Back to Class: Corporations, Finance, and Governance in the Global Economy

A pair of Stanford GSB professors use movies, skits, and Saturday Night Live-style cold opens to teach the “broad and deep applicability of finance.”

March 31, 2021

| by Patrick J. Kiger
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A still from the movie The Godfather. Credit: Getty Images/Steve Schapiro

Real-world corporate clashes sometimes mimic the fictional power struggles waged between Vito Corleone and his enemies. | Getty Images/Steve Schapiro

This course aims to give Stanford GSB students the skills and tools that they need to interact with and navigate the complex, continuously changing field of finance, and to understand the pervasive and profound influence that finance plays in companies, the economy, and society across the globe.

Editor’s Note

In this ongoing series, we ask Stanford GSB faculty members to share the purpose, structure, and takeaways of one particular course.

“Regardless of whether you’re going to have a career in banking, private equity, entrepreneurship, or in government, you will be interacting with the finance world,” explains co-instructor Joshua D. Rauh, the Ormond Family Professor of Finance. The ultimate goal, he notes, is to have students appreciate both “the broad and deep applicability of finance” as well as learn concepts developed in finance research.

The course covers topics ranging from valuation of cash flows and control to the capital structure, payout policy, and governance of both mature and entrepreneurial firms. Other subjects include restructuring and managing of firms in financial distress, the use of public markets to obtain liquidity and multiple share classes to retain control, and governance in venture capital and private equity. It also examines the rise of activism, social responsibility, and debates about the objectives of firms, both now and in the future.

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The cold-open format leads to more student engagement. At the same time, there is clear content around a session’s topic that is delivered in every skit.
Attribution
Amit Seru

Co-instructor Amit Seru, the Steven and Roberta Denning Professor of Finance, notes that getting students to assimilate and work with that much high-level, complex finance material is a challenge, particularly in an age of shortening attention spans. For that reason, the professors designed a course that’s highly interactive and, whenever possible, use engaging methods laden with humor to help students connect with the topics

Each session, for example, begins with a Saturday Night Live-style cold open, in which Rauh and Seru perform a brief dialogue, which they generally write and rehearse just a few days beforehand so that they can deal with recent events. One routine centered on the valuation of control during the WeWork versus SoftBank saga and its parallels with the movie The Godfather.

Before the pandemic, they would toss Kit Kats from an “opaque candy box” to students to illustrate the euphoric market reaction to actions (signals) such as corporate dividends. That stunt was designed to illustrate what such actions can do when information about a firm’s future prospects is asymmetric — it is known to firm managers but not available to the market.

“The cold-open format leads to more student engagement,” Seru explains. “At the same time, there is clear content around a session’s topic that is delivered in every skit.”

Rauh and Seru have created structured course material for each session, which includes both a short “dossier” — a mini case study about a real-world financial event — and a “background note,” which contains finance research and concepts useful for understanding that event.

Students are organized into teams to discuss the dossier and background material before class. In the sessions, teams receive “cold calls” from the instructors, during which they’re expected to offer a prepared response, with each team member participating.

The class also features guest speakers — “protagonists” in the case studies. These speakers listen to the discussions that professors have with the teams and then add their perspectives on the dossier questions being discussed in the session.

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