Corporate finance is the study of firm’s financing decisions and the interaction of these decisions with their investments. But corporate finance does not exist in a vacuum. The financial activities of corporations interact with financial markets, banks, and households. Stock markets trade paper issued by corporations. The state of the general economy and monetary policy affect corporations and their financial decisions.
The question as to how much capital banks should hold relate to the corporate finance topic of optimal capital structure. We therefore have a research agenda that goes beyond what happens inside corporations. We also seek to enhance our understanding of financial markets and banking and, ultimately, to understand the functioning of corporations and the valuation of real projects and corporate securities within the broader context of financial markets, intermediation, and institutions.
Exemplary project: Money and Liquidity in Financial Markets (K. Nyborg, P. Östberg)
We argue that fluctuations in stock prices and order flow are linked to conditions in the interbank market for liquidity. Tightness in the interbank market leads banks to engage in what we term “liquidity pull-back”, which involves selling financial assets either by banks directly or by levered investors. Empirical tests on the stock market are supportive: Tighter interbank markets, as measured by the Libor-OIS spread, are associated with relatively more volume in more liquid stocks, selling pressure, especially in more liquid stocks, and negative returns that reverse within three days. We control for market-wide uncertainty and in the process also contribute to the literature on portfolio rebalancing.
Our general point is that money matters in financial markets. From a practical perspective, our results suggest that investors can potentially benefit from timing trades in accordance with fluctuations in interbank conditions and that corporations may benefit from monitoring interbank conditions when considering issuing or buying back securities.
Selected research projects
- Moral Hazard in Mutual Fund Management: The Quality Assuring Role of Fees (M. Habib, B. Johnsen)
- A Formal Model of Sovereign Debt Sustainability for Advanced Economies (F. Collard, M. Habib, J.-C. Rochet)
- Stock Liquidity and Corporate Cash Holdings (K. Nyborg, Z. Wang)
- Money and Liquidity in Financial Markets (K. Nyborg, P. Östberg)
- Evidence of Excess Comovement in US Mergers (P. Östberg, C. Wenk)
- Peer Effects at Work: The Common Stock Investments of Co-Workers (P. Östberg, H. Hvide)
- Managerial Incentives to Take Asset Risk (M. Chesney, J. Stromberg, A. Wagner)
- The Executive Turnover Risk Premium (A. Wagner, F. Peters)
- When and How Is Voluntary Disclosure Quality Reflected in Equity Prices? (A. Wagner, F. Eugster)
Connections to courses
Corporate Finance addresses students interested in finance who aim to work in, for example, investment banking, private equity, financial consultancy especially with respect to valuation and corporate restructurings, in finance functions within public or private firms, or as equity analysts. Corporate Finance has a strong presence in the Banking and Finance specialization at the Bachelor’s and Master’s levels. It is also taught to a lesser extent in the Quantitative Finance Master’s program and in the Management and Economics Master’s specialization. The following list provides examples of courses particularly related to our topic.
List of courses
More detailed information on each module can be found by copying the 8-digit code into the search field of the University’s course catalogue.
|Corporate Finance I and II||BOEC0228
|Intermediate Corporate Finance||BOEC0050|
|Betriebswirtschaftliche Steuerlehre I and II||BOEC0219
|Finance with Excel||BOEC0024|
|Advanced Corporate Finance I and II||MFOEC117
|Takeovers, Restructuring and Corporate Governance||MFOEC153|
|Mergers and Acquisitions||MAWWÜF6|
|Empirical Corporate Finance: Methodology and Applications||MFOEC171|
|International Tax Planning||MOEC0207|
|Seminar zur betriebswirtschaftlichen Steuerlehre||MOEC0112|
|Doctoral Colloquium in Corporate Finance||DOEC0254
|Empirical Corporate Finance||DOEC0040|
The PhD training is coordinated across Switzerland within the Swiss Finance Institute PhD program in Finance.
Faculty members involved
The following Faculty members research and/or teach in Corporate Finance.