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2013/2014  KAN-AEF_AE40  Firm Theory and Corporate Governance

English Title
Firm Theory and Corporate Governance

Course information

Language English
Exam ECTS 7.5 ECTS
Type Mandatory
Level Full Degree Master
Duration One Semester
Course period Spring
Time Table Please see course schedule at e-Campus
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Aleksandra Gregoric - Department of International Economics and Management (INT)
Main academic disciplines
  • Economics, macro economics and managerial economics
Last updated on 02-07-2013
Learning objectives
Corporate governance deals with how firms are organized and, in particular, with the relationship between owners, managers and other stakeholders in a corporation. The main objective of this course is to equip students with a knowledge base in order for them to be able to understand and participate in the general decision making concerning governance activities in a corporation.

Upon completion of the course the students should be able to:
  • Discuss the concepts of incomplete contracts, moral hazard, asymmetry of information etc. and critically analyse the agency issues in private corporations.
  • Identify the relevance of corporate laws in mitigating the agency problems in the corporations.
  • Identify the benefits and downsides associated with various types of structures, such as corporations with concentrated ownership, family firms, etc. and critically assess the specifics of these governance structures in comparison to firms with dispersed ownership and control.
  • Identify the opportunities and potential pitfalls in the use of incentive based remuneration as a tool to motivate managers and to critically assess the efficiency of various incentive schemes.
  • Critically assess the structure of corporate boards and discuss its implications for board behaviour and firm performance.
  • Identify and elaborate on the main barriers to efficient functioning of the board of directors and other corporate governance mechanisms (i.e. incentives, large owners, legal rules etc.).
  • Critically discuss the influence/role of other stakeholders (i.e. Government, employees) in firm governance and its implications for the decision –making in private corporations.
  • Compare and evaluate the specifics of the corporate governance systems across the world, to critically assess selected elements of governance codes, and to be able to apply these recommendations and the acquired knowledge of corporate governance to real world cases.
Prerequisites for registering for the exam
Compulsory assignments (assessed approved/not approved)
Three compulsory case preparations during the course on a pass/fail basis. All three case preparations must be passed prior to the registration for the 4-hour written exam.
Firm Theory and Corporate Governance:
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Case based assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period April and May/June, The retake will take place in June.
Aids allowed to bring to the exam Limited aids, see the list below and the exam plan/guidelines for further information:
  • Allowed calculators
  • Allowed dictionaries
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Description of the exam procedure
The exam has the form of three compulsory case preparations during the course on a pass/fail basis and an individual 4-hour written closed book exam with a case analysis starting two days before the exam date.

Language dictionaries and authorized calculators (Texas Instruments TI-30X IIS (solar), Texas Instruments TI-30X IIB (battery), TI-30X IIS/IIB, TI-30XS MultiView and TI-30XB MultiView) are allowed at the exam.
Course content and structure

An applied case-based economics course. It complements the courses Corporate Finance and Industrial Organization.
The course is a topic course, covering topical issues in corporate governance. We begin with a general introduction to agency problems in modern corporations and proceed to analyse governance solutions to these problems. We start by discussing the incentives and current issues in the executive compensation. We then continue with the ownership structure and the role of owners in firm governance, and give special attention to family firms. We also analyse how the legal framework facilitates and supports the functioning of the firms and the other governance mechanisms. We next look at the board of directors and discuss how it changes with the life cycle of the firm. We conclude by an introduction to the recent findings in the field of behavioral economics with specific focus on their relevance for organizations and governance.

Teaching methods
The format of the course is based on three elements:
1. Case analysis (i.e. in groups you will solve and present four business cases).
2. Lectures and discussion on the newest relevant research in corporate governance.
3. Guest lectures by representatives of business community.
Expected literature

Preliminary literature.
Collection of cases and articles on corporate governance.

Last updated on 02-07-2013