MF8881/MF2285

Prof. Thomas J. Chemmanur

Office: Fulton 336

Phone: (617) 552 3980

Spring 2026

E-mail: chemmanu@bc.edu (preferred mode of communication)

Teaching Assistant (TA) for the Course:

Zi Wang

Office : Fulton Hall 324D

E-mail : wangenh@bc.edu

Outline of topics with interesting links:

Session 1 Introduction and overview of the course. Valuation–review of conceptual issues. Valuation methodologies. Performance of alternative valuation techniques.

CASE DISCUSSION: Atlantic Corporation

Please download these three valuation examples: (MS Format) (Rich Text Format)

Lecture Slides on Valuation I

Review Chapter 17.3 (RWJ).

READING Kim, M., and J.R. Ritter: “Valuing IPOs” (Course Pack).

ADVANCED READING Welch, Ivo, “A First Course in Corporate Finance,” Chapter 10: “Valuation using Comparables.”

PROBLEM SET – I (All problems)

LINK: Securities and Exchange Commission Website

LINK: Advanced Video: Robert Shiller Nobel Prize Lecture on Stock Valuation

Session 2 Financial contracting. The role of the venture capitalist and the private placement market in the early stages of financing a company. The incentive effects of alternative venture capital contracts: Structuring a venture capital financing deal. Two rationales for why venture capital deals often involve warrants and convertible securities.

Anatomy of a Term Sheet (PDF file)

More Term Sheet Explanations (PDF file)

Book Recommendation (Word file)

Lecture Slides on Venture Capital Financing

READING Sahlman, W. A., “Aspects of financial contracting in venture capital” (Course Pack)

ADVANCED READING (Not Required for the Exam). Chemmanur, T. J., Krishnan, K., & Nandy, D. K. (2011) “How does venture capital financing improve efficiency in private firms? A look beneath the surface”, The Review of Financial Studies, 24(12), 4037-4090.

ADVANCED READING (Not Required for the Exam). Mollick, E., “The dynamics of crowdfunding: An exploratory study”

ADVANCED READING (Not Required for the Exam): Chemmanur, T. J., Loutskina, E., & Tian, X. (2014). Corporate venture capital, value creation, and innovation. The Review of Financial Studies, 27(8), 2434-2473.

ADVANCED READING (Not Required for the Exam): Chemmanur, Thomas J., Tyler J. Hull, and Karthik Krishnan. “Do local and international venture capitalists play well together? The complementarity of local and international venture capitalists.” Journal of Business Venturing 31, no. 5 (2016): 573-594.

READING: Kaplan, S. N., & Strömberg, P. (2003). Financial contracting theory meets the real world: An empirical analysis of venture capital contracts. The Review of Economic Studies, 70(2), 281-315.

READING: Smart Investors Foolish Choices

READING: How good are private equity returns?

PROBLEM SET – II (All problems)

LINK: Industry Perspectives on Private Equity

LINK: Private Equity Online (Free registration required)

LINK: Private Raise (Free registration required)

LINK: Price Waterhouse Venture Capital Survey

LINK: The VC Comic Strip

LINK: An Interesting VC Blog

LINK: Another Interesting VC Blog

LINK: New York Times Deal Book

LINK: TheFunded.com

Session 3 CASE DISCUSSION AND WRITE-UP: Apex Investment Partners.

LINK: Tech Crunch

Session 4 Initial Public Offerings. Valuing IPOs. Why go public? The costs vs. benefits of going public. Theories of IPO pricing. The role of the underwriter in an IPO: The importance of underwriter reputation.

Lecture Slides on Valuing IPOs

Lecture Slides on IPO Vol I

Lecture Slides on IPO Vol II

Review Chapter 15 (BM) or Chapter 19 (RWJ).

READING Ibbotson, R., J. Sindelar, and J. R. Ritter, “The Market’s problems with the pricing of Initial public offerings” (Course Pack)

Advanced Reading (Not required for the exam) Chemmanur, T., “The pricing of initial public offerings: A dynamic model with information production,” pages 285-287 and 299-301 (Course Pack).

READING Kim, M., and J.R. Ritter: “Valuing IPOs”.

Advanced Reading (Not required for the exam) Equity Valuation

Advanced Reading (Not required for the exam): M Gahng, JR Ritter, and D Zhang: “SPACs”

READING Loughran, Ritter, and Rydqvist: “Initial Public Offerings: International Insights”

PROBLEM SET – I: Problem 4.

LINK: OpenIPO – level the playing field

LINK: RENAISSANCE CAPITAL – THE IPO EXPERTS – IPO CALENDAR AND PROFILES

LINK: TechInvestor High-Tech IPO Watch

LINK: Hoover’s Online: IPO Central

LINK: IPO Calendar

LINK: IPO Montior.com

LINK: IPO Boutique

LINK: New York Times Deal Book

LINK: IPO Scoop.com

Session 5 CASE DISCUSSION AND WRITE-UP: Immunologic Pharmaceutical Corporation: Case (A), Case (B-1), Case (B-2), Case (B-3), and Case (B-4).

The long-term (post-IPO) performance of newly public firms; Recent developments in IPOs; The relationship between management quality and IPOs; Institutional Trading in IPOs; Alternatives to Traditional IPOs for Going Public: Direct Listings and SPACs.

Lecture Slides on IPO Long Run Performance

READING Ritter, J. R., “The Long-Term performance of IPOs” (Course Pack).

Advanced Reading (Not required for the exam) Chemmanur, He and Nandy: “The Going-Public Decision and the Product Market”.

Advanced Reading (Not required for the exam) Chemmanur , Hu and Huang: “The Role of Institutional Investors in Initial Public Offerings”.

Advanced Reading (Not required for the exam) Chemmanur, Thomas, and Imants Paeglis: “Management Quality, Certification, and Initial Public Offerings”.

Advanced Reading (Not required for the exam) Chemmanur, Thomas, and Jiao Yawen: “Dual Class IPOs: A Theoretical Analysis”.

Advanced Reading (Not required for the exam) Gao, Ritter, and Zhu: “Where Have All the IPOs Gone?”

General Interest Article (Not required for the exam): “The IPO Prospectus: How to Read the Fine Print”.

LINK: Analyzing an IPO Prospectus

Session 6 Capital Raising by Seasoned Firms. Review of Capital Structure under perfect capital markets: The Modigliani-Miller proposition on Capital structure. Capital structure under asymmetric information: selling equity and other securities under asymmetric information. The information effects of stock issues and repurchases.

Please download Topic Note-3 and Note-4 before coming to class (Topic Note-4 is not to be discussed in class and not required for exam!)

Lecture Slides on Capital Structure I

Lecture Slides on Capital Structure II

Review Chapters 14, 17 & 18 (BM) or Chapters 14, 15 & 16 (RWJ).

READING Asquith, P., and D. Mullins: Signaling with Dividends, Stock Repurchases, and Equity Issues, sections II- VII (Course Pack).

READING Smith, C: “Investment Banking and the Capital Acquisition Process ” (Course Pack)

ADVANCED READING (Not Required for the Exam). Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), 574-592.

PROBLEM SET – IV(A)

CASE DISCUSSION: California PERS (A) (No write-up required)

To be discussed along with the following reading:

READING Nesbitt, S., “Long-term rewards from shareholder activism: A study of the CALPERS effect” (Course Pack).

Lecture Slides on Agency cost of Equity

LINK: Shareholders Square Table

LINK: Harvard Program on Corporate Governance

LINK: Issues in Corporate Governance

Review Chapter 16.2, 16.3 and 16.5 (RWJ)

READING Jensen, M. C., “Agency costs of free cash flow, corporate finance, and takeovers,” Introduction, Sec-I, and Sec-II (Hand out in class).

LINK: Executive PayWatch

Current statistics on dividends and repurchases made by US firms

Please download Topic Note-1 and Note-2 before coming to class

Lecture Slides on Dividend Policy

Review Chapters 16 (BM) OR Chapter 18 (RWJ).

READING Asquith, P., and D. Mullins: Signalling with Dividends, Stock Repurchases, and Equity Issues, section I (Course Pack).

READING Chetty, R., and Saez, E: Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut

READING (ADVANCED) MM Propositions after thirty years (Course Pack).

Advanced Reading (Not required for the exam) Allen and Michaely: “Payout Policy”.

Advanced Reading (Not required for the exam) Fama and French: “Disappearing Dividends: Changing Firm Characteristics or Lower Propensity to Pay?”

PROBLEM SET- IV(B) Problems 1 to 4.

LINK: Dividend.com

LINK: Street Insider

Session 9 Mid-term Exam (In-class exam)

Session 10 First half: CASE DISCUSSION AND WRITE-UP: Dividend Policy at FPL Group Inc; To be discussed along with:

READING: The dividend cut heard around the world: The case of FPL Group Inc (Course Pack).

Second Half: Corporate Restructuring: Spin-offs, Carve-outs, Tracking Stock Issues.

Lecture Slides on Summary of Financial Policies

Lecture Slides on Restructuring

READING Cusatis, Miles, and Woolridge, “Some new evidence that spin-offs create value” (Course Pack).

READING Chemmanur and Paeglis: “Why Issue Tracking Stock? Insights from a Comparison with Spin-offs and Carve Outs”.

Advanced Reading (Not required for the exam) Chemmanur and Yan: “A Theory of Corporate Spin-offs”.

Advanced Reading (Not required for the exam) Chemmanur and Tian: “Communicating Private Information to the Equity Market before a Dividend Cut: An Empirical Analysis”

Advanced Reading (Not required for the exam) Chemmanur and Tian: “‘Preparing’ the Equity Market for Adverse Corporate Events: A Theoretical Analysis of Firms Cutting Dividends”

Advanced Reading (Not required for the exam) Chemmanur, Thomas, Karthik, Krishnan, and Debarshi, Nandy: “The Effects of Corporate Spin-offs on Productivity”.

Advanced Reading (Not required for the exam) Khorana, A., Shivdasani, A., Stendevad, C., & Sanzhar, S. (2011). Spin‐offs: Tackling the Conglomerate Discount. Journal of Applied Corporate Finance, 23(4), 90-101.

The agency costs of debt financing. The effect of debt on corporate investment policy: under-investment and risk-shifting. The role of debt covenants in controlling the agency cost of debt. The role of convertible securities in controlling the agency problems associated with debt. The difference between bank debt and publicly traded debt. Summary on various aspects of a firm’s capital structure. Current state of the art on financial policy: What we know and what we do not know about a firm’s financial policies.

Lecture slides on Agency Cost of Debt

Lecture slides on Bank Debt

READING James, C. and P. Weir, “Are bank loans different? Some evidence from the stock market” (Course Pack)

PROBLEM SET – IV(B) Problem 5.

LINK: Spinoffs News (Upcoming Spinoffs)

Session 11 First Half: Review of option pricing with the Black-Scholes formula, for a dividend paying stock. Application of the option pricing methodology to valuing corporate securities.

Please download Topic Note-7 and Note-8 before coming to class

Lecture Notes on Option Pricing Introduction

Normal Distribution Table Option Value Table

Review Chapters 20 and 22 (BM) or Chapters 21 and 22 (RWJ).

READING Courtadon, G., and J. Merrick, “The option pricing model and the valuation of corporate securities” (Course Pack).

Second Half: Valuing Warrants. Valuing convertible debt and other equity derivatives.

Please download Topic Note-9 before coming to class

Lecture Notes on Warrant Valuation

Advanced Reading (Not Required for the Exam): Chemmanur, T.J. and Fulghieri, P., 1997. Why include warrants in new equity issues? A theory of unit IPOs. Journal of Financial and Quantitative Analysis, pp.1-24.

Review Chapters 20 and 22 (BM) or Chapters 21 and 22 (RWJ).

PROBLEM SET – V (All problems)

LINK: Stockwarrants.com

Session 12 First Half: CASE DISCUSSION AND WRITE-UP: Chrysler’s Warrants.

Second Half: An introduction to financial engineering. Introduction to dynamic capital budgeting: Real options.

Session 13 (Real Options Continued). The option to delay undertaking a project. The option to expand a business in scale and to enter new markets. Valuing a new venture using the real options methodology. Using the real-option methodology to develop financial strategy.

READING Copeland, T. E., and P. T. Keenan, “How much is flexibility worth?” (Course Pack).

READING “Unlocking the value of Real Options” (Only first ten pages is required reading: Rest is advanced material not required for the exam).

Lecture Notes on Real Options – Volume I

Lecture Notes on Real Options – Volume II

PROBLEM SET – VI (All problems)

LINK: The McKinsey Quarterly (free registration required)

Advanced Reading (Not required for the exam) Kellogg, Ryan. “The effect of uncertainty on investment: Evidence from Texas oil drilling.” American Economic Review 104, no. 6 (2014): 1698-1734.

Table of Contents

Advanced Corporate Finance

Outline of topics with interesting links:

Session 1 Introduction and overview of the course. Valuation–review of conceptual issues. Valuation methodologies. Performance of alternative valuation techniques.

Session 3 CASE DISCUSSION AND WRITE-UP: Apex Investment Partners.

Session 4 Initial Public Offerings. Valuing IPOs. Why go public? The costs vs. benefits of going public. Theories of IPO pricing. The role of the underwriter in an IPO: The importance of underwriter reputation.

Session 5 CASE DISCUSSION AND WRITE-UP: Immunologic Pharmaceutical Corporation: Case (A), Case (B-1), Case (B-2), Case (B-3), and Case (B-4).

Session 9 Mid-term Exam (In-class exam)

Session 10 First half: CASE DISCUSSION AND WRITE-UP: Dividend Policy at FPL Group Inc; To be discussed along with:

Session 11 First Half: Review of option pricing with the Black-Scholes formula, for a dividend paying stock. Application of the option pricing methodology to valuing corporate securities.

Session 12 First Half: CASE DISCUSSION AND WRITE-UP: Chrysler’s Warrants.

Session 13 (Real Options Continued). The option to delay undertaking a project. The option to expand a business in scale and to enter new markets. Valuing a new venture using the real options methodology. Using the real-option methodology to develop financial strategy.

Session 14 Final Exam Week: Final Exam (In-class exam)

Table of Contents

MF8881/MF2285

Advanced Corporate Finance

Outline of topics with interesting links:

Session 1 Introduction and overview of the course. Valuation–review of conceptual issues. Valuation methodologies. Performance of alternative valuation techniques.

Session 3 CASE DISCUSSION AND WRITE-UP: Apex Investment Partners.

Session 4 Initial Public Offerings. Valuing IPOs. Why go public? The costs vs. benefits of going public. Theories of IPO pricing. The role of the underwriter in an IPO: The importance of underwriter reputation.

Session 5 CASE DISCUSSION AND WRITE-UP: Immunologic Pharmaceutical Corporation: Case (A), Case (B-1), Case (B-2), Case (B-3), and Case (B-4).

Session 7 The corporate governance of firms. The agency problem in corporations. The agency cost of equity. Controlling the agency problems associated with equity, and improving corporate governance through share-holder monitoring and investor activism.

Session 9 Mid-term Exam (In-class exam)

Session 10 First half: CASE DISCUSSION AND WRITE-UP: Dividend Policy at FPL Group Inc; To be discussed along with:

Session 11 First Half: Review of option pricing with the Black-Scholes formula, for a dividend paying stock. Application of the option pricing methodology to valuing corporate securities.

Session 12 First Half: CASE DISCUSSION AND WRITE-UP: Chrysler’s Warrants.

Session 13 (Real Options Continued). The option to delay undertaking a project. The option to expand a business in scale and to enter new markets. Valuing a new venture using the real options methodology. Using the real-option methodology to develop financial strategy.

Session 14 Final Exam Week: Final Exam (In-class exam)