| CODE | BFI3344 | ||||||||||||
| TITLE | Investment Banking | ||||||||||||
| UM LEVEL | 03 - Years 2, 3, 4 in Modular Undergraduate Course | ||||||||||||
| MQF LEVEL | 6 | ||||||||||||
| ECTS CREDITS | 4 | ||||||||||||
| DEPARTMENT | Banking, Finance and Investments | ||||||||||||
| DESCRIPTION | This study-unit provides an introduction to investment banking and its related activities. Investment Banking is an important aspect of banking and finance and students are provided with an introductory course where students are provided exposure and an understanding of the practical aspects and theory of investment banking, including, capital structure, mergers and acquisitions, and valuation. Study-Unit Aims: The study-unit aims at providing participants with an introductory course on investment banking. It provides a background on all the aspects related to investment banking, including including equity and debt financing, mergers & acquisitions and leveraged buyouts. This study-unit will also cover various aspects of valuation and valuation methodologies most typically used by investment bankers. The study-unit will also cover the theory of capital structure theory and will take a very practical approach overall. It is structured over fourteen lectures of two hours each. By offering this credit, the Banking and Finance Department of the University of Malta is confident that its graduates will be well equipped to study other more in-depth courses related to banking The Banking and Finance Department’s study-unit on investment banking is unique. It is designed for students who would like to pursue a career in financial services, in particular in corporate finance. The investment banking study-unit provides detailed knowledge together with practical skills so that students are able to fulfill their responsibilities more efficiently and effectively once they embark on their profession. By drawing upon international best practice, it helps prepare students to adapt to the modern financial services practitioners’ environment. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: 1. Explain the main theories in corporate finance; 2. Name the various types of valuation methods used in investment banking; 3 Explain the rationale of using debt in capital structure; 4 List the characteristics of different types of financing methods used in investment banking; 5 Describe how leveraged buyouts are used in investment banking; 6 Identify why firms use either IPOs or mergers and acquisitions. 2. Skills: By the end of the study-unit the student will be able to: 1. Estimate the cost of capital of a firm; 2. Rank debt and equity in terms of cost and risk as a financing instrument; 3. Compare the capital structure of firms; 4. Evaluate captial raising strategies of firms; 5. Distinguish different financing methods. 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). |
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| STUDY-UNIT TYPE | Lecture | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Aldo Scardino |
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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 2024/5. It may be subject to change in subsequent years. |
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