier, and rival firms.

Strine (2002), The social responsibility of boards of directors and stockholders inchange of control transactions: is there any there there?.

Harford (2003) Takeover bids and target directors incentives: the impact of a bid ondirectors wealth and board seats.

Gompers, Ishii, and Metrick (2003) Corporate governance and equity prices


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Q & A


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Concluding Remarks

[email protected]

Financial Education Association

Sept 18-20th, 2008 (Hilton Head, SC)

Financial Management Association

Oct 8th-11th, 2008 (Dallas, TX)

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