Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 1 Corporate Finance: Instructor’s Manual Applied Corporate Finance - Second Edition Aswath Damodaran Stern Scho ...

Aswath Damodaran 2 The Objective in Corporate Finance “If you don’t know where you are going, it does not matter how you get the ...

This is the big picture of corporate finance. Tie in the course outline to the big picture. (I put session numbers on this page ...

Aswath Damodaran 4 The Classical Viewpoint ! Van Horne: "In this book, we assume that the objective of the firm is to maximize i ...

This is the answer to the question posed in the previous overhead. There are alternative objective functions (Maximize market sh ...

Aswath Damodaran 6 The Criticism of Firm Value Maximization ! Maximizing stock price is not incompatible with meeting employee n ...

Aswath Damodaran 7 Why traditional corporate financial theory focuses on maximizing stockholder wealth. ! Stock price is easily ...

Aswath Damodaran 8 The Classical Objective Function STOCKHOLDERS Maximize stockholder wealth Hire & fire managers Board Ann ...

Aswath Damodaran 9 What can go wrong? STOCKHOLDERS Managers put their interests above stockholders Have little control over mana ...

Aswath Damodaran 10 I. Stockholder Interests vs. Management Interests ! In theory: The stockholders have significant control ove ...

Aswath Damodaran 11 The Annual Meeting as a disciplinary venue ! The power of stockholders to act at annual meetings is diluted ...

Aswath Damodaran 12 Board of Directors as a disciplinary mechanism This sounds judgmental and it is meant to be. Directors do no ...

Aswath Damodaran 13 The CEO often hand-picks directors.. ! The 1992 survey by Korn/Ferry revealed that 74 % of companies relied ...

Aswath Damodaran 14 Directors lack the expertise (and the willingness) to ask the necessary tough questions.. ! In most boards, ...

Aswath Damodaran 15 Who’s on Board? The Disney Experience - 1997 This may be going back in time but it may help understanding Di ...

Aswath Damodaran 16 The Calpers Tests for Independent Boards ! Calpers, the California Employees Pension fund, suggested three t ...

Aswath Damodaran 17 Business Week piles on... The Worst Boards in 1997 .. A poor board does not necessarily translate into a poo ...

Aswath Damodaran 18 !Application Test: Who’s on board? ! Look at the board of directors for your firm. Analyze How many of the ...

Aswath Damodaran 19 So, what next? When the cat is idle, the mice will play .... ! When managers do not fear stockholders, they ...

Aswath Damodaran 20 Overpaying on takeovers ! The quickest and perhaps the most decisive way to impoverish stockholders is to ov ...