個案總覽

The NovaStar case describes the challenges faced by short seller Marc Cohodes of hedge fund Rocker Partners as he tried to expose what he thought was widespread fraud in mortgage lender NovaStar Financial. The case is set in the time period from 2001 to 2007 and tracks the growth of the subprime industry and its collapse leading to the financial crisis. The case describes the business model of NovaStar, a leading subprime mortgage lending company, and its accounting practices with a focus on the key risks and opportunities facing the company. The case requires students to put themselves in the shoes of Marc Cohodes in order to understand the business model and accounting numbers and to identify if the financial performance is a good representation of the true economic performance. In particular, students learn accounting concepts related to securitization, gain on sale accounting, valuation of available for sale securities, and analyzing the statement of cash flows. The case also allows students to understand the roles and incentives of various capital market participants such as sell-side analysts, the media, auditors, and the Securities and Exchange Commission (SEC).

The case studies the decision of the security services corporation Brink's Company to spin-off its home security division from the rest of the company. The decision followed intense pressure on the company by three activist hedge funds who felt that Brink's was chronically undervalued and the individual businesses were worth more than the combined company. The company resisted the decision for over a year before agreeing to the break up. The case follows the argument made by the company and each of the investors. It also describes the actions by the company to convince its shareholders of the merits of keeping the company together, as well as the actions the activist investors took to get the attention of management, the board, and other investors. The businesses, secure transportation and home security monitoring, are described from both a business strategy and a financial perspective so that the potential value of different value enhancing options can be analyzed.

Mike Mayo takes on Citigroup (B) is a supplementary exercise to go along with Mike Mayo takes on Citigroup (A) case and is designed to give students an opportunity to understand the creation of deferred tax liabilities (DTLs) and the life cycle of a DTL using an example based on the difference between Modified Accelerated Cost Recovery System (MACRS) depreciation which is allowed for tax purposes, and straight line depreciation which is typically the method used for financial statements.

The case details the conflict between Mike Mayo, an influential banking analyst, and Citigroup about what Mayo considers aggressive accounting policies. Mike Mayo questions Citigroup's lack of a valuation allowance against its deferred tax assets despite Citi's recent losses. The case discusses the economics of and accounting for deferred tax assets. It also focuses on management-analyst relations and challenges faced by analysts in providing a negative opinion on companies. The inclusion of deferred tax assets in Tier 1 capital and implications for regulatory capital are also discussed.