Assignment in Corporate Finance (NBS8335)

Assignment in Corporate Finance (NBS8335)

Task: Critically evaluate the literature on Corporate Finance on one of the following topics:

1. Is cash negative debt?
2. What is a debt overhang problem, and what does it imply?
3. Are tangible and intangible assets equally good as collateral for investment finance?

Answer your chosen question in 2,000 words (+/–10%) drawing on either TWO or THREE journal articles on the topic, presenting original research (i.e., no survey type articles). These 2 or 3 articles should be selected by yourself. To search for articles you can use the library database, online services such as www.scholar.google.co.uk, www.ssrn.com, and https://econpapers.repec.org/, or search directly on the websites of the journals listed below.

Only articles from the following finance journals are eligible:

• Journal of Finance
• Journal of Financial Economics
• Review of Financial Studies
• Review of Finance
• Review of Corporate Finance Studies
• Journal of Corporate Finance
• Journal of Financial and Quantitative Analysis
• Journal of Financial Intermediation

Formative feedback

Start thinking about your essay in November. Doing so maximizes your opportunities to ask for support. DO NOT wait until the end of the teaching period.

Weekly Q&A sessions (synchronous online) take place throughout the semester. There, students can raise and discuss problems related to the study material. Students can ask questions regarding their essays directly in these sessions, or in advance by email. Questions send by email will be considered anonymously in the Q&A session.

Marking criteria

While your assignment focuses on your choice of 2 or 3 articles, you are expected to demonstrate in your assignment knowledge of the material covered in the lectures and seminars, which are related to your chosen topic, and of a broader context.

Please bear in mind that with the essay, you are expected to demonstrate your achievements with respect to the module’s Learning Outcomes:

Intended Knowledge Outcomes

1. Understand and explain fundamental concepts of corporate financing decision,
2. Analyse and critically assess valuation of various vehicles for corporate finance,
3. Evaluate and assess investment opportunities,
4. Analyse and evaluate capital structure and pay-out decision

Intended Skill Outcomes

1. Applications of economic reasoning to financial corporate decisions
2. Reinforce problem solving skills
3. Develop rigorous theoretical arguments based on mathematical reasoning

Note that the topics are linked to the Knowledge Outcomes as follows:

• All three topics are related to fundamental concepts of corporate financing decisions.
• Topic 1 (Is cash negative debt?) is primarily related to valuation.
• Topic 2 (What is a debt overhang problem, and what does it imply?) is primarily related to capital structure.
• Topic 3 (Are tangible and intangible assets equally good as collateral for investment finance?) is primarily related to investment.

The following list contains further key criteria for the assessment of your work.

• Overall presentation: grammar, spelling, referencing etc.
• Structure: formal and adequate structure (introduction, …, conclusion)
• General quality of arguments: logical, no important omissions, no unnecessary inclusions.
• Selection of papers: using less important papers or papers from other sources than the given list of journals will lead to penalty marks
• Understanding: clear demonstration of knowledge of the material
• Bigger picture: use concepts from, and establish clear connections to, the material taught in the lectures and seminars.
• Clearly indicate the actual word count of the submitted work at the start of the essay.

Note Low performance with respect to one criterion cannot always be compensated by a high performance with respect to another criterion. Example: if papers from other journals than listed above are used, the performance cannot be satisfactory, regardless of performance in other dimensions.

It is absolutely essential that you also consider the following when discussing your topic as failing to do so might mean that you don’t pass the assignment:

• Before writing, aim at a good understanding of the arguments and think about why the topic is important for the finance of corporations;
• Report on, and then compare, the journal articles you select in terms of their findings – e.g., do they all conclude the same thing, and if not, why not? For example, how do any empirical findings relate to the predictions of the theoretical model? What about model assumptions – what are these based upon, and how justified do these appear to be?
• Make sure to carefully explain how the papers link to the relevant areas of corporate finance from the module, for example to valuation, pay-out policy, investment decisions, or capital structure theory.
• Apply the knowledge you’ve obtained in lectures to supplement what you discuss in relation to the journal articles;
• Ensure referencing is to a defined standard throughout, e.g. Harvard style (see, e.g, https://libguides.ncl.ac.uk/managing/referencing_styles);
• As this is a module in finance, ensure your focus is on the financial side of the theory and findings.

Please note: All assignments will be scanned for plagiarism. In case plagiarism is detected, the assignment might be marked as a fail, and further actions might be taken by the University. 

Pre-assessment support: In the last week before the Christmas vacation (w/c 14 Dec), the Q&A session will be used as Pre-assessment clinic. The objectives are (i) to give students some guidance for the preparation of their essay; (ii) to help students forming expectations about the assessment; (iii) to answer remaining questions students may have regarding the study material.

Post-assessment support: Students can expect generic feedback on canvas and individual feedback upon request.

Submission deadline: To be confirmed.