A blink of an eye and I’m halfway through my term at London Business School. A question that some friends ask me is whether my time here is really worth the expense and opportunity cost. My answer is an unqualified yes. One of my key goals in taking time out from the workforce has been to gain a more profound mastery of finance; and on that note, I’m seeing the difference my newfound knowledge is contributing to the way I think about financial matters.

Several years ago in my former job as a journalist for Singapore’s Straits Times, I recall meeting a CEO of a bank, and I asked him why he was choosing to raise funds with debt, as opposed to equity. He muttered something about how debt is cheaper. Given what I know today, I wouldn’t have asked him that question. In thinking about financing decisions, firms actually have a preferred hierarchy, or the so-called pecking-order theory of capital structure.

The highest preference is to use internal financing before resorting to any form of external funds. If a company must use external funds, the preference is to use the following order of financing sources: debt, convertible securities, preferred stock, and common stock.

Implicit in this theory is information asymmetry, in which managers know more about the firm’s earnings and growth opportunities than outside investors do. In this case, this pecking order simply reflects the motivations of the CEO to reduce agency costs of equity and avoid the seemingly inevitable negative market reaction to an announcement of a new stock issue. Would the CEO have told me all that? Probably not.

Financial theory aside, a rich source of my learning has come from my classmates. There are numerous examples, but I’m going to cite two. At an information session hosted by a fund manager from the City of London we were given an analyst report on a certain company. He then droned on about why he liked the stock, until one of our Greek classmates stopped him in his tracks and said that the company’s main shareholders hailed from his country and had other, more complicated motivations. Clearly impressed, the fund manager wanted to see my classmate after the session.

Another episode dealt with corporate governance. A Japanese analyst classmate shared with us how the recent Olympus fiasco could mark the start of a wider malfeasance exposé. Like many of her analyst peers, she said she had been alarmed by how Japanese companies had made acquisitions and booked hefty advisory fees in the process. As we now know, Olympus paid its financial adviser about one-third of the US$2.2bn it paid for medical equipment maker Gyrus, an extremely high cost considering that most M&A advisory fees are about 1 per cent of the purchase price.

There’ll be more interesting nuggets to share this year, as I’m teaming up with a Sri Lankan classmate to do extensive research work for a leading Asian bank as part of my final project. I’ll also be taking more niche asset management classes.

Gabriel Chen is a Singaporean student at London Busines School and a former financial journalist for Singapore’s Straits Times.