ISBR Business School

Bangalore
MBA/PGDM- Advanced Capital Structure Theories (304)
Batch 2017- 2019 , III Semester

Course Syllabus MBA / PGDM

Course DEGREE
No of modules 05
Learning Facilitator PROF. AMIT KANCHANBARAS
E-mail projects@isbr.in
Learning Facilitator office phone 9844280805
MBA/PGDM Mission Statement:
Our mission is to prepare enterprising leaders who are analytical, communicative, ethical and
alive to social responsibility, and, who, by discovering their own inner voice, are able to
celebrate diversity in a rapidly changing global environment.

Course Key Learning Goals /Objectives:

The Learning objective of this ‘Advanced Capital Structure Theories’ curriculum, is to
orient the students by providing them the necessary insight into the various financial
strategies and underling characteristics with specific focus to the Capital structure
using various models / approach practiced – M&M Theorems ; asymmetry in financial
markets.

Course Description /Objectives:

The course description has been done keeping the appended below objectives in mind,
from the students ‘understanding point of view.
a) The modules mentioned will give the students an insight and understanding of
Capital structure theories
b) The various elements that encompass the capital structure theories as adopted and
practiced by various business organizations – basis their respective business models and
rapid changing dynamic market scenarios
c) Leveraging the various case study methodologies ; financial theorems ; and classic
case studies will help in firming up the students’ understanding in a simplified manner
which otherwise is complexed
Course Design (and its relationship to course Learning Outcomes)
Module 1- Emperical perspective on Financial characteristics : Analysis of composite
cash flows, Leverage, Ownership structure, ROE, P/E ratio, Dividend payout , Divdend
yields and other financial characteristics of Sensex and Nifty firms
Module 2- Principal Agent Conflict and Financial Strategies: Introduction, Limited
liability and the separation of ownership and control, role of management with diffuse
ownership. Classic directive to management, extended stakeholders, Conflicts of interest,
Contracts and a revised directive.
Module 3- Information Asymmetry and the Markets for Corporate Securities:
Introduction, Theories of the effects of information asymmetry, Valuation of traded
equity under asymmetric information, Information asymmetry and the Quality of the
market for a firm’s equity, optimal ownership structure.
Module 4 - Leverage Decision: Introduction, Corporate and personal taxation, Modifying
MM propositions to account for corporate taxes, Traditional trade-off theory, Agency
theory and leverage decision, Asymmetric information and leverage, balancing agency
costs with information asymmetry
Module 5- The Firm’s Environment, Governance, strategy, operation and financial
structure- Firm’s business environment, operation structure, Financial structure, risk
performance and contingencies, empirical analyses of risk.

References: Capital Structure and Corporate Financing Decisions – theory, Evidence

and Practice – H. Kent Baker ,Gerald S Martin , Financial Management – Prasanna
Chandra ;
Journal/Newspaper/ online readings: M&M Theorems ; Jensen & Meckling 1976;
Wikipedia .
Course Design:
Module 1:
Contact/ Content Pedagogy Required
Teaching Readings/Compulsory
Hours Reading
12 hours Emperical perspective on Cash flows – Compulsory : “Financial
Financial characteristics : concept , Management by Dr.
Analysis of composite cash analysis ; types Prasanna Chandra
flows, Leverage, Ownership of financial
structure, ROE, P/E ratio, ratios &
Dividend payout , Divdend financial
yields and other financial markets
characteristics of Sensex and characteristics
Nifty firms
Module 2:
Contact/ Content Pedagogy Required Readings
Teaching
Hours
8 hours Module 2- Principal Conceptual Compulsory : “Financial
Agent Conflict and understanding – Management by Dr.
Financial Strategies: Ownership , limited Prasanna Chandra
Introduction, Limited liability – bearing on
liability and the management and
separation of ownership control ; conflicts Reference : Capital
and control, role of Structure and Corporate
management with Financing Decisions – theory,
diffuse ownership. Evidence and Practice – H.
Classic directive to Kent Baker ,Gerald S Martin
management, extended
stakeholders, Conflicts
of interest, Contracts
and a revised directive.

Module 3
Contact/ Content Pedagogy Required Readings
Teaching
Hours
6 hrs Information Introduction and Compulsory : Capital
Asymmetry and the overview – Financial Structure and Corporate
Markets for Corporate markets and various Financing Decisions –
Securities: corporate securities theory, Evidence and
Introduction, Theories considering the Practice – H. Kent Baker
of the effects of recent market trends ,Gerald S Martin
information asymmetry, .
Valuation of traded Reference: Assymetric
equity under Information in Financial
asymmetric Markets – Introduction and
information, Application
Information asymmetry - Ricardo N Bebczuk
and the Quality of the
market for a firm’s
equity, optimal
ownership structure.
Module 4:
Contact/ Content Pedagogy Required Readings
Teaching
Hours
6 hrs Leverage Decision: Overview of Compulsory : Financial
Introduction, Corporate corporate and Management
and personal taxation, individual taxation ;
- Dr. Prasanna
Modifying MM Conceptual
propositions to account understanding of Chandra
for corporate taxes, ‘Leverage’ Agency ,
Traditional trade-off trade-off theories &
theory, Agency theory leverage decision
and leverage decision,
Asymmetric
information and
leverage, balancing
agency costs with
information asymmetry

Module 5:
Contact/ Content Pedagogy Required Readings
Teaching
Hours
4 hours The Firm’s Overview on the Compulsory : Capital
Environment, various components Structure and Corporate
Governance, strategy, influencing the Financing Decisions –
operation and financial business operations theory, Evidence and
structure: Firm’s – Internal and Practice – H. Kent Baker
business environment, External ,Gerald S Martin
operation structure,
Financial structure, risk
performance and
contingencies, empirical
analyses of risk.

Director Faculty