The course aims to develop an understanding of how firms finance their investments and operations. In particular, we will study how firms design their capital structure, as well as which corporate governance mechanisms they put in place in order to ease their access to external financing. In the first part of the course we assume that the firm’s cash flows are exogenous with respect to financial decisions; in this framework we study the Modigliani Miller theorems stating which conditions make capital structure irrelevant, and derive the optimal debt/equity mix in the presence of taxes and costly bankruptcy. In subsequent lectures we address the issue of how a firm’s capital structure affects its value once information problems between firm insiders and external investors are taken into account. The topical issue of takeovers and mergers will also be examined.