CCLE027 Financial Models and Application to Corporate Law
The first part of the course introduces the economic concept of Capital Structure. The choice of debt and equity in a corporate environment has been discussed at length in economics starting with Miller and Modigliani. There are many problems with debt/equity ratios as a financial valuation tool. The courts have tried to address the complications arising from the interpretation of this important ratio. The difficulties with this valuation method will be discussed at length.
The second part of the course introduces the concept of risk as a component of valuation of different corporate instruments, such as equity and bonds and variants of such instruments. The economic models related to the term structure of interest rates are introduced and the evolution into various risk assessment methods for the different instruments are discussed individually. In addition, the choice of Capital Structure for a corporation is analysed giving weight to the effect on dividend choice and corporate dividend policy is evaluated. The theory of dividend will be analysed in great detail. The approach will be from a lawyer’s point of view, and the methodology actually used in courts will be discussed.
MSc Law and Finance programme only.