312830 Master Seminar "Financial Constraint" (S) (SoSe 2023)

Brief description
Financial constraints arise due to frictions in the supply of capital, which are mainly due to information asymmetries between investors and the firm (Tirole, 2006), decreasing the elasticity of the supply of external capital curve, and driving a wedge between the internal and the external cost of capital. In the limit, a perfectly inelastic (i.e., vertical) supply curve implies that the firm “has been cut out of its usual source of credit” (Kaplan and Zingales, 1997). Empirical evidence suggest that the probability of being under financial constraint depends on a firm’s age and size (Hyytinen and Väänänen, 2006; Schneider and Veugelers, 2010; Hadlock and Pierce, 2010) or on its decision to be innovative (Hottenrott and Peters 2012; Hall et al., 2016). Evidence also suggest that these companies might adopt alternative strategies to raise financial resources such as, for instance, trade credits (Danielson and Scott, 2004; De Blasio, 2005; Yang, 2011) or tax avoidance (Edwards et al., 2016; Kong et al., 2021).
These master seminars aim at introducing students to these dynamics, investigating firms’ behavior under financial constraints through presentation, discussion and critical review of key research papers.

Course objectives
Students will increase their knowledge on market dynamics and firms behavior under financial constraints, and they will advance and deepen their familiarity on research methods through discussions and critical reviews of selected scientific articles.

Organization
These master seminars start with some introductive lectures on the core issues investigated by current literature, and successive seminar sessions during which students have to contribute to the learning process by presenting scientific articles, and actively taking part in discussions concerning the proposed cases studies.

Assessment methods
An oral presentation of scientific articles during the master seminars (first step), and the submission of an essay with a critical review at the end of the course (second step).

Prerequisites
None

Materials
Selected scientific articles.