ECO420 Corporate Governance

• Topics

  This is a course in the microeconomic theory of investment with asymmetric information; specifically, principal-agent models of the relationship between investors (shareholders or creditors) and corporate insiders (entrepreneurs or managers).

  Insiders may not act in the interest of investors (moral hazard) or may know more about the project than investors (adverse selection).

  The course textbook is The Theory of Corporate Finance by economics Nobel Prize winner Jean Tirole. We cover these topics from the book:

  • Outside financing capacity
  • Determinants of borrowing capacity
  • Corporate financing with adverse selection
  • Investor activism
  • Control rights
  • Takeovers

• Learning outcome

  After completing the course, students will be familiar with the main issues in current debates about corporate governance. They will be familiar with central theoretical and empirical approaches to understanding corporate governance. The course provides a solid background that will allow them to discuss and evaluate corporate governance issues in a professional context. 

  Knowledge

  After completing the course, students will:

  • Understand the features of the corporate governance framework within which all modern corporations operate, and why this framework is the way it is
  • Know the current debates in corporate governance
  • Know the main challenges in corporate governance 
  • Know the main mechanisms used to resolve corporate governance incentive problems 

  Skills

  After completing the course, students can:

  • Formulate ideas for how corporate governance questions can be studied with a theory model
  • Formulate ideas for how corporate governance questions can be studied with an empirical model
  • Interpret results from theoretical and empirical studies on corporate governance questions

  General competence

  After completing the course, students can:

  • Discuss issues in corporate governance with confidence, based on a broad knowledge of empirical and theoretical approaches as well as substantive issues
  • Understand why corporate financing takes the forms that it does
  • Identify subtle incentive problems, and possible remedies, in investor-manager relationships
  • Reflect in an informed and independent way about corporate governance, and more generally about the role of corporations in society

• Teaching

  Teaching

  Lectures and student activities (problem sets, discussion). Lectures on technical material will be streamed and recorded. 

• Recommended prerequisites

  The course assumes some basic skills in using and interpreting formal economic models. Knowledge corresponding to ECO400 or ECO401 is useful, but not at all necessary.

• Credit reduction due to overlap

  None.

• Compulsory Activity

  None.

• Assessment

  3 hour written individual school exam on paper (in English).

• Grading Scale

  A - F.

• Computer tools

  None.

• Literature

  Textbook:

  Tirole: The Theory of Corporate Finance, Princeton University Press, 2006

  Excerpts will be provided on Leganto so you do not need to buy the book.

   

  Articles.

• Permitted Support Material

  One bilingual dictionary (Category I)

  Calculator

  All in accordance with Supplementary provisions to the Regulations for Full-time Study Programmes at the Norwegian School of Economics Ch.4 Permitted support materialhttps://www.nhh.no/en/for-students/regulations/https://www.nhh.no/en/for-students/regulations/and https://www.nhh.no/en/for-students/examinations/examination-support-materials/https://www.nhh.no/en/for-students/examinations/examination-support-materials/