Knowledge and Training for Financial Decision Making!

NEWSLETTER of April 26, 2019

 

The following content has been added at finexpert:


Studies > Performance

Rothschild / Deutsches Aktieninstitut

ESG FROM THE PERSPECTIVE OF INSTITUTIONAL INVESTORS - WHAT LISTED COMPANIES SHOULD KNOW

Besides the usual financial criteria, environmental and social topics, as well as corporate governance, are becoming ever more important to institutional investors when valuing companies and making investment decisions. A study released by Deutsches Aktieninstitut and Rothschild & Co affirms this trend. The study “ESG from the perspective of institutional investors - what listed companies should know” is based on extensive interviews with 18 international institutional investors, managing c. €14.4 trillion in assets and includes ten of the Top 20 investors in the DAX and MDAX. >more

Studies > Corporate Finance

Deloitte

BE YOUR OWN ACTIVIST: DEVELOPING AN ACTIVIST MINDSET

Activist investors have been operating in the marketplace for some time, but recently, the combination of a favourable regulatory environment and abundance of funds to invest, means that activists are here to stay. Executives and Boards who understand and apply activist techniques are better placed to meet the demands of activists and simultaneously drive shareholder value. This means they may look to understand the motivation of activists, ask some difficult internal questions about company performance and future direction, and then take concrete steps to improve shareholder returns. These pre-emptive actions can demonstrate that management is listening to shareholders and is taking measures to achieve superior results. >more

Studies > M&A

Bain & Company

2019 GLOBAL HEALTHCARE PRIVATE EQUITY AND CORPORATE M&A REPORT

Healthcare PE activity rose to record levels yet again in 2018. Total disclosed deal value reached $63.1 billion, the highest recorded since 2006, and deal count grew to 316 from 265 in 2017. North America remains the most active region, and provider and related services remains the most active sector. As we anticipated in last year’s report, PE funds expanded their suite of deal approaches, relying more on partnerships, public markets, nontraditional buyout structures and creative value-creation strategies in order to complete deals in a historically competitive market. >more

Studies > Macro

KKR

GLOBAL MACRO TRENDS: THE UNCOMFORTABLE TRUTH

As the intensifying yearn for yield by investors increasingly bumps up against “the uncomfortable truth” of declining interest rates amidst soaring fiscal deficits and bulging debt loads, KKR’s Global Macro, Balance Sheet, and Risk Analytics team has analyzed what yield-oriented investors, especially those with large swaths of exposure to Fixed Income and Real Assets, can do to outperform without taking on undue risks in this environment. Our suggestion is to own more cash flowing assets linked to nominal GDP, build more flexibility across mandates, and shorten duration where appropriate. Importantly, despite our view that inflation will remain low in the medium-term, we respect that the ‘Authorities’ are trying shrink existing debt loads by holding nominal interest rates below nominal GDP. As such, we believe strongly that an overweight to modestly leveraged Infrastructure and certain Real Estate investments with yield is prudent to add some ballast to one’s portfolio. >more


Research Papers > Corporate Finance

CLIENTELE EFFECTS EXPLAIN THE DECLINE IN CORPORATE BOND MATURITIES

Alexander W. Butler, Xiang Gao, and Cihan Uzmanoglu
2019
The average maturity of newly issued corporate bonds has declined substantially over the past 40 years, and traditional determinants of debt maturity fail to explain the trend. We show that the changing composition of the investors in the corporate bond market resolves this puzzle. The results of a Granger causality test, an instrumental variable approach, a natural experiment, and a regulatory study suggest that a decline in insurance company ownership in bonds leads to shorter bond maturities. These findings illustrate how developments in financial institutions can have real effects on corporations. >more

Research Papers  > M&A

CREDITOR CONTROL OF CORPORATE ACQUISITIONS

David Becher, Thomas P. Griffin, and Greg Nini
2019
We examine the impact of creditor control rights on corporate acquisitions. Nearly 75% of private credit agreements restrict borrower acquisition decisions. Following a covenant violation, creditors use their bargaining power to tighten these restrictions and limit acquisition activity, particularly deals expected to earn negative announcement returns. Firms that do announce an acquisition while in violation of a covenant earn 1.8% higher stock returns, on average, with the effect concentrated among firms with weak external governance. We conclude that creditors provide valuable corporate governance that benefits shareholders by reducing managerial agency costs. >more