Prof. Thomas Chemmanur
Office: Fulton 440
Phone: (617) 552 3980
Course Objective: The
objective of this course is to introduce Ph.D students to current research
issues and tools in corporate finance and financial intermediation, which will
be of interest in their dissertation research (thus, in some sense, the course
can also be called, “dissertation topics in corporate finance:” many papers
that will be discussed are papers from the current or previous year’s academic
job market). The course will be based primarily on research papers from
theoretical and empirical corporate finance, theoretical and empirical financial
intermediation, and advanced game theory. There are also papers in the current year in areas related to
information economics and asset pricing; and also areas at the interface of
corporate finance and accounting research. The students who can benefit the most
from this course are those who plan to write their dissertations in corporate
finance, financial institutions (and intermediation), and in related areas in
finance and economics (e.g., industrial organization, applied game theory,
privatization). However, students
planning to write their dissertations in other areas (e.g., market
microstructure, asset pricing, or accounting) may also benefit from the course.
Normally I expect students to have already taken MF891: Ph.D seminar
in Corporate Finance (or have equivalent knowledge), and an introductory
doctoral-level course in game theory (or have equivalent knowledge). This year,
however, I only want students to be taking MF891 concurrently (or in the past). For
game theory, there have been numerous excellent and easily accessible textbooks
written in the last four or five years. I will mention only three of these
1. Eric Rasmusen, Games and Information: An introduction to game theory,
Basil Blackell. (A basic book)
2. Gibbons, R., Game Theory for Applied Economists, Princeton University
Press, Princeton, New Jersey (intermediate level).
3. Fudenberg, D., and J. Tirole, Game Theory, M.I.T Press, Cambridge
Massachusetts. (Fairly advanced)
Course materials: Most of the classes will be based on academic papers. I plan to make
these available to you as we go along. Papers have been included in this seminar
for several reasons. Most are recent; all are provocative; and some are
substantial contributions to the literature. Many of the papers are recent job
market papers, which should prove particularly instructive to students.
Unfortunately, the limited time available precludes including all the
interesting papers on each topic. However, the papers that are included should
provide students with an entry into each research topic, which they can follow
up on if they are interested in doing research in that area.
Requirements: Since the objective of this course is to read and understand recent work
in Corporate Finance (theory and empirical) participants (both presenters and
non-presenters) are expected to spend adequate time giving careful attention to
the assigned readings before coming to class. Other than papers on which I
choose to lecture, each paper will be presented by one participant nominated in
advance for this purpose. All participants will have to take responsibility for
one or two lectures each, depending on the size of the class. A critique of the
paper(s) being presented by each presenter has to be turned in by two previous
selected non-presenters on the day of the paper presentation, prior to the
presentation (if one student presents two papers, I require only one critique to
be handed in, but covering both papers presented). This will work out to about
five or six critiques for each participant in the seminar to hand in.
Format: Each presentation must adhere strictly to the following format (1)
Statement of the problem studied; (2) Brief survey of the literature; (3)
Concise, intuitive, explanation of the argument producing the major results (for
theory papers) or empirical methodology; (4) Summary of main results;
(5) Critical examination of the paper;
(6) Sketch of major extensions to the paper with specific suggestions
about possible solution techniques (for theory) or empirical methodology/data
for these extensions (students who can effectively accomplish the last point will get extra
credit). Most important, each
presentation must be both informative and entertaining.
Critique Format: Critiques must be between three to six pages in length (depending on the
paper). The format of the critiques should be roughly along the following lines:
(1) Statement of the problem studied; (2) Brief survey of the literature; (3)
Concise, intuitive explanation of the argument producing the major results (for
theory papers) or empirical methodology; (4) Summary of results; (5) Critical
examination of the paper.
and Grading: The course grade is
determined as follows:
a. Class presentations: 40%
b. Critiques of papers: 40%
c. Class Participation: 20%
Office Hours: For brief discussions, you
can meet with me right after class (Wednesday: 5:00 to 6:00 P.M.). Longer
office hours can be scheduled by appointment (send me e-mail if you wish to make
an appointment or wish to contact me for any other reason; I prefer e-mail to
The main papers that will be used in the discussion of each topic are
Topic One: (Jan
18 and Jan 25) IPOs, the Going
Public Decision, and Investment Banking. (Two Classes)
Chemmanur, T., S. He, and D. Nandy, 2005, “The Going Public Decision
and the Product Market”, Working Paper, Boston College.
Chemmanur, T., and P. Fulghieri, 1999, “A Theory of the Going Public
Decision”, Review of Financial Studies, 12, 249-279.
Pichler, P., and W. William., 2001, “A Theory of the Syndicate: Form
Follows Function”. Journal of Finance 56, 2237-64.
Hoberg, G., 2005, “Strategic Underwriting in Initial Public Offers”,
Working Paper, University of Maryland.
Hoberg, G., 2005, “Competitive Underwriting in Initial Public
Offers”, Working Paper, University of Maryland.
Katrina E., R. Michaely, and M. O’Hara, 2005, “Competition in
Investment Banking: Proactive, Reactive, or Retaliatory?”, Working paper,
Topic Two: (Feb
1) IPOs Versus
Acquisitions (One Class)
Chemmanur, T., and O. Bayar, 2005, “IPOs or Acquisitions? A Theory of
the Choice of Exit Strategy by Entrepreneurs and Venture Capitalists”, Working
Paper, Boston College.
Officer, M., 2005, “The Price of Corporate Liquidity: Acquisition
Discounts for Unlisted Targets.”, Working Paper, University of Southern
Officer, M., A. Poulsen, and M. Stegemoller, 2005, “Information
Asymmetry and Acquirer Returns”, Working paper, University of Southern
Topic Three: (Feb
8 and Feb 15) Entrepreneurial Finance, Venture Capital, and the Management
of Innovation (Two Classes)
Lerner, J. and A. Scholar, 2002, “The Liquidity Puzzle: Theory and
Evidence From Private Equity”, Working Paper, NBER
Kaplan, S., P. Stromberg, and B. Sensoy, 2005, “What are Firms?
Evolution from Birth to Public Companies”, Working Paper, University of
Bemgtsson, O., 2005, "A Study of Repeated Relationships between Venture Capitalists and Entrepreneurs" University of Chicago (Job Market Paper)
Subramanian, K., 2005, “Access, Ownership, Independent Venture Capital,
Strategic Venture Capital and Internal Capital Markets”, Working Paper,
University of Chicago.
Gromb, D., and D. Scharfstein, 2003, “Entrepreneurship in
Equilibrium”, Working Paper, Harvard Business School.
Aghion, P., M. Dewatripont, and J. Stein, 2005, “Academic Freedom, Private-Sector Focus, and the Process of Innovation”, Working Paper, Harvard Business School.
Topic Four: (Feb
22 and Mar 1) Spin-offs and
Carve-outs, Internal Capital Markets, and the Diversification Discount (Two
Chemmanur, T., and D. Nandy, 2005, “How is Value Created in Spin-offs?
A look Inside the Black Box,” Working Paper, Boston College.
Chemmanur, T., and A. Yan, 2004, “A Theory of Corporate Spin-offs”,
Journal of Financial Economics.
Habib, M., B. Johnson, and N. Naik, 1997, “Spin-offs and
Information”, Journal of Financial Intermediation 6, 153-176.
Nanda, V., 1991, “On the
Good News in Equity Carve-outs”, Journal of Finance 46, 1717-1737.
Nanda, V. and M.P. Narayanan, 1999, “Disentangling Value: Financing
Needs, Firm Scope, and Divestitures”, Journal of Financial Intermediation 8,
Xuan, Y., 2005, "Empire-Building or Bridge-Building? Evidence from New CEOs' Internal Capital Allocation Decisions," Harvard University, (Job Market Paper)
Dittmar, A., 2004, "Capital Structure in Corporate Spin-offs," Journal of Business 77.
Topic Five: (March
Disclosure (One Class)
Chemmanur, T., and P. Fulghieri, 2005, “Optimal Disclosure and
Litigation Rules Around New Equity Issues”, Working Paper, Boston College.
Fisher, P., and R. Verrecchia., 2000 “Reporting Bias”, The Accounting
Review, 75, 229-245
Fisher, P., and P. Stocken, 2001 “Imperfect Information and Credible
Communication”, Journal of Accounting Research, 39, 119-134.
Immodiano, G., and I. Pagano, 2005, “Optimal Regulation of Auditing”,
Seasoned Equity Offerings and Institutional Trading (One Class)
T., and Y. Jiao, 2005, “Information Production, the SEO Discount, and
Underpricing: A Model of Seasoned Equity Offerings”, Working Paper, Boston
Chemmanur, T., S. He, and G. Hu, 2005, "The Role of Institutional Investors in Seasoned Equity Offerings," Working Paper, Boston College.
B., and V. Nanda, 1993, “Trading and Manipulation Around Seasoned Equity
Offerings”, Journal of Finance 48, 213-245.
Altinkilic, O, and R. hansen, 2003, "Discounting and Underpricing in Seasoned Equity Offers," Journal of Financial Ecnomics 69.
Liu, Y, and P. Malatesta, 2005, "Credit Ratings and the Pricing of Seasoned Equity Offers," Working Paper, University of Washington.
Topic Seven: (Mar
29 and Apr 5) Interaction Between Corporate Finance and Asset Pricing (Two Classes)
R., and N. Wang, 2004, “An Agency Based Asset Pricing Model”, Working Paper,
J., G. Gorton, and A. Krishnamurthy, 2004, “Equilibrium Investment and Asset
Prices under Imperfect Corporate Control”, Forthcoming, American Economic
M., and V. Nair, 2004, “Governance Mechanisms and Equity Prices”,
Forthcoming, Journal of Finance.
P., J. Ishii, and A. Metrick, 2003, “Corporate Governance and Equity
Prices”, Quarterly Journal of Economics 118, 107-155.
S., and L. Veldkamp, 2005, “Information Acquisition and Portfolio
Under-Diversification”, Working Paper, New York University.
Stock Repurchases (One Class)
Bulan, L., N, Subramanian, and L, Tanlu., 2005, "When are Dividend Omissions Good News?", Working Paper, Brandies University. (Guest Speaker, Laarni Bulan of Brandies University will be presenting)
Oded, J., 2005 “Why do Firms Announce Open-Market Repurchase
Programs?”, Review of Financial Studies, 18. 271-300.
Chowdhry, B., and V. Nanda, 1994, “Repurchase Premia As a Reason for
Dividends: A Dynamic Model of Corporate Payout Policies”, Review of Financial
Studies, 7, 321-350.
26) Topics in Banking (One class)
T., and P. Fulghieri, 1994, “Reputation, Renegotiation, and the Choice between
Bank Loans and Publicly Traded Debt”, Review of Financial Studies.
T., and P. Fulghieri, 1994
“Investment Bank Reputation, Information Production, and Financial
Intermediation,” Journal of Finance.
Carola, 2004, “The Effect of Bankign Relationships on the Firm’s IPO
Underpricing,” Journal of Finance 59, 2903-2958
and Puri, 2005, “On the Benefits of Concurrent Lending and Underwriting,”
Working Paper, Duke University and Columbia University.