Autumn semester 2026

Credits
5 ECTS

Teaching method
Classroom instruction + student presentations.
2x2 lectures per week for 7 weeks (2nd half of the semester)

Language
English

Examination
Oral - 20 minutes 

Assessment
Pass/No pass, internal co-examination (re-exam oral)

Lecturer
Stefan Hirth

Course description
The first part of the course consists of lectures based on Tirole’s (2006) textbook and a number of core articles investigating the microeconomic foundations of Corporate Finance, as well as mostly theoretical research articles employing dynamic and continuous-time models. The second part of the course will be based on primarily empirical research articles employing the state-of-the-art empirical methods in Corporate Finance. The third part sheds light on recent developments and research avenues in Corporate Finance, which is intended to guide students towards ideas for their own research.

Students are provided with a firm understanding of modern Corporate Finance models and the empirical methods employed in current research; in particular the various empirical methods to deal with endogeneity in Corporate Finance.

Academic prerequisites
A background in Corporate Finance (Bachelor/Master) and Microeconomics (3410 Micro 1 (Bachelor) and 4425 Micro 2 (Master)) or a strong quantitative background (e.g., Math, Econ, Statistics) is recommended.

For PhD students at AU (ECON), this course has been pre-approved as an internal BSS PhD course equivalent to 5 ECTS.

Contents

1. The Theory of Corporate Finance.
   The Microeconomics of Corporate Finance.
   Dynamic and Continuous-Time Models in Corporate Finance.
2. Empirical Corporate Finance.
3. Recent developments and research avenues in Corporate Finance.

Potential topics include (but are not limited to):

1. The classical Modigliani-Miller propositions, capital structure theories, agency conflicts, signaling models, executive compensation, payout policy, contract theory.
   Dynamic and continuous-time models for capital structure, default timing, and real option exercise.
2. Econometric techniques aimed at addressing endogeneity problems such as: instrumental variables, difference-in-differences estimators, regression discontinuity design, and matching methods.
3. Cash holdings and financial flexibility, debt structure, executive compensation and incentives, behavioral Corporate Finance, Corporate Finance and product market competition, Corporate Finance and the information landscape, and feedback from financial markets.

Description of qualifications
After having completed the course, the students

• have a solid knowledge of the microeconomic foundations of Corporate Finance,
• have a solid knowledge of advanced Corporate Finance models, focusing on dynamic and continuous-time models,
• have an overall understanding of empirical methods applied in Corporate Finance,
• can implement relevant theoretical models and empirical methods – potentially using specific software such as Stata, Mathematica, Matlab, R, Python,
• know the state-of the art and recent developments of the field.

Regarding the student presentations, students learn how to

• critically engage with scientific literature,
• discuss results and relate them to existing findings,
• present in a clear and concise manner, as when they present their own research projects in seminars and conferences.

Overall, the learning objective of the course is that students become familiar with some unsolved puzzles in Corporate Finance, they will be able to formulate new research questions, and they are equipped with the toolkit to build their own theoretical models, analyze them and discuss the results. Moreover, they can derive empirical hypotheses and have an overall understanding of how they can bring their theoretical predictions to an empirical test.

Comments on the form of instruction
Lectures will be a mix between classical teaching by the lecturer and students presenting and analyzing part of the material.

Feedback

• Non-facilitated peer feedback
• Facilitated peer feedback (in response to other students’ presentations)
• Oral activities in class (short exercises etc.)
• Self-assessment (those who don’t present in a given week will be able to double-check their own solution with both the presenter’s and lecturer’s solution)
• Feedback on course work (in response to other students’ presentations)
• Group feedback (depending on number of students / weeks, students’ presentations can be organized in groups)
• Student presentation in class

Examination
The oral exam draws from all topics covered in the course.
The examination can include going through models and performing derivations on the board, as well as testing students’ ability to critique the identification strategy used in an empirical paper or sketch an empirical test designed to evaluate theoretical predictions.

Prerequisites for examination participation
Student presentation during the course based on one article assigned by the lecturer. In addition to the students being free to present in their own style, given the guidelines communicated by the lecturer, they will have to address specific questions related to the article provided by the lecturer. Each presentation must last at least 15 minutes.

Reexamination form
If the student fails the ordinary exam but has fulfilled the prerequisite for exam participation (student presentation during the course), then the reexamination form will be the same as for the ordinary exam.

If the student has not fulfilled the prerequisite for exam participation, then as a replacement, the lecturer will assign a new research article with accompanying questions at the latest one week before the oral exam date, which the student is supposed to present at the start of the oral exam. The overall oral exam time will then be extended to 30 minutes.

Literature
“The Theory of Corporate Finance” by Jean Tirole (Princeton University Press, 2006). Selected chapters.

“Endogeneity in Empirical Corporate Finance” by Michael R. Roberts and Toni M. Whited (2013) In Handbook of the Economics of Finance (Vol. 2, pp. 493-572). Elsevier. Available at https://doi.org/10.1016/B978-0-44-453594-8.00007-0 or SSRN https://ssrn.com/abstract=1748604

+ a number of core articles for each topic. These can include, but are not limited to:

Bakke and Whited, 2012, Threshold events and identification: A study of cash shortfalls, Journal of Finance

Becker, Cronqvist, and Fahlenbrach, 2010, Estimating the effects of large shareholders using a geographic instrument, Journal of Financial and Quantitative Analysis. Volume 46, Issue 4 August 2011 , pp. 907-942 

Boyle, Glenn W., and Graeme A. Guthrie: Investment, uncertainty, and liquidity (2003), Vol 58, No. 5, Journal of finance, 2143-2166

Goldstein, Robert, Nengjiu Ju, and Hayne Leland: An EBIT-based model of dynamic capital structure(2001), Vol 74, No. 4, Journal of Business, 483-512

Steven R. Grenadier, Andrey Malenko: Real Options Signaling Games with Applications to Corporate Finance, The Review of Financial Studies, Volume 24, Issue 12, December 2011, Pages 3993–4036

Leland, Hayne E.: Corporate debt value, bond covenants, and optimal capital structure (1994), Vol 49, No. 4, Journal of finance, 1213-1252

Myers, Stewart C.: Determinants of corporate borrowing (1977), Vol. 5, No. 2, Journal of financial economics, 147-175

Myers, Stewart C., and Nicholas Majluf, “Corporate Financing and Investment Decisions When Firms Have Information that Investors Do Not Have,” Journal of Financial Economics (June 1984), Vol. 13, No. 2, pp. 187-222.

Slides and lecture notes provided by the lecturer.

Registration
Registration for PhD course: Corporate Finance no later than 1 September 2026.

Contact 
Susanne Christensen, sch@econ.au.dk