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ECON4245 - Economics of the Firm

Course content

The course focuses on the relationship between the firm and its management on the one hand, and its sources of finances on the other hand (banks, share holders, etc.). Emphasis is put on incentives, such as: incentives for the management to perform in the interest of owners, incentives for creditors and owners to monitor the firm’s management, and incentives for owners to fulfil obligations to creditors. These and related issues are studied by using models from contract theory, in particular moral-hazard models, but also models of asymmetric information and models of incomplete contracts.

Learning outcomes

Knowledge outcomes
The students are expected to get an understanding of the basic issues within corporate finance and corporate governance. This includes: a firm’s limited capacity to get credit due to moral hazard; how asymmetric information makes outside finance expensive; how corporate finance relates to product markets and is affected by the potential for earnings manipulations; how activities by outsiders to the firm affect corporate finance; and how allocation of control rights affects corporate finance.

Skills
The student should be able to formulate problems related to corporate finance and to use contract theoretic models to analyse such problems. The students should understand how information problems make it difficult to align the interests of the various parties involved – owners, creditors, and management – and how these difficulties affect the way the firm is financed.

Admission

The subject is open for both Norwegian and international applicants.

Students who are admitted to study programmes at UiO must each semester register which courses and exams they wish to sign up for in StudentWeb.

Students enrolled in other Master's Degree Programmes can, on application, be admitted to the course if this is cleared by their own study programme.

International applicants, if you are not already enrolled as a student at UiO, please see our information about admission requirements and procedures for international applicants.

Prerequisites

Formal prerequisites

Bachelor's degree in Economics, or equivalent

Overlap

10 credits against ECON531 Foretaksøkonomi. 10 credits against SØK531 Foretaksøkonomi, 3. avd. samfunnsøkonomi.

Teaching

Lectures: 2 hours per week for 13 weeks. Seminars: 2 hours per week for 6 weeks.

Exam information

A 3 hour written school exam.

Exam resources

No special exam resources are allowed.

Language of examination

The problem set will be given in English. Answers can be given in Norwegian, Swedish, Danish or in English. See § 6.4 i Forskrift om studier og eksamener ved Universitetet i Oslo .

Assessment and grading

Course grades are awarded on a descending scale using alphabetic grades from A to E for passes and F for fail. Read more about the grading system .

Explanations and appeals

Students can request an explanation of their grades, and can also appeal against their grades or make a complaint about formal examination errors. Read more about explanations and appeals

Possibility of make-up exams and re-takes

The Department of Economics has passed following resolution for ECON-courses: It will no longer be possible for candidates to register for an exam in a lower level course after having passed exams in intermediate and advanced level courses in the same subject area (also where there are no pre-requisites that apply to the intermediate course). Further information can be found here.

You can usually resit an exam, but the conditions depend on whether you had a valid reason for absence from the regular exam. Read more about resitting an exam .

Withdrawing from exams and limits on re-takes

A student can sit for this exam up to 3 times. If a student wishes to withdraw from the exam, s/he must do this in StudentWeb at least two weeks prior to the first day of the exam. Failure to do so will be counted as one of the three opportunities to sit for the exam.

Exam options for students with special needs

Students may apply for access to alternative exam resources or exam forms on the basis of chronic illness and/or special needs that create a marked disadvantage to other students in the exam situation. Mothers who are breastfeeding may apply for extra time to complete the exam.

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