Study-Unit Description

Study-Unit Description


CODE BKF4211

 
TITLE Investment Banking

 
UM LEVEL 04 - Years 4, 5 in Modular UG or PG Cert Course

 
MQF LEVEL 6

 
ECTS CREDITS 4

 
DEPARTMENT Banking, Finance and Investments

 
DESCRIPTION The acquisition of an understanding of the practical aspects and theory of investment banking
including, capital structure, mergers and acquisitions, and valuation.

Study-unit Objective:

The purpose of this study-unit is to introduce students to the world of investment banking, including
equity and debt financings, mergers & acquisitions and leveraged buyouts. Central to all of these is
valuation, and as such, the first part of the study-unit will be devoted to covering the valuation
methodologies most typically used by investment bankers. The study-unit will have an emphasis on the
understanding of capital structure theory and will take a very practical approach. In addition to the
examination, students will be required to complete a group project relating to a valuation assignment.

Study-unit Conduct:

Students are expected to take responsibility for their learning and take an active role in the learning
process. As such, students are expected to come to class prepared and ready to learn, which requires
researching and reading around the subject before class. An important component of the study-unit is
the practical application of the concepts and techniques learnt. Study-unit readings will come from both
the assigned textbook as well as other articles which supplement the concepts we’re learning. These
additional sources may come from the media or may be academic articles.

Professional Conduct:

Students are expected to demonstrate professional conduct for the duration of the study-unit. Some
aspects of this include the following: attending each class and arriving on time, staying for the entire
class, restricting discussions in class to the current study-unit material, keeping mobile phones in the “off”
or “silent” modes, and not placing or answering calls, text messages, or emails during class time.
Unprofessional conduct is disruptive to the learning environment and makes mastering the study-unit
material more difficult for all students. The same type of conduct is expected throughout your
prospective professional careers.

Required Reading:

Ross, Westerfield, Jaffe, and Jordan
Modern Financial Management (2008)
McGraw Hill Higher Education

Support Reading
Rosenbaum and Pearl
Investment Banking: Valuation, Leveraged Buyouts, and Mergers & Acquisitions (2013)
John Wiley & Sons

Syllabus:
The outline below is subject to change based on factors such as learning progression and unforeseen
circumstances. It is the student's responsibility to read assigned materials as the course progresses.

Understanding the Investment Banking landscape
• Disintermediation and the Capital Markets
• The players in the Investment Banking Industry
• Rudiments of the core theories of corporate finance
• Key questions in corporate finance and their applications to Investment Banking

Foundations of Corporate Valuation
• Financial Statements and the short term – Free Cash Flow
• Free Cash Flow Projections
• Financial Statements and the long term – Ratio Analysis
• Discounted Cash Flow Valuation

Ross, Westerfield, Jaffe, and Jordan (2008): Chapters 2, 3, 4, and 5 Practical Application of valuation techniques.

• Overview of valuation methodologies
1. Cost Approach
2. Adjusted Net Asset Approach
3. Discounted Cash Flow Approach
4. Market multiples Approach
• Calculating cost of capital (Weighted Average Cost of Capital)
• Drafting of a Valuation report

Case Study / Group Project

The efficiency of capital markets and implications for Investment Banking
• The meaning of efficient capital markets
• Weak, semi-strong and strong forms of efficiency
• Anomalies – bubbles and market crashes
• Implications for corporate financing decisions

Ross, Westerfield, Jaffe, and Jordan (2008): Chapter 13

Dividend Policy
• Empirical evidence on dividend policy
• The irrelevance of dividend policy
• Arguments against the irrelevance theorem
• Asymmetric information and signalling
• Dividend policy and agency costs

Ross, Westerfield, Jaffe, and Jordan (2008): Chapter 18

Capital Structure (Part 1)
• The Debt-Equity irrelevance theorem
• Corporate and personal taxes
• Effects of bank costs
• Implications and limitations of the trade-off theory of optimal capital structure

Ross, Westerfield, Jaffe, and Jordan (2008): Chapters 14, 15, and 16

Capital Structure (Part 2)
• Asymmetric information explanation of capital structure
• Minimising the agency costs of equity and debt

Ross, Westerfield, Jaffe, and Jordan (2008): Chapters 16 Introduction to Mergers and Acquisitions

• Forms of takeover
• The market for corporate control
• Stylised facts about merger activity
• Sources of gain

Ross, Westerfield, Jaffe, and Jordan (2008): Chapter 29

Professional Conduct
Students are expected to demonstrate professional conduct for the duration of the study-unit. Some
aspects of this include the following: attending each class and arriving on time, staying for the entire
class, restricting discussions in class to the current course material, keeping mobile phones in the “off”
or “silent” modes, and not placing or answering calls, text messages, or emails during class time.
Unprofessional conduct is disruptive to the learning environment and makes mastering the study-unit
material more difficult for all students. The same type of conduct is expected throughout your
prospective professional careers.

Academic Integrity and Group Work
It is critical to the reputation of the University of Malta that everyone associated with the Faculty and
the Department behaves with the highest academic integrity. As the Faculty that helps create business
and government leaders, we have a special obligation to ensure that our ethical standards are beyond
reproach. Any dishonesty in our academic transactions violates this trust. The University of Manitoba
Undergraduate Calendar addresses.

This study-unit typically requires a group project, case study and workshop. Students have to be aware
that group projects are subject to the same rules regarding academic dishonesty. Because of the
unique nature of group projects, all group members should exercise special care to ensure that the
group project does not violate the University’s polices relating to academic integrity. Should a
violation occur, group members are jointly accountable unless the violation can be attributed to a
specific individual(s).

 
STUDY-UNIT TYPE Lecture

 
METHOD OF ASSESSMENT
Assessment Component/s Assessment Due Sept. Asst Session Weighting
Assignment SEM1 Yes 20%
Examination (2 Hours) SEM1 Yes 80%

 
LECTURER/S

 

 
The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints.
Units not attracting a sufficient number of registrations may be withdrawn without notice.
It should be noted that all the information in the description above applies to study-units available during the academic year 2023/4. It may be subject to change in subsequent years.

https://www.um.edu.mt/course/studyunit