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Corporate finance : cases and materials / by William W. Bratton.

By: Bratton, William W.
Contributor(s): Brudney, Victor. Brudney and Chirelstein's cases and materials on corporate finance.
Material type: TextTextSeries: University casebook series.Publisher: New York : Foundation Press ; Thomson/West, 2012Edition: 7th ed.Description: xxxviii, 1261, [553] p. : ill., forms ; 26 cm.ISBN: 9781609300593 .Subject(s): Corporations -- Finance -- Law and legislation -- United States -- CasesDDC classification: 346.73​066 Online resources: Table of contents only Summary: Contents Valuing the firm and its securities Debt financing Financing with hybrid securities Equity capital structure: payout policy and ownership stakes Mergers and acquisitions Appendices. Machine generated contents note: pt. I VALUING THE FIRM AND ITS SECURITIES Introduction Section A Market Value and Fundamental Value 1.Introduction Tri-Continental Corp. v. Battye Note: Funds Note: Merger Appraisal Rights and the Closed-End Fund Discount 2.Market Efficiency (A).The Efficient Market Hypothesis Brealey, Myers, and Allen, Principles of Corporate Finance Note: Speculative Efficiency, Allocative Efficiency, and Incentive Problems Note: Empirical Testing of the EMH (B).Noise Trading, Behaviorism, and Other Alternatives to the Efficient Market Hypothesis Shleifer and Summers, The Noise Trader Approach to Finance Note: Behavioral Theory Note: Bubbles and Crashes Note: Heterogeneous Expectations Models Section B Elements of Fundamental Value 1.The Time Value of Money Alchian and Allen, University Economics Note: The Role of Discounting in Bond Valuation Note: Discounting in Capital Budgeting Decisions Contents note continued: 2.Expected Returns (A).The Composition of "Returns" Warren Buffett, The Essays of Warren Buffett: Lessons for Corporate America Note: Accounting Earnings, "Owner Earnings," and Net Cash Flows (B).Future Returns and Probability Distributions Grayson, The Use of Statistical Techniques in Capital Budgeting 3.Risk and the Capitalization Rate (A).Risk as Degree of Dispersion Lewellen, The Cost of Capital Note: Risk and Return Characteristics of Different Securities (B).Comparable Firms and Market Capitalization Rates: The Price/​Earnings Ratio Francis I. duPont &​ Co. v. Universal City Studios, Inc Universal City Studios, Inc. v. Francis I. duPont &​ Co Note: Inferred Capitalization Rates and Constant Growth Valuation Note: Price/​Earnings Ratios and Investment Strategy (C).Measures of Risk -The Capital Asset Pricing Model and Beta (1).Portfolio Theory (a).portfolio selection Contents note continued: Sharpe, Portfolio Theory and Capital Markets (b).diversification as a means of reducing risk (c).choosing a "best portfolio" -the critical ratio and the separation theorem Lintner, A Model of a Perfectly Functioning Securities Market Lorie, Dodd and Kimpton, The Stockmarket: Theories and Evidence (2).The Capital Asset Pricing Model (a).derivation Modigliani and Pogue, An Introduction to Risk and Return: Concepts and Evidence Note: Arbitrage (b).using the CAPM in appraisal Cede &​ Co. v. Technicolor, Inc. Note: The Judicial Role in Appraisal Global GT LP v. Golden Telecom Inc. (c).using the CAPM in capital budgeting Note: Shareholder Value, Risk Aversion, and Risk Neutrality (d).empirical testing of the CAPM and multiple factor models Contents note continued: 4.Premiums and Discounts in Mergers and Acquisitions Kraakman, Taking Discounts Seriously: The Implications of "Discounted" Share Prices as an Acquisition Motive Note: Downward-Sloping Demand Rapid-American Corp. v. Harris Problem Note: Premiums, Discounts, and Merger Gain Le Beau v. M.G. Bancorporation, Inc. Note: Valuation Concepts Introduced in Le Beau Note: The Implicit Minority Discount Note: The Marketability Discount 5.Risk Reduction through Hedging (A).Risk Exposure (B).Hedging (1).Forward Contracts (2).Futures Contracts (3).Swaps (4).Options (C).Option Strategies and Put-Call Parity (1).Using Options (2).Put-Call Parity Note: Financial Engineering (D).Call Option Valuation Note: Equity Swaps (E).Regulation of Derivatives (1).Overview Contents note continued: The Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States Note: Early Warnings (2).Pre-Crisis Initiatives (3).Dodd-Frank (4).Counterparty Relationships Caiola v. Citibank, N.A. Note: Proceedings Respecting Bankers Trust (2).Hedging and Corporate Law Rights and Duties Brane v. Roth Note: Hedging, Shareholder Value, The CAPM, and the Irrelevance Hypothesis Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom Inc. Note: Empty Voting (F).Regulation of Systemic Risk (1).The Scope of the Problem Timothy F Geithner, Changes in the Structure of the US Financial System and Implications for Systemic Risk (2).The Financial Crisis of 2008 and Reform UK Financial Services Authority, The Turner Review: A Regulatory Response to the Global Banking Crisis Contents note continued: Chairman Ben S. Bernanke, Financial Reform to Address Systemic Risk Note: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 pt. II DEBT FINANCING Eliasen v. Itel Corporation Note: Priority of Claim Section A Capital Structure and Leverage 1.Leverage and Value (A).The Cost of Capital and the Value of the Firm Durand, Costs of Debt and Equity Funds for Business: Trends and Problems of Measurement (B).The Modigliani-Miller Position and the Revised Concept of Optimal Capital Structure (1).The M-M Thesis and Its Assumptions Van Horne, Financial Management and Policy (2).Relaxing M-M's Assumptions (a).institutional constraints (b).taxes Note: Taxation and the M-M Theorem (c).bankruptcy costs (d).agency costs Note: Fiduciary Law and Capital Structure (e).information asymmetries Myers, Capital Structure Contents note continued: Note: The Pecking Order Section B Basic Terms and Concepts (A).Bonds, Debentures, and Notes (B).Loans (C).Points of Comparison 2.Corporate Trust and the Trust Indenture Act of 1939 Elliott Associates v. J. Henry Schroder Bank &​ Trust Co. Note: Corporate Trust Note: The Trust Indenture Act of 1939 3.The Bondholder and the Going Concern (A).The Promise to Pay 1 Dewing, The Financial Policy of Corporations Note: Redemption Rights and Duties Morgan Stanley &​ Co., Inc. v. Archer Daniels Midland Co. Note: Refunding Cases Note: Bondholder Remedies Upon Default (B).Promises That Protect the Value of the Promise to Pay (1).Business Covenants (a).debt contracts and debtor misbehavior (b).principal covenants (c).studies and commentaries (2).Judicial Interpretation of Covenants Sharon Steel Corp. v. The Chase Manhattan Bank, N.A. Contents note continued: Affiliated Computer Services, Inc. v. Wilmington Trust Company Note: Boilerplate Indenture Terms Section C Security and Seniority 1.Mortgage Bonds 2.Leases 3.Asset Securitization (A).Overview Lupica, Asset Securitization: The Unsecured Creditor's Perspective Note: Risk and Return (B).Transaction Structure (C).Accounting Treatment (a).prior to 2010 (b).since 2010 (D).Bankruptcy Risks In re LTV Steel Company, Inc. Note: Subsequent Proceedings Note: Policy Debates (E).Securitized Mortgages and the Financial Crisis of 2008 The Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States Note: Collateralized Debt Obligations-Operative Assumptions Contents note continued: Congressional Oversight Panel, Special Report on Regulatory Reform, Modernizing the American Financial Regulatory System: Recommendations for Improving Oversight, Protecting Consumers, and Ensuring Stability Note: Dodd-Frank and Securitization 4.Subordination (A).Seniors, Juniors, and Subordinated Lenders (B).Subordination of Unsecured Claims (C).Second Lien Loans and Intercreditor Agreements (D).Asset Securitization Concord Real Estate CDO 2006-1, LTD. v. Bank of America N.A. Section D Credit Derivatives 1.The Contracts and the Players Eternity Global Master Fund Limited v. Morgan Guaranty Trust Company of New York Note: The ISDA Agreement 2.Counterparty Relationships VCG Special Opportunities Master Fund Ltd. v. Citibank, N.A. Note: In Over Their Hedge 3.Credit Default Swaps and Collateralized Debt Obligations Note: Litigation 4.Credit Default Swaps and the Financial Crisis of 2008 Section E High Leverage Restructuring 1.Leverage and Management Discipline Jensen, Agency Costs of Free Cash Flow, Corporate Finance and Takeovers 2.The Rise, Decline, and Reappearance of Leveraged Restructuring Holmstrom and Kaplan, Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s Note: The High Leverage Restructurings of the 1980s Note: The Private Equity Restructurings of the 2000s Note: Performance Contents note continued: 3.Event Risk and Bond Contracts Metropolitan Life Insurance Company v. RJR Nabisco, Inc. Note: The Aftermath of the RJR Nabisco Restructuring Note: Spin Offs Note: Fiduciary Theory, Good Faith Duties, and Other Bases for Judicial Protection of Bondholders Note: Lender Liability Compared Section F Debtor Distress 1.Altering the Bond Contract-Amendment and Exchange, Coercion and Holding Out Aladdin Hotel Co. v. Bloom Note: Amendment Under the Trust Indenture Act Katz v. Oak Industries Inc. Note: Coerced Votes and Hold Outs Note: Vulture Investors Note: Prepackaged Bankruptcy 2.Creditor Protection in Law (A).Regulation of Capital Structure (1).Public Utilities (2).Investment Companies (3).Margin Requirements (4).Bank Capital Tarullo, International Harmonization of Banking Regulation and Agency Accountability Note: Basel III and Dodd-Frank Contents note continued: Basel Committee on Banking Supervision, Consultative Document, International framework for liquidity risk measurement, standards and monitoring (B).Corporate Law Legal Capital Rules (1).The Stated Capital Requirement (2).Dividends and Distributions (a).traditional statutes Klang v. Smith's Food &​ Drug Centers, Inc. Note: Restrictions on Distributions (b).new model statutes (C).Fraudulent Conveyance Law In re Color Tile, Inc. Wieboldt Stores, Inc. v. Schottenstein Note: Fraudulent Conveyance Avoidance of Leveraged Buyouts (D).Fiduciary Duty Credit Lyonnais Bank Nederland N.V. v. Pathe Communications Co. Note: Pre-Bankruptcy Fiduciary Duties to Creditors North American Catholic Educational Programming Foundation, Inc. v. Gheewalla Section G Insolvency Reorganization 1.Introduction: The Reorganization Bargain and the Limits of the Parties' Bargaining Freedom (A).Reorganization By Judicial Proceeding Contents note continued: (B).The Parameters of the Bankruptcy Bargain 2.The Rise and Decline of Absolute Priority (A).Absolute Priority Under the Bankruptcy Act of 1938 Ayer, Rethinking Absolute Priority After Ahlers Note: A Contrasting Account Consolidated Rock Products Co. v. Du Bois Note: The Aftermath of the Consolidated Rock Products Company Case Note: Issues Under Absolute Priority Note: The Composition Tradition and the Best Interest of Creditors Standard (B).The Bankruptcy Act of 1978 House Report No. 95-595 3.Reorganization under the Bankruptcy Code In re Zenith Electronics Corporation Note: Proceedings Under Chapter 11 (B).Absolute Priority Under Chapter 11 Excerpt From Debates on Bankruptcy Reform Act of 1978 Note: Issues Under the Code Note: Empirical Results -Deviations From Absolute Priority (C).Rethinking Traditional Reorganization Contents note continued: (1).Rethinking Creditors' Rights-The Common Pool and the Creditors' Bargain (2).Rethinking the Reorganization Process-Alternative Approaches (a).market-based proposals (1).cash auction (2).securities market test (3).options (4).judicially-supervised auction (b).contractual proposals (1).automatic conversion (2).contractual choice 4.Creditor Control and Asset Sales Skeel, Creditor's Ball: The "New" New Corporate Governance in Chapter 11 Note: Restrictions on Executive Pay Note: Incidents of Creditor Control In re Chrysler LLC Note: Section 363 Sales pt. III FINANCING WITH HYBRID SECURITIES Section A Preferred Stock Financing 1.Rights and Preferences (A).Preferred Stock Defined (B).The Preferred Stock Contract (C).Issuer Motivations and Holder Expectations 2.Claims to Dividends (A).Preferred Stock Dividend Provisions (B).Board Discretion to Withhold Payment Contents note continued: (1).Cumulative Preferred (2).Noncumulative Preferred (3).Issuer Tender and Exchange Offers to Holders of Preferred in Arrears Eisenberg v. Chicago Milwaukee Corp. Note: Denver Tramway (4).Board Discretion and Voting Control 3.Claims to Principal, Including Arrearages (A).The Liquidation Preference (B).Redemption Rights Mueller v. Kraeuter &​ Co. SV Investment Partners, LLC v. ThoughtWorks, Inc. 4.Alteration of Financial Rights (A).By Charter Amendment Goldman v. Postal Telegraph Note: Junior Hold Ups (B).By Merger Bove v. The Community Hotel Corporation of Newport, Rhode Island Note: The Investment Value Doctrine Note: Drafting Note: Preferred Class Voting in Respect of Mergers 5.Judicial Review of Allocations in Mergers (A).De Facto Theories Rothschild International Corporation v. Liggett Group Inc. Note: "De Facto" Theories (B).Fairness Scrutiny Contents note continued: Dalton v. American Investment Co. Note: FLS Holdings LC Capital Master Fund, Ltd. v. James Section B Convertible Securities and Warrants 1.Terms and Valuation (A).The Value of a Call Option (B).Convertible Bond Features and Valuation Variables (1).Traditional Convertibles (a).elements of convertible bond value (b).the conversion premium (c).issuer call rights Note: The Convertible Bond Puzzle (2).Variations on the Traditional Convertible (a).original issue discount convertibles (b).puttable convertibles (c).equity-linked securities (d).floating price ("toxic") convertibles 2.Conflicts of Interest (A).Protective Contract Provisions Note: Implied in Fact Antidilution Protection Note: Authorized Stock HB Korenvaes Investments, L.P. v. Marriott Corporation Note: Convertible Hedges Note: Interpretation Contra Proferentum Note: Convertible Bond Contracts (B).Duties Implied in Law Contents note continued: Van Gemert v. Boeing Co. Note: Van Gemert's Operative Theory Note: The Duty to Notify in Delaware Broad v. Rockwell International Corp. Note: Fair and Unfair Dividends Note: Fair and Unfair Mergers Note: Appraisal Rights 3.Contingent Convertibles in Bank Capital Structures Basel Committee on Banking Supervision Note: CoCos Section C Venture Capital Finance 1.Overview (A).History and Characteristics (B).Securities and Documentation (C).Control Arrangements Equity-Linked Investors, L.P. v. Adams Note: Case for Comparison Note: Opportunism In re Trados Incorporated Shareholder Litigation Note: The Duty to the Common When the Common is Under Water pt. IV EQUITY CAPITAL STRUCTURE -PAYOUT POLICY AND OWNERSHIP STAKES Section A Payout Policy -Dividends, Repurchases, and Retained Earnings 1.Cash Dividends and Dividend Policy (A).A Theory of Stock Valuation Contents note continued: (1).Dividend Capitalization Model (2).The Retention Ratio (B).The Role of Dividend Policy (1).Traditional Dividend-Practice Lintner, Distributions of Incomes of Corporations Among Dividends, Retained Earnings and Taxes Note: Payout Practices (2).Dividends as a Financing Decision -The Dividend Puzzle (a).dividend policy under the irrelevance hypothesis (b).taxes, other imperfections, and the low payout hypothesis (3).Information Asymmetries, Signaling, and Pecking Order Theory (4).Management Dividend Policies and Agency Theory (5).The Trend toward Cash Retention 2.Applicable Legal Standards Berwald v. Mission Development Company Note: Dividends and "Corporate Opportunity" Wertheim Schroder &​ Co. Incorporated v. Avon Products, Inc. Note: Special Dividends Note: Disclosure on the Downside Note: Dividends and Conflicts of Interest 3.Stock Dividends Contents note continued: Note: Explaining Stock Splits and Stock Dividends Note: Stock Dividends As Information and the Regulation of Disclosure New York Stock Exchange, Listed Company Manual Note: Reverse Splits and Fractional Shares 4.Restructuring by Dividend -Spin Offs and Tracking Stock (A).Spin Offs (B).Tracking Stock 5.Repurchase of Outstanding Shares (A).The Economics of Share Repurchases (1).Repurchase Transactions (2).Theoretical Irrelevance Between Dividends and Repurchases (3).Agency Costs and Information Asymmetries (4).Taxation Note: Repurchases -Volume and Stated Purpose (B).Repurchases -Fiduciary and Disclosure Obligations (2).Fiduciary Duties Strassburger v. Earley Note: Regulation of Repurchases Note: Greenmail and Defensive Repurchases (3).Federal Securities Laws -Repurchase Tender Offers Note: Federal Regulation of Repurchase Tender Offers Contents note continued: (4).Federal Securities Laws -Open Market Repurchases (a).manipulation -Securities Exchange Act Section 9(a)(2) (b).safe harbor for potentially manipulative repurchases Note: OMRs and Market Transparency (5).Dividends, Repurchases, and Corporate Governance Bratton, The New Dividend Puzzle Section B Equity Ownership and the Value of the Firm 1.Executive Stock Options (A).Stock Options and Incentive Alignment Thomas and Martin, The Determinants of Shareholder Voting on Stock Option Plans Note: After Exercise AT &​ T Corp. v. Lillis Note: Tax and Accounting (B).Policy Debates (1).Pay without Performance (2).The Defense (3).The Financial Crisis of 2008 Bratton and Wachter, The Case Against Shareholder Empowerment Note: Executive Pay Under Dodd-Frank (C).Fiduciary Duties Lewis v. Vogelstein Note: Stock Options under Delaware Fiduciary Law Ryan v. Gifford Contents note continued: Note: Spring-Loading 2.Blockholding (A).Blockholding, Corporate Governance, and Shareholder Value (1).Blockholders as Monitors (2).Comparative Corporate Governance: Market Versus Blockholder Systems (3).Implications (4).Activist Hedge Funds (B).Regulation of Blockholders (1).Regulation as a Barrier to Blockholding CSX Corporation v. The Children's Investment Fund Management (UK) LLP (2).Fiduciary Regulation of Blockholders (a).noncontrolling blockholders Rock, Controlling the Dark Side of Relational Investing (b).controlling blockholders Levco Alternative Fund v. The Reader's Digest Association, Inc. Note: The Tele-Communications-AT &​ T Merger Note: Regulatory Barriers: The "One Share, One Vote" Controversy Perlman v. Feldmann Note: The Proposed Rule of Equal Opportunity Note: Regulation of Control Sales After Feldmann Contents note continued: pt. V MERGERS AND ACQUISITIONS Section A The Move to Merge Andrade, Mitchell, and Stafford, New Evidence and Perspectives on Mergers Note: Mergers and Value Creation Section B Accounting and Taxes 1.Accounting for Mergers -Purchase, Pooling, and Accounting for Goodwill (A).Purchase Versus Pooling (B).Revised Purchase Treatment Financial Accounting Standards Board Summary of Statement No. 141, Business Combinations Questions Financial Accounting Standards Board Summary of Statement No. 142, Goodwill and Other Intangible Assets Note: Testing Goodwill for Impairment 2.Tax Treatment of Mergers Carney, Mergers &​ Acquisitions: Cases and Materials (2d ed. 2007) Section C Formal Aspects of Merger 1.The Mechanics of the Process (A).Classical Mergers (1).Stock for Stock Merger (2).Small Scale Merger (3).Classical Merger with Cash Consideration (4).Parent Subsidiary Mergers Contents note continued: (B).Sale of Assets -An Alternative to the Classical Merger Hollinger, Inc. v. Hollinger International, Inc. (C).Share Purchase and Share Exchange (D).Triangular Mergers (E).De Facto Mergers Farris v. Glen Alden Corp Note: A Pennsylvania Triangular Merger Hariton v. Arco Electronics, Inc. Note: Other Consequences of De Facto Merger Note: Successor Liability 2.Appraisal Thompson, Exit, Liquidity, and Majority Rule: Appraisal's Role in Corporate Law Note: Reform Section D The Merger Agreement Volk, Leicher &​ Koloski, Negotiating Business Combination Agreements -The "Seller's" Point of View IBP, Inc. v. Tyson Foods, Inc. Hexion Specialty Chemicals, Inc. v. Huntsman Corp Note: MACs Section E Fairness and Disclosure 1.Freeze -Outs and Buyouts: Fair Dealing, Fair Price, and the Appraisal Remedy (A).Freeze -Outs (1).Alternative Perspectives Contents note continued: Brudney &​ Chirelstein, Fair Shares in Corporate Mergers and Takeovers Easterbrook and Fischel, Corporate Control Transactions (a).business purpose Coggins v. New England Patriots Football Club, Inc. Note: Business Purpose and Fairness (b).fair dealing and fair price Weinberger v. UOP, Inc. Note: On Remand Note: Market Price as a Measure of the Value of Subsidiary Stock Note: Clarifying Weinberger Note: Kahn v. Lynch Communication Systems In re Siliconix Incorporated Shareholders Litigation Glassman v. Unocal Exploration Corp. In re Pure Resources, Inc., Shareholders Litigation Subramanian, Fixing Freezeouts Note: The Siliconix Cases (3).Appraisal Exclusivity Note: Interrelations Between Fairness Claims and Appraisal Actions (B).Management Buyouts In re Topps Co. Shareholders Litigation Note: Umpiring the Going Private Process Note: The Fairness Opinion Contents note continued: 2.The Duty of Care Note: The Remand in Cede v. Technicolor Note: The Duty of Care and Merger Negotiations Note: The Duty of Care and Asset Sales 3.Enhanced Scrutiny Revlon, Inc. v. MacAndrews &​ Forbes Holdings, Inc. Note: The Unocal Background Note: Mills v. Macmillan Note: The Revlon Standard Paramount Communications Inc. v. QVC Network Inc. Note: The "Revlon" Duty After Paramount Omnicare, Inc. v. NCS Healthcare, Inc. Note: Lockups Note: Comments on the Delaware Cases Lyondell Chemical Company v. Ryan Note: Lear Corporation 4.Disclosure Duties (A).State Fiduciary Law Emerald Partners v. Berlin Note: Further Proceedings Note: The Status of the Fiduciary Duty to Disclose (B).Federal Disclosure Rules: The Materiality of Soft Information Starkman v. Marathon Oil Co. Basic Incorporated v. Levinson Contents note continued: Note: Misrepresentations, Silence, Mergers and Other Soft Information Note: Materiality and Context Note: Sources of Legal Obligations to Disclose on the Part of Non-Transactors APPENDICES A.Financial Contract Forms Best Buy Indenture Best Buy Supplemental Indenture Note Purchase Agreement Equinox Subordination Provisions Preferred Stock Charter Provisions TARP Preferred Stock TARP Warrant Masco Corp. Notes Conversion Provisions National Venture Capital Association Term Sheet National Venture Capital Association Voting Agreement Agreement and Plan of Merger B.State Corporate Codes Provisions of the Revised Model Business Corporation Act Provisions of the Delaware and New York Statutes C.The Bankruptcy Code D.Provisions of the Federal Securities Laws and Rules Promulgated Thereunder E.Sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 F.Tables.
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Reference 346.73/​066 BRA.C (Browse shelf) Not For Loan SLSN-B-7416

Includes bibliographical references (p. v-vii) and index.

Contents
Valuing the firm and its securities
Debt financing
Financing with hybrid securities
Equity capital structure: payout policy and ownership stakes
Mergers and acquisitions
Appendices.
Machine generated contents note: pt. I VALUING THE FIRM AND ITS SECURITIES
Introduction
Section A Market Value and Fundamental Value
1.Introduction
Tri-Continental Corp. v. Battye
Note: Funds
Note: Merger Appraisal Rights and the Closed-End Fund Discount
2.Market Efficiency
(A).The Efficient Market Hypothesis
Brealey, Myers, and Allen, Principles of Corporate Finance
Note: Speculative Efficiency, Allocative Efficiency, and Incentive Problems
Note: Empirical Testing of the EMH
(B).Noise Trading, Behaviorism, and Other Alternatives to the Efficient Market Hypothesis
Shleifer and Summers, The Noise Trader Approach to Finance
Note: Behavioral Theory
Note: Bubbles and Crashes
Note: Heterogeneous Expectations Models
Section B Elements of Fundamental Value
1.The Time Value of Money
Alchian and Allen, University Economics
Note: The Role of Discounting in Bond Valuation
Note: Discounting in Capital Budgeting Decisions
Contents note continued: 2.Expected Returns
(A).The Composition of "Returns"
Warren Buffett, The Essays of Warren Buffett: Lessons for Corporate America
Note: Accounting Earnings, "Owner Earnings," and Net Cash Flows
(B).Future Returns and Probability Distributions
Grayson, The Use of Statistical Techniques in Capital Budgeting
3.Risk and the Capitalization Rate
(A).Risk as Degree of Dispersion
Lewellen, The Cost of Capital
Note: Risk and Return Characteristics of Different Securities
(B).Comparable Firms and Market Capitalization Rates: The Price/​Earnings Ratio
Francis I. duPont &​ Co. v. Universal City Studios, Inc
Universal City Studios, Inc. v. Francis I. duPont &​ Co
Note: Inferred Capitalization Rates and Constant Growth Valuation
Note: Price/​Earnings Ratios and Investment Strategy
(C).Measures of Risk
-The Capital Asset Pricing Model and Beta
(1).Portfolio Theory
(a).portfolio selection
Contents note continued: Sharpe, Portfolio Theory and Capital Markets
(b).diversification as a means of reducing risk
(c).choosing a "best portfolio"
-the critical ratio and the separation theorem
Lintner, A Model of a Perfectly Functioning Securities Market
Lorie, Dodd and Kimpton, The Stockmarket: Theories and Evidence
(2).The Capital Asset Pricing Model
(a).derivation
Modigliani and Pogue, An Introduction to Risk and Return: Concepts and Evidence
Note: Arbitrage
(b).using the CAPM in appraisal
Cede &​ Co. v. Technicolor, Inc.
Note: The Judicial Role in Appraisal
Global GT LP v. Golden Telecom Inc.
(c).using the CAPM in capital budgeting
Note: Shareholder Value, Risk Aversion, and Risk Neutrality
(d).empirical testing of the CAPM and multiple factor models
Contents note continued: 4.Premiums and Discounts in Mergers and Acquisitions
Kraakman, Taking Discounts Seriously: The Implications of "Discounted" Share Prices as an Acquisition Motive
Note: Downward-Sloping Demand
Rapid-American Corp. v. Harris
Problem
Note: Premiums, Discounts, and Merger Gain
Le Beau v. M.G. Bancorporation, Inc.
Note: Valuation Concepts Introduced in Le Beau
Note: The Implicit Minority Discount
Note: The Marketability Discount
5.Risk Reduction through Hedging
(A).Risk Exposure
(B).Hedging
(1).Forward Contracts
(2).Futures Contracts
(3).Swaps
(4).Options
(C).Option Strategies and Put-Call Parity
(1).Using Options
(2).Put-Call Parity
Note: Financial Engineering
(D).Call Option Valuation
Note: Equity Swaps
(E).Regulation of Derivatives
(1).Overview
Contents note continued: The Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States
Note: Early Warnings
(2).Pre-Crisis Initiatives
(3).Dodd-Frank
(4).Counterparty Relationships
Caiola v. Citibank, N.A.
Note: Proceedings Respecting Bankers Trust
(2).Hedging and Corporate Law Rights and Duties
Brane v. Roth
Note: Hedging, Shareholder Value, The CAPM, and the Irrelevance Hypothesis
Deephaven Risk Arb Trading Ltd. v. UnitedGlobalCom Inc.
Note: Empty Voting
(F).Regulation of Systemic Risk
(1).The Scope of the Problem
Timothy F Geithner, Changes in the Structure of the US Financial System and Implications for Systemic Risk
(2).The Financial Crisis of 2008 and Reform
UK Financial Services Authority, The Turner Review: A Regulatory Response to the Global Banking Crisis
Contents note continued: Chairman Ben S. Bernanke, Financial Reform to Address Systemic Risk
Note: The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
pt. II DEBT FINANCING
Eliasen v. Itel Corporation
Note: Priority of Claim
Section A Capital Structure and Leverage
1.Leverage and Value
(A).The Cost of Capital and the Value of the Firm
Durand, Costs of Debt and Equity Funds for Business: Trends and Problems of Measurement
(B).The Modigliani-Miller Position and the Revised Concept of Optimal Capital Structure
(1).The M-M Thesis and Its Assumptions
Van Horne, Financial Management and Policy
(2).Relaxing M-M's Assumptions
(a).institutional constraints
(b).taxes
Note: Taxation and the M-M Theorem
(c).bankruptcy costs
(d).agency costs
Note: Fiduciary Law and Capital Structure
(e).information asymmetries
Myers, Capital Structure
Contents note continued: Note: The Pecking Order
Section B Basic Terms and Concepts
(A).Bonds, Debentures, and Notes
(B).Loans
(C).Points of Comparison
2.Corporate Trust and the Trust Indenture Act of 1939
Elliott Associates v. J. Henry Schroder Bank &​ Trust Co.
Note: Corporate Trust
Note: The Trust Indenture Act of 1939
3.The Bondholder and the Going Concern
(A).The Promise to Pay
1 Dewing, The Financial Policy of Corporations
Note: Redemption Rights and Duties
Morgan Stanley &​ Co., Inc. v. Archer Daniels Midland Co.
Note: Refunding Cases
Note: Bondholder Remedies Upon Default
(B).Promises That Protect the Value of the Promise to Pay
(1).Business Covenants
(a).debt contracts and debtor misbehavior
(b).principal covenants
(c).studies and commentaries
(2).Judicial Interpretation of Covenants
Sharon Steel Corp. v. The Chase Manhattan Bank, N.A.
Contents note continued: Affiliated Computer Services, Inc. v. Wilmington Trust Company
Note: Boilerplate Indenture Terms
Section C Security and Seniority
1.Mortgage Bonds
2.Leases
3.Asset Securitization
(A).Overview
Lupica, Asset Securitization: The Unsecured Creditor's Perspective
Note: Risk and Return
(B).Transaction Structure
(C).Accounting Treatment
(a).prior to 2010
(b).since 2010
(D).Bankruptcy Risks
In re LTV Steel Company, Inc.
Note: Subsequent Proceedings
Note: Policy Debates
(E).Securitized Mortgages and the Financial Crisis of 2008
The Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States
Note: Collateralized Debt Obligations-Operative Assumptions
Contents note continued: Congressional Oversight Panel, Special Report on Regulatory Reform, Modernizing the American Financial Regulatory System: Recommendations for Improving Oversight, Protecting Consumers, and Ensuring Stability
Note: Dodd-Frank and Securitization
4.Subordination
(A).Seniors, Juniors, and Subordinated Lenders
(B).Subordination of Unsecured Claims
(C).Second Lien Loans and Intercreditor Agreements
(D).Asset Securitization
Concord Real Estate CDO 2006-1, LTD. v. Bank of America N.A.
Section D Credit Derivatives
1.The Contracts and the Players
Eternity Global Master Fund Limited v. Morgan Guaranty Trust Company of New York
Note: The ISDA Agreement
2.Counterparty Relationships
VCG Special Opportunities Master Fund Ltd. v. Citibank, N.A.
Note: In Over Their Hedge
3.Credit Default Swaps and Collateralized Debt Obligations
Note: Litigation
4.Credit Default Swaps and the Financial Crisis of 2008
Section E High Leverage Restructuring
1.Leverage and Management Discipline
Jensen, Agency Costs of Free Cash Flow, Corporate Finance and Takeovers
2.The Rise, Decline, and Reappearance of Leveraged Restructuring
Holmstrom and Kaplan, Corporate Governance and Merger Activity in the United States: Making Sense of the 1980s and 1990s
Note: The High Leverage Restructurings of the 1980s
Note: The Private Equity Restructurings of the 2000s
Note: Performance
Contents note continued: 3.Event Risk and Bond Contracts
Metropolitan Life Insurance Company v. RJR Nabisco, Inc.
Note: The Aftermath of the RJR Nabisco Restructuring
Note: Spin Offs
Note: Fiduciary Theory, Good Faith Duties, and Other Bases for Judicial Protection of Bondholders
Note: Lender Liability Compared
Section F Debtor Distress
1.Altering the Bond Contract-Amendment and Exchange, Coercion and Holding Out
Aladdin Hotel Co. v. Bloom
Note: Amendment Under the Trust Indenture Act
Katz v. Oak Industries Inc.
Note: Coerced Votes and Hold Outs
Note: Vulture Investors
Note: Prepackaged Bankruptcy
2.Creditor Protection in Law
(A).Regulation of Capital Structure
(1).Public Utilities
(2).Investment Companies
(3).Margin Requirements
(4).Bank Capital
Tarullo, International Harmonization of Banking Regulation and Agency Accountability
Note: Basel III and Dodd-Frank
Contents note continued: Basel Committee on Banking Supervision, Consultative Document, International framework for liquidity risk measurement, standards and monitoring
(B).Corporate Law Legal Capital Rules
(1).The Stated Capital Requirement
(2).Dividends and Distributions
(a).traditional statutes
Klang v. Smith's Food &​ Drug Centers, Inc.
Note: Restrictions on Distributions
(b).new model statutes
(C).Fraudulent Conveyance Law
In re Color Tile, Inc.
Wieboldt Stores, Inc. v. Schottenstein
Note: Fraudulent Conveyance Avoidance of Leveraged Buyouts
(D).Fiduciary Duty
Credit Lyonnais Bank Nederland N.V. v. Pathe Communications Co.
Note: Pre-Bankruptcy Fiduciary Duties to Creditors
North American Catholic Educational Programming Foundation, Inc. v. Gheewalla
Section G Insolvency Reorganization
1.Introduction: The Reorganization Bargain and the Limits of the Parties' Bargaining Freedom
(A).Reorganization By Judicial Proceeding
Contents note continued: (B).The Parameters of the Bankruptcy Bargain
2.The Rise and Decline of Absolute Priority
(A).Absolute Priority Under the Bankruptcy Act of 1938
Ayer, Rethinking Absolute Priority After Ahlers
Note: A Contrasting Account
Consolidated Rock Products Co. v. Du Bois
Note: The Aftermath of the Consolidated Rock Products Company Case
Note: Issues Under Absolute Priority
Note: The Composition Tradition and the Best Interest of Creditors Standard
(B).The Bankruptcy Act of 1978
House Report No. 95-595
3.Reorganization under the Bankruptcy Code
In re Zenith Electronics Corporation
Note: Proceedings Under Chapter 11
(B).Absolute Priority Under Chapter 11
Excerpt From Debates on Bankruptcy Reform Act of 1978
Note: Issues Under the Code
Note: Empirical Results
-Deviations From Absolute Priority
(C).Rethinking Traditional Reorganization
Contents note continued: (1).Rethinking Creditors' Rights-The Common Pool and the Creditors' Bargain
(2).Rethinking the Reorganization Process-Alternative Approaches
(a).market-based proposals
(1).cash auction
(2).securities market test
(3).options
(4).judicially-supervised auction
(b).contractual proposals
(1).automatic conversion
(2).contractual choice
4.Creditor Control and Asset Sales
Skeel, Creditor's Ball: The "New" New Corporate Governance in Chapter 11
Note: Restrictions on Executive Pay
Note: Incidents of Creditor Control
In re Chrysler LLC
Note: Section 363 Sales
pt. III FINANCING WITH HYBRID SECURITIES
Section A Preferred Stock Financing
1.Rights and Preferences
(A).Preferred Stock Defined
(B).The Preferred Stock Contract
(C).Issuer Motivations and Holder Expectations
2.Claims to Dividends
(A).Preferred Stock Dividend Provisions
(B).Board Discretion to Withhold Payment
Contents note continued: (1).Cumulative Preferred
(2).Noncumulative Preferred
(3).Issuer Tender and Exchange Offers to Holders of Preferred in Arrears
Eisenberg v. Chicago Milwaukee Corp.
Note: Denver Tramway
(4).Board Discretion and Voting Control
3.Claims to Principal, Including Arrearages
(A).The Liquidation Preference
(B).Redemption Rights
Mueller v. Kraeuter &​ Co.
SV Investment Partners, LLC v. ThoughtWorks, Inc.
4.Alteration of Financial Rights
(A).By Charter Amendment
Goldman v. Postal Telegraph
Note: Junior Hold Ups
(B).By Merger
Bove v. The Community Hotel Corporation of Newport, Rhode Island
Note: The Investment Value Doctrine
Note: Drafting
Note: Preferred Class Voting in Respect of Mergers
5.Judicial Review of Allocations in Mergers
(A).De Facto Theories
Rothschild International Corporation v. Liggett Group Inc.
Note: "De Facto" Theories
(B).Fairness Scrutiny
Contents note continued: Dalton v. American Investment Co.
Note: FLS Holdings
LC Capital Master Fund, Ltd. v. James
Section B Convertible Securities and Warrants
1.Terms and Valuation
(A).The Value of a Call Option
(B).Convertible Bond Features and Valuation Variables
(1).Traditional Convertibles
(a).elements of convertible bond value
(b).the conversion premium
(c).issuer call rights
Note: The Convertible Bond Puzzle
(2).Variations on the Traditional Convertible
(a).original issue discount convertibles
(b).puttable convertibles
(c).equity-linked securities
(d).floating price ("toxic") convertibles
2.Conflicts of Interest
(A).Protective Contract Provisions
Note: Implied in Fact Antidilution Protection
Note: Authorized Stock
HB Korenvaes Investments, L.P. v. Marriott Corporation
Note: Convertible Hedges
Note: Interpretation Contra Proferentum
Note: Convertible Bond Contracts
(B).Duties Implied in Law
Contents note continued: Van Gemert v. Boeing Co.
Note: Van Gemert's Operative Theory
Note: The Duty to Notify in Delaware
Broad v. Rockwell International Corp.
Note: Fair and Unfair Dividends
Note: Fair and Unfair Mergers
Note: Appraisal Rights
3.Contingent Convertibles in Bank Capital Structures
Basel Committee on Banking Supervision
Note: CoCos
Section C Venture Capital Finance
1.Overview
(A).History and Characteristics
(B).Securities and Documentation
(C).Control Arrangements
Equity-Linked Investors, L.P. v. Adams
Note: Case for Comparison
Note: Opportunism
In re Trados Incorporated Shareholder Litigation
Note: The Duty to the Common When the Common is Under Water
pt. IV EQUITY CAPITAL STRUCTURE
-PAYOUT POLICY AND OWNERSHIP STAKES
Section A Payout Policy
-Dividends, Repurchases, and Retained Earnings
1.Cash Dividends and Dividend Policy
(A).A Theory of Stock Valuation
Contents note continued: (1).Dividend Capitalization Model
(2).The Retention Ratio
(B).The Role of Dividend Policy
(1).Traditional Dividend-Practice
Lintner, Distributions of Incomes of Corporations Among Dividends, Retained Earnings and Taxes
Note: Payout Practices
(2).Dividends as a Financing Decision
-The Dividend Puzzle
(a).dividend policy under the irrelevance hypothesis
(b).taxes, other imperfections, and the low payout hypothesis
(3).Information Asymmetries, Signaling, and Pecking Order Theory
(4).Management Dividend Policies and Agency Theory
(5).The Trend toward Cash Retention
2.Applicable Legal Standards
Berwald v. Mission Development Company
Note: Dividends and "Corporate Opportunity"
Wertheim Schroder &​ Co. Incorporated v. Avon Products, Inc.
Note: Special Dividends
Note: Disclosure on the Downside
Note: Dividends and Conflicts of Interest
3.Stock Dividends
Contents note continued: Note: Explaining Stock Splits and Stock Dividends
Note: Stock Dividends As Information and the Regulation of Disclosure
New York Stock Exchange, Listed Company Manual
Note: Reverse Splits and Fractional Shares
4.Restructuring by Dividend
-Spin Offs and Tracking Stock
(A).Spin Offs
(B).Tracking Stock
5.Repurchase of Outstanding Shares
(A).The Economics of Share Repurchases
(1).Repurchase Transactions
(2).Theoretical Irrelevance Between Dividends and Repurchases
(3).Agency Costs and Information Asymmetries
(4).Taxation
Note: Repurchases
-Volume and Stated Purpose
(B).Repurchases
-Fiduciary and Disclosure Obligations
(2).Fiduciary Duties
Strassburger v. Earley
Note: Regulation of Repurchases
Note: Greenmail and Defensive Repurchases
(3).Federal Securities Laws
-Repurchase Tender Offers
Note: Federal Regulation of Repurchase Tender Offers
Contents note continued: (4).Federal Securities Laws
-Open Market Repurchases
(a).manipulation
-Securities Exchange Act Section 9(a)(2)
(b).safe harbor for potentially manipulative repurchases
Note: OMRs and Market Transparency
(5).Dividends, Repurchases, and Corporate Governance
Bratton, The New Dividend Puzzle
Section B Equity Ownership and the Value of the Firm
1.Executive Stock Options
(A).Stock Options and Incentive Alignment
Thomas and Martin, The Determinants of Shareholder Voting on Stock Option Plans
Note: After Exercise
AT &​ T Corp. v. Lillis
Note: Tax and Accounting
(B).Policy Debates
(1).Pay without Performance
(2).The Defense
(3).The Financial Crisis of 2008
Bratton and Wachter, The Case Against Shareholder Empowerment
Note: Executive Pay Under Dodd-Frank
(C).Fiduciary Duties
Lewis v. Vogelstein
Note: Stock Options under Delaware Fiduciary Law
Ryan v. Gifford
Contents note continued: Note: Spring-Loading
2.Blockholding
(A).Blockholding, Corporate Governance, and Shareholder Value
(1).Blockholders as Monitors
(2).Comparative Corporate Governance: Market Versus Blockholder Systems
(3).Implications
(4).Activist Hedge Funds
(B).Regulation of Blockholders
(1).Regulation as a Barrier to Blockholding
CSX Corporation v. The Children's Investment Fund Management (UK) LLP
(2).Fiduciary Regulation of Blockholders
(a).noncontrolling blockholders
Rock, Controlling the Dark Side of Relational Investing
(b).controlling blockholders
Levco Alternative Fund v. The Reader's Digest Association, Inc.
Note: The Tele-Communications-AT &​ T Merger
Note: Regulatory Barriers: The "One Share, One Vote" Controversy
Perlman v. Feldmann
Note: The Proposed Rule of Equal Opportunity
Note: Regulation of Control Sales After Feldmann
Contents note continued: pt. V MERGERS AND ACQUISITIONS
Section A The Move to Merge
Andrade, Mitchell, and Stafford, New Evidence and Perspectives on Mergers
Note: Mergers and Value Creation
Section B Accounting and Taxes
1.Accounting for Mergers
-Purchase, Pooling, and Accounting for Goodwill
(A).Purchase Versus Pooling
(B).Revised Purchase Treatment
Financial Accounting Standards Board Summary of Statement No. 141, Business Combinations
Questions
Financial Accounting Standards Board Summary of Statement No. 142, Goodwill and Other Intangible Assets
Note: Testing Goodwill for Impairment
2.Tax Treatment of Mergers
Carney, Mergers &​ Acquisitions: Cases and Materials (2d ed. 2007)
Section C Formal Aspects of Merger
1.The Mechanics of the Process
(A).Classical Mergers
(1).Stock for Stock Merger
(2).Small Scale Merger
(3).Classical Merger with Cash Consideration
(4).Parent Subsidiary Mergers
Contents note continued: (B).Sale of Assets
-An Alternative to the Classical Merger
Hollinger, Inc. v. Hollinger International, Inc.
(C).Share Purchase and Share Exchange
(D).Triangular Mergers
(E).De Facto Mergers
Farris v. Glen Alden Corp
Note: A Pennsylvania Triangular Merger
Hariton v. Arco Electronics, Inc.
Note: Other Consequences of De Facto Merger
Note: Successor Liability
2.Appraisal
Thompson, Exit, Liquidity, and Majority Rule: Appraisal's Role in Corporate Law
Note: Reform
Section D The Merger Agreement
Volk, Leicher &​ Koloski, Negotiating Business Combination Agreements
-The "Seller's" Point of View
IBP, Inc. v. Tyson Foods, Inc.
Hexion Specialty Chemicals, Inc. v. Huntsman Corp
Note: MACs
Section E Fairness and Disclosure
1.Freeze
-Outs and Buyouts: Fair Dealing, Fair Price, and the Appraisal Remedy
(A).Freeze
-Outs
(1).Alternative Perspectives
Contents note continued: Brudney &​ Chirelstein, Fair Shares in Corporate Mergers and Takeovers
Easterbrook and Fischel, Corporate Control Transactions
(a).business purpose
Coggins v. New England Patriots Football Club, Inc.
Note: Business Purpose and Fairness
(b).fair dealing and fair price
Weinberger v. UOP, Inc.
Note: On Remand
Note: Market Price as a Measure of the Value of Subsidiary Stock
Note: Clarifying Weinberger
Note: Kahn v. Lynch Communication Systems
In re Siliconix Incorporated Shareholders Litigation
Glassman v. Unocal Exploration Corp.
In re Pure Resources, Inc., Shareholders Litigation
Subramanian, Fixing Freezeouts
Note: The Siliconix Cases
(3).Appraisal Exclusivity
Note: Interrelations Between Fairness Claims and Appraisal Actions
(B).Management Buyouts
In re Topps Co. Shareholders Litigation
Note: Umpiring the Going Private Process
Note: The Fairness Opinion
Contents note continued: 2.The Duty of Care
Note: The Remand in Cede v. Technicolor
Note: The Duty of Care and Merger Negotiations
Note: The Duty of Care and Asset Sales
3.Enhanced Scrutiny
Revlon, Inc. v. MacAndrews &​ Forbes Holdings, Inc.
Note: The Unocal Background
Note: Mills v. Macmillan
Note: The Revlon Standard
Paramount Communications Inc. v. QVC Network Inc.
Note: The "Revlon" Duty After Paramount
Omnicare, Inc. v. NCS Healthcare, Inc.
Note: Lockups
Note: Comments on the Delaware Cases
Lyondell Chemical Company v. Ryan
Note: Lear Corporation
4.Disclosure Duties
(A).State Fiduciary Law
Emerald Partners v. Berlin
Note: Further Proceedings
Note: The Status of the Fiduciary Duty to Disclose
(B).Federal Disclosure Rules: The Materiality of Soft Information
Starkman v. Marathon Oil Co.
Basic Incorporated v. Levinson
Contents note continued: Note: Misrepresentations, Silence, Mergers and Other Soft Information
Note: Materiality and Context
Note: Sources of Legal Obligations to Disclose on the Part of Non-Transactors
APPENDICES
A.Financial Contract Forms
Best Buy Indenture
Best Buy Supplemental Indenture
Note Purchase Agreement
Equinox Subordination Provisions
Preferred Stock Charter Provisions
TARP Preferred Stock
TARP Warrant
Masco Corp. Notes Conversion Provisions
National Venture Capital Association Term Sheet
National Venture Capital Association Voting Agreement
Agreement and Plan of Merger
B.State Corporate Codes
Provisions of the Revised Model Business Corporation Act
Provisions of the Delaware and New York Statutes
C.The Bankruptcy Code
D.Provisions of the Federal Securities Laws and Rules Promulgated Thereunder
E.Sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
F.Tables.

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