FIN 555 Financial Markets and Employees
(English only)
General Information
The organization of markets has changed significantly in recent decades. Transaction costs in capital markets have declined, and now provide firms with much better access to private equity, venture capital, and tailored financial products. Product markets have internationalized and resulted in more complex and widely distributed supply chains. Labor markets have been affected by the trend toward the gig economy and firms’ increased reliance on innovation and intangible assets. The last aspect is key because we need to ask how firms can develop a sustainable competitive advantage in a setting in which their key assets are employees. All these developments significantly influence the management, ownership, financing, and organization of firms, while also bearing crucial implications for stakeholder interests and economic inequality.
This course surveys and discusses recent findings on the interface between financial markets and employees. Much of the textbook discussions in various subfields of business and economics are still based on traditional paradigms, which view firms as collections of physical assets that generate cash flows, and which see financial markets as mainly occupied with valuing and distributing these cash flows. Yet, recent research has moved on from this paradigm and acknowledges the secular shift of market economies toward intangible capital. The new paradigm recognizes that this traditional conception is in serious need of overhaul, and needs to incorporate the increased role of human capital in corporations and the shift in the balance of power between investors and employees that this development entails. Still, much of this change in thinking and many new findings have not found their way into business education. This course is intended to fill this gap.
Further Information
Learning Outcomes
After successfully completing this course, students should be able to do the following:
- Assess business situations that affect the labor force and understand what is special about human capital.
- Analyze the relationship between firms' labor force (e.g., commitment to employment insurance, difficulties in attracting and retaining employees, job satisfaction) and how financial markets relate to these decisions (valuation, choice of ownership, capital structure).
- Understand how the markets for key employees (top and middle managers, CEOs, directors, innovators) are organized, and why they sometimes feature skyrocketing levels and complex structures of compensation.
- Evaluate how financial transactions like buyouts, mergers and acquisitions, and recapitalizations affect employees and the composition and compensation of firms' labor force.
- Assess the composition of the workforce, and when diversity of skills and opinions is useful and when it is harmful for decision-making and firm value.
- Develop a toolbox of theoretical concepts relevant to analyzing human capital issues (and beyond).
- Gain a sound knowledge of empirical facts that are not yet available in a comprehensive written textbook or survey format.
- Ground ethical discussions of firms' human resource policies in a sound understanding of theory and empirical facts.
Prerequisites
- Formal: None
- Recommended: The course requires cross-disciplinary thinking and understanding of key concepts in accounting, finance, economics, and management at the level of the respective courses in the Master’s curriculum. The course will introduce key theoretical concepts in economics (e.g., signaling, hold-up problems, principal-agent relations, etc.). No prior knowledge of these concepts is assumed, and all requisite tools from game theory and microeconomics will be introduced at a relatively informal level. However, tolerance for handling abstract concepts is required.
Registration
Registration is via Portal2.
Policy regarding the revision of corrected exams
If you believe that your exam was not fairly graded (e.g., a mistake in the correction or unfair allocation of points), you can ask for your exam to be regraded. In such a case, you must provide a written statement in which you request a complete revision of your exam, provide reasons for why you believe to deserve more credit, and ask for regrading. Please note that we will regrade the entire exam and not just the passages for which you request regrading. The revision may also negatively affect your grade (e.g., we spot a mistake that was not previously identified). We will not modify the grade on the day of the exam revision.