What you will study
The module consists of the following five units:
Unit 1 – Corporate governance
This unit provides you with an overview of corporate governance, including the meaning, significance, and fundamental principles underpinning it. A critical examination of current theories and practices of global corporate governance is also covered. You'll then be introduced to some key corporate governance issues like board diversity, board structure, executive compensation, and institutional investors. As a result of this, you'll understand how governance plays a pivotal role in addressing fraud and ethics issues and in determining corporate investments and financing decisions.
Unit 2 – Company valuation
This unit looks at company valuation in the context of investment. The unit outlines a number of ways of valuing companies, using the techniques from Financial markets and the financing of organisations (B815), and shows how different valuation techniques can be used in different contexts. Namely, the three main types of valuation approaches are discussed. The unit starts by looking at asset values, which use balance sheet data to estimate value. Market multiples, which use share prices to establish comparative benchmarks for value, are then illustrated. Finally, discounted cash flow valuation (DCF) techniques, which use forecast data to estimate present value, are considered.
Unit 3 – Financing decisions, pay-out policy and Islamic finance
The unit introduces you to the rich academic literature on the importance of capital structure and pay-out policy. Based on the material in Financial markets and the financing of organisations (B815), this unit increases your understanding of how capital raised by companies (e.g., via equity or debt) can influence their strategic directions. The unit begins by reviewing the various securities companies use to raise capital. The Modigliani-Miller theorem, which suggests that capital structure and dividend policy are not related to firm value, is then discussed. You'll then learn various “market imperfections” that make capital structure and pay-out policy relevant and how behavioural biases influence financing decisions. Finally, Islamic finance principles and trends are introduced.
Unit 4 – Mergers & acquisitions and corporate restructuring
The unit discusses mergers and acquisitions (M&As) waves in the past decades and their impact on financial decision-making and firm value. You will learn why firms engage in M&As and whether M&As actually benefit different stakeholders (including shareholders, debtholders and employees). Building on the earlier units on governance and financing policies, you will examine how M&As can act as a governance mechanism. Corporate restructuring methods, as well as their costs and benefits, are then discussed. You'll also learn that many firms operate in multiple lines of businesses and what the associated costs and benefits are.
Unit 5 – Ethics, fraud and governance
The final unit provides an overview of ethics. Ethical issues and dilemmas are identified, and the role that the code of ethics plays in an organization discussed. You'll be introduced to the meaning, impact, nature of fraud, as well as why it is committed. The focus will be on internal fraud as it is the most prevalent and costly form of fraud. The unit then discusses how corporate governance plays a key role in countering internal fraud by focusing on key corporate governance mechanisms, including ethical leadership, auditors and audit committees, and internal controls.
You will learn
By completing this module, you will be able to:
- examine various governance mechanisms to mitigate agency problems
- illustrate how standard setters influence corporate governance practices
- understand the limitation of the shareholder perspective and evaluate the stakeholder view's relevance to corporate governance
- understand the three main methods of company valuation – asset-based valuation, market multiples and discounted cash flow
- critically evaluate the strengths and weaknesses of each valuation technique
- identify the most appropriate valuation method based on the circumstances
- explain the link between capital structure, pay-out policy and company value
- examine the implications of behavioural biases for corporate financial policy
- understand the key principles and instruments of Islamic finance
- explain trends in mergers and acquisitions, evaluate the motives behind them and examine post-performance
- assess practical issues around corporate restructuring
- assess fraud risk and identify insider fraud types and methods
- understand the role of corporate governance and external auditors in countering fraud.