June 23, 2011
Corporate Finance Roundtable: What Should Change?
Posted by Christine Hurt

I am very much enjoying reading all the posts, and I'm grateful for Erik's hosting of this topic.  I wanted to chime in to the discussion and add little except the follow-up question:  What next?

1.    I have also taught Corporate Finance more than once, and I have also gone from using a business book and adding in law to using a law book and adding in finance.  Neither is very satisfactory, and neither strategy satisfies all students.  We have been trying to fashion a course out of what is there, but what should be there?  What should law students know about finance that is different than an undergraduate course?  I agree that many students simply need to be introduced to finance topics.  But then what -- what legal overlay should be there?  The law books merely have cases in which finance topics arise -- valuation, dilution, etc.  If law doesn't interfere much with a firm's financial structure choices, then is there more to the course than just getting transactional attorneys ready to speak the lingo?

2.    Which leads to my real question.  After the financial crisis, some fingers pointed to the lawyers at the SEC.  The prevailing wisdom was that SEC attorneys were competent litigators but did not understand the financial products they were (not) regulating.  The sense was that this needed to change.  Would this vacuum have been filled if every attorney graduating from law school took corporate finance?  My sense is that the corporate finance course provides a foundation but would get nowhere near the type of sophisticated and even esoteric knowledge required for the SEC to stay one step ahead of the market.  Is it a losing battle?

3.     As an aside, I teach NPV in Torts.  I don't know if everyone does, but I get the feeling many in my class have never thought about it before (and hope never to think about it again).

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