Found 417 article(s) in category 'Financial Services'

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return. Mihir Desai, 2017, Book, “In 1688, essayist Josef de la Vega described finance as both “the fairest and most deceitful business . . . the noblest and the most infamous in the world, the finest and most vulgar on earth.” The characterization of finance as deceitful, infamous, and vulgar still rings true today – particularly in the wake of the 2008 financial crisis. But, what happened to the fairest, noblest, and finest profession that de la Vega saw?Link

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Lessons Unlearned? Corporate Debt in Emerging Markets

Lessons Unlearned? Corporate Debt in Emerging Markets. Laura Alfaro, May 2017, Paper, “This paper documents a set of stylized facts about leverage and financial fragility in the nonfinancial corporate sector in emerging markets since the Global Financial Crisis (GFC). Corporate debt vulnerability indicators prior to the Asian Financial Crisis (AFC) attributed to corporate financial roots provide a benchmark for comparison. The firm-level data suggest that emerging markets post-GFC have lower leverage ratios than the five Asian crisis countries (Asian Five) in the run-up to the AFC. However, a broader set of emerging market countries show weaker liquidity, solvency, and profitability indicators.Link

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The Case Against Subsidizing Housing Debt

The Case Against Subsidizing Housing Debt. Jeffrey Frankel, May 29, 2017, Opinion, “At the end of the first quarter, according to the Federal Reserve Bank of New York, American consumer debt for the first time exceeded its previous peak (in dollars), reached in the third quarter of 2008, just as the global financial crisis erupted. Although car loans and student debt have been rising especially rapidly, housing debt remains more than two-thirds of the $12.7 trillion total.Link

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Harvard’s Hausmann Asks JPMorgan to Cut Venezuela From Index

Harvard’s Hausmann Asks JPMorgan to Cut Venezuela From Index. Ricardo Hausmann, May 26, 2017, Video, “Harvard University economist Ricardo Hausmann is calling on JPMorgan Chase & Co. to remove Venezuela from its bond indexes so that investors whose portfolios track the gauges aren’t compelled to buy notes issued by a government accused of human-rights violations.Link

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Understanding the Political Economy of the Eurozone Crisis

Understanding the Political Economy of the Eurozone Crisis. Jeffry Frieden, 2017, Paper, “The Eurozone crisis constitutes a grave challenge to European integration. This article presents an overview of the causes of the crisis and analyzes why it has been so difficult to resolve. We focus on how responses to the crisis were shaped by distributive conflicts both among and within countries. On the international level, debtor and creditor countries have fought over the distribution of responsibility for the accumulated debt; countries with current account surpluses and deficits have fought over who should implement the policies necessary to reduce the current account imbalances. Within countries, interest groups have fought to shift the costs of crisis resolution away from themselves.Link

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Why Did Trump Accept Venezuela’s Money?

Why Did Trump Accept Venezuela’s Money? Kenneth Rogoff, May 4, 2017, Opinion, “There is a certain irony in recent news that Venezuela donated a half-million dollars to Donald Trump’s presidential inauguration through Petróleos de Venezuela (PDVSA), the state-owned oil company. Venezuela, of course, is a serial defaulter, having done so more times than almost any other country over the last two centuries.Link

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Private Equity and Financial Fragility during the Crisis

Private Equity and Financial Fragility during the Crisis. Josh Lerner, 2017, Paper, “Does private equity increase financial fragility during economic crises? To investigate this issue, we examine the financial decisions and performance of private equity-backed companies in the United Kingdom during the 2008 financial crisis. We find that PE-backed companies experienced a smaller decline in investment, relative to a carefully selected control group. PE-backed companies also experienced a larger increase in debt and equity issuances, while overall leverage remained unchanged. The effects are particularly strong for companies that were more likely to be financially constrained and those where private equity sponsors were more likely to have resources to help the portfolio company. The results are consistent with the hypothesis that PE sponsors relax financing constraints during a sudden tightening of credit markets and inconsistent with the hypothesis that private equity increase financial fragility during periods of financial turmoil.Link

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Multinational Activity in Emerging Markets: How and When Does Foreign Direct Investment Promote Growth?

Multinational Activity in Emerging Markets: How and When Does Foreign Direct Investment Promote Growth? Laura Alfaro, 2017, Paper, “Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms.Link

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Coordination Frictions in Venture Capital Syndicates

Coordination Frictions in Venture Capital Syndicates. Ramana Nanda, Matthew Rhodes-Kropf, April 11, 2017, Paper, “An extensive literature on venture capital has studied asymmetric information and agency problems between investors and entrepreneurs, examining how separating entrepreneurs from the investor can create frictions that might inhibit the funding of good projects. It has largely abstracted away from the fact that a startup typically does not have just one investor, but several VCs that come together in a syndicate to finance a venture. In this chapter, we therefore argue for an expansion of the standard perspective to also include frictions within VC syndicates.Link

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