September 27, 2022
In the popular imagination, the spectacular corporate transactions of the 1980s raised the profile of corporate finance from a numbers-dense exercise for accountants to a glamorous adventure, narrated via best-sellers and splashy films with big stars. In reality, corporate finance is a complicated area that, when mastered and applied innovatively, can lead to tremendous value for the stakeholders of an organization and for society.
The course, Corporate Finance, taught to MS Quantitative Finance (MSQF) students during the summer semester at Stern by NYU Stern Clinical Professor of Finance, Anjolein Schmeits, is a gateway to understanding how organizations make investment and financing decisions. Through a combination of case studies, projects, and discussions, the course covers the theory and practice of various valuation techniques, applications and limitations in the real world, and such foundational topics as capital budgeting, investment decision rules, real options, and the cost of capital, among others.
Professor Schmeits lecturing in her Corporate Finance course for the MSQF program
©Myaskovsky: Courtesy of NYU Photo Bureau.
Schmeits explained, “The Corporate Finance course that I teach is mostly concept-based, and the key principles of finance apply generally. I try to bring in both perspectives mostly by discussing institutional differences between the East and the West, presenting stylized facts on financing choices made by Chinese versus US-based companies, and by bringing in current events—both geopolitical and financial market developments. An example would be a discussion on recent developments in the Chinese housing and real estate market. I also try to draw parallels whenever relevant.”
Real-world cases are introduced to teach students to analyze the most representative financial decisions, and Schmeits leads them to hypothesize alternative scenarios. This helps students internalize and apply the concepts, as well as question assumptions. “It puts the students in the shoes of the decision-makers and allows them to both become competent practitioners and critical consumers of financial analysis,” she explained. MSQF Class of 2023 student Lucas Liu,commented, “I love that she incorporates case studies in almost every class. We get to witness the real-world application of the concepts we just discussed in class. And her lectures are very structured and thought-provoking.”
The professor, an expert in contract design and the optimal choice of financing sources by companies, as well as in the role of financial intermediaries in financial markets and in corporate governance, has substantial practical experience as well. She has done policy work for the Dutch government—Schmeits is a Netherlands native—relating to the competitiveness of the corporate sector and the cost of capital and has also worked with an investment bank on valuation issues in fairness opinions. “Where relevant, I share what I have learned from these real-word examples, show the students what can go wrong if the concepts are not correctly applied in practice, and discuss what the main challenges and debates are among policymakers and practitioners regarding valuation and financial management.”
The current economic environment plays a role in showing students how the real world affects analyses and decisions. This summer, for example, the class discussed the impact of inflation on the cost of capital, economic growth, and corporate profits, and also talked about the effect of changes in the corporate tax code on financial and payout policy.
“We also discussed how we can incorporate economic uncertainty in the valuation framework, and the tools we can use to stress test the effect of financial decisions on the value of companies,” Schmeits said. “In addition, we talked about the impact of shareholder activism and some legislative initiatives in Congress regarding share buybacks, tax proposals, etc., and also followed the news on specific companies as it relates to the course topics. This can be anything from Apple's decision to issue new bonds to the acquisition of Twitter or Starbucks' expansion strategy in China.”
During the duration of the course, students work on two substantive group case projects: an investment analysis and a comprehensive analysis study where they have to develop a financial plan for a growing company by linking its strategic objectives to an optimal financial policy, including the design of the financial securities that the firm should issue to raise capital.
Students give two thumbs up for the professor’s teaching style, which suits the complex, technical subject. “I can see her passion for the content,” said Yinuo Wang, MSQF CO’23. “And she gives detailed notes and feedback on our assignments that help solidify our understanding of the content.”
The respect and enjoyment is mutual. Remarks Schmeits: “I very much enjoy teaching the students. They are smart, engaged, analytically strong, committed to learn, and willing to put in the effort. The turnaround time on assignments sometimes is short, but they have stepped up to the plate every single time. The students are a bit younger than the typical Stern MBA students, and their quantitative skills therefore are a bit ‘fresher’ in their minds. This is very helpful for a finance-focused program like the MSQF, which goes much deeper into one discipline, contrary to an MBA program, which by design offers a broader (or more generalist) business degree. The students have been a pleasure to work with.”
Professor Schmeits at the front of the MSQF classroom at Stern
©Myaskovsky: Courtesy of NYU Photo Bureau.