Found 388 article(s) for author 'Financial Services'

Expectations and investment

Expectations and investment. Andrei Shleifer, May 2016, Paper. “Using micro data from the Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to the extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behaviour.Link 

Tags: , , , , ,

A Debt Agenda for the G7

A Debt Agenda for the G7. Martin Feldstein, May 23, 2016, Opinion. “On May 26-27, the heads of the Group of Seven leading industrial countries will gather in Japan to discuss common security and economic problems. A major common problem that deserves their attention is the unsustainable increase in the major developed countries’ national debt. Failure to address the explosion of government borrowing will have adverse effects on the global economy and on debt-burdened countries themselves.Link

Tags: , , , , ,

Risk Neglect in Equity Markets

Risk Neglect in Equity Markets. Malcolm Baker, Spring 2016, Paper. “The link between measures of risk and return within the equity market has been very weak over the past 47 years: in the United States, returns on high-risk stocks have cumulatively fallen short of the returns on low-risk stocks, during a period when the equity market as a whole experienced high returns relative to Treasury bills. In the spirit of Fischer Black’s 1993 article “Beta and Return,” published in this journal, the author takes seriously the idea that this evidence reflects a risk anomaly—a mispricing of risk for behavioral and institutional reasons—and revisits the associated implications for investing and corporate finance, examining asset allocation, high leverage in financial firms, low leverage in industrial firms, private equity, venture capital, and bank capital regulation along the way. Many of these implications fit nicely with Black’s original conjectures, and the author highlights refinements and additions to the original list.Link

Tags: , , , , , ,

Financing Risk and Innovation

Financing Risk and Innovation. Ramana Nanda, Matthew Rhodes-Kropf, March 2016, Paper, “We provide a model of investment in new ventures that demonstrates why some places, times, and industries should be associated with a greater degree of experimentation by investors. Investors respond to financing risk, a forecast of limited future funding, by modifying their focus to finance less innovative firms. In equilibrium, financing risk disproportionately impacts innovative ventures with the greatest real option value by creating a trade-off between protecting the firm from financing risk and maximizing its real option value. We propose that extremely novel technologies may need ‘hot’ financial markets to get through the initial period of discovery or diffusion. This paper was accepted by Gustavo Manso, finance.Link

Tags: , , , , ,

Pay Now or Pay Later? The Economics within the Private Equity Partnership

Pay Now or Pay Later? The Economics within the Private Equity Partnership. Victoria Ivashina, Josh Lerner, March 26, 2016, Paper. “The article focuses on the importance of equity partnerships that are essential to the professional service and investment sectors. It examines private equity partnerships and shows that the allocation of fund economics to individual partners is divorced. It mentions that departures of senior partners have negative effects on the ability of funds to raise additional capital.Link

Tags: , , , , , , ,

A Model of Credit Market Sentiment

A Model of Credit Market Sentiment. Robin Greenwood, Samuel Hanson, March 24, 2016, Paper. “We present a model of credit market sentiment in which investors form beliefs about future creditworthiness by extrapolating past defaults. Our key contribution is to model the endogenous two-way feedback between credit market sentiment and credit market outcomes. This feedback arises because investors’ beliefs depend on past defaults, but beliefs also drive future defaults through investors’ willingness to refinance debt. Our model is able to capture many documented features of credit booms and busts, including the link between credit growth and future returns, and the “calm before the storm” periods in which fundamentals have deteriorated but the credit market has not yet turned.Link

Tags: , , , , ,

Gains from Foreign Direct Investment: Macro and Micro Approaches World Bank’s ABCDE Conference

Gains from Foreign Direct Investment: Macro and Micro Approaches World Bank’s ABCDE Conference. Laura Alfaro, March 23, 2016, Paper. “This paper discussed the importance of an “integrated approach” to the study of the effects of FDI on host countries. Macro-level work that examines countries at different stages of development and institutional capacity is needed to surface the role of local conditions and absorptive capacities; micro-level work, that is firm-level data in developed as well as developing nations, to understand the mechanisms that impart substance to the anticipated benefits; and theoretical work to guide the analyses. The paper summarizes likely motives for foreign direct investment and potential effects of FDI on local economies as well as recent findings from the macro literature on the role of complementarities between FDI and local policies, conditions, and institutions and summarizes new efforts to understand the micro mechanisms and channels by which host countries can benefit from multinational activity, within and between firm productivity increases.Link

Tags: , , , , , ,

Women eschew Wall Street’s boys’ club — and its glass ceiling

Women eschew Wall Street’s boys’ club — and its glass ceiling. Iris Bohnet, March 3, 2016, Video. “Wall Street has long been considered a men’s-only club — so what is it like for a woman there, when only 15 percent of traders are female? According to Maureen Sherry, a former Bear Stearns director turned author, the problem goes beyond frat-boy antics and sexual harassment. Economics correspondent Paul Solman talks to Sherry about how the glass ceiling is repelling women from Wall Street.Link

Tags: , , , ,

Pay Now or Pay Later?: The Economics within the Private Equity Partnership

Pay Now or Pay Later?: The Economics within the Private Equity Partnership. Victoria Ivashina, Josh Lerner, March 2016, Paper, “The economics of partnerships have been of enduring interest to economists, but many issues regarding intergenerational conflicts and their impact on the continuity of these organizations remain unclear. We examine 717 private equity partnerships, and show that (a) the allocation of fund economics to individual partners is divorced from past success as an investor, being instead critically driven by status as a founder, (b) the underprovision of carried interest and ownership–and inequality in fund economics more generally–leads to the departures of senior partners, and (c) the departures of senior partners have negative effects on the ability of funds to raise additional capital.Link

Tags: , , , , ,

Why Investors Should Care About the Next Generation of Accounting Standards

Why Investors Should Care About the Next Generation of Accounting Standards. Robert Eccles, February 27, 2016, Opinion. “This is the mission of the Sustainability Accounting Standards Board, a nonprofit organization established by Jean Rogers in 2011. Michael Bloomberg, former New York mayor, is the current chair, and former Securities and Exchange Commission chair Mary Schapiro is SASB’s vice chair. SASB’s approach is a simple but powerful one. Through a rigorous process, it identifies the material ESG information that should be reported on a company’s Form 10-K, or equivalent reporting document for non-U.S.-listed companies, and the recommended key performance indicator or metric for each issue. The ESG issues are grouped into the following five categories: environment, social capital, human capital, business models and innovation, and leadership and governance.Link

Tags: , , ,