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NEWSLETTER of June 21, 2019

 

The following content has been added at finexpert:


Studies > Performance

The Boston Consulting Group

AFTER THE HONEYMOON ENDS: MAKING CORPORATE-STARTUP RELATIONSHIPS WORK

Accelerating market forces are pressuring even well-established companies to innovate and tap new markets in order to stay ahead of the competition. While many corporates have been content to pursue internal, incremental change in response to global competition and disruptive technologies, others have boosted their innovation engines by collaborating with startups. These relationships give corporates access to startups’ creativity, new ways of working, and proficiency with new technologies. Such relationships often start out very positively, with a heady honeymoon period during which both sides enjoy some early successes. Over time, however, frustration can set in as one or both partners wake up to the reality that they are not achieving all of their hopes and expectations. >more

Studies > Corporate Finance

Deloitte

CROWDLENDING – EINE ALTERNATIVE FÜR UNTERNEHMEN?

Disruption of the banking market was prophesied to crowdlending. There was talk of high growth rates and a threat to banks. In addition to private peer-to-peer loans, swarm financing was considered to have great potential for financing small and medium-sized enterprises (SMEs). Deloitte had already taken this opportunity in 2015 to take a closer look at crowdlending in this important segment. The result back then: crowdlending was not yet a serious competitor for traditional bank loans. The interviewees felt that a personal relationship with their bank was too important for them to have considered the new financing option more closely. A repeat of the study in 2018 showed that although the general awareness of crowd lending had risen sharply, companies still indicated that their house bank was their preferred financing partner. >more

Studies > Alternative Investments

Ernst & Young

PE PULSE: QUARTERLY INSIGHTS AND INTELLIGENCE ON PE TRENDS

2018 represented the strongest year for PE activity since before the financial crisis, as strong earnings, overall positive macroeconomic sentiment and the need to deploy more than US$700b in dry powder won out over the headwinds of increasing competition and continued high valuations. However, 2019 is off to a slower start as concerns around Brexit, escalating trade tensions and the late stage of the current cycle all seem to be coming to the forefront. In Q1 2019, firms announced transactions valued at US$96b, down 24% from Q1 2018. Amid this backdrop, PE firms are seeking ways to remain active and engage in opportunities where they can add value while avoiding the worst of today’s high-price environment. PE firms are leveraging add-ons, growth capital, and complex carve-outs as strategies to build compelling portfolios and mitigate continued high valuations, which have averaged 10.6 times EBITDA over the last two years, according to Leveraged Commentary and Data (LCD). >more

Studies > Alternative Investments

Cambridge Associates

READY, STEADY, CO-INVEST

Co-investments are one of only a handful of control levers within a limited partner’s (LP) toolbox, and we encourage all private market investors, regardless of size, to consciously consider implementing a co-investment program. In 2015, we provided an introduction to the multitude of benefits co-investments may add to a private investment program. Since then, Cambridge Associates’ Co-Investment practice has sourced more than 1,000 investment opportunities, totaling nearly $90 billion of capital requirement. We have worked extensively with clients to successfully integrate co-investments into many private investment portfolios. Drawing on our collective experience, this follow-up piece highlights an actionable co-investment framework for investors. >more

Studies > Jobs | Opportunities

CMS Hasche Sigle

UPDATE ARBEITSRECHT JUNE 2019

Employment opportunities for older workers, in particular pensioners, have been improved by case law and legislation in recent years. Against the background of demographic change, this is an important building block in order to compensate for the existing shortage of skilled workers in many areas. In our main article, we will explain to you what design options you have. >more


Research Papers > Corporate Valuation

EQUITY RISK PREMIUMS (ERP): DETERMINANTS, ESTIMATION AND IMPLICATIONS – THE 2019 EDITION

Aswath Damodaran
2019
The equity risk premium is the price of risk in equity markets, and it is a key input in estimating costs of equity and capital in both corporate finance and valuation. Given its importance, it is surprising how haphazard the estimation of equity risk premiums remains in practice. We begin this paper by looking at the economic determinants of equity risk premiums, including investor risk aversion, information uncertainty and perceptions of macroeconomic risk. In the standard approach to estimating the equity risk premium, historical returns are used, with the difference in annual returns on stocks versus bonds, over a long period, comprising the expected risk premium. We note the limitations of this approach, even in markets like the United States, which have long periods of historical data available, and its complete failure in emerging markets, where the historical data tends to be limited and volatile. We look at two other approaches to estimating equity risk premiums – the survey approach, where investors and managers are asked to assess the risk premium and the implied approach, where a forward-looking estimate of the premium is estimated using either current equity prices or risk premiums in non-equity markets. In the next section, we look at the relationship between the equity risk premium and risk premiums in the bond market (default spreads) and in real estate (cap rates) and how that relationship can be mined to generated expected equity risk premiums. We close the paper by examining why different approaches yield different values for the equity risk premium, and how to choose the “right” number to use in analysis. >more

Research Papers > Corporate Finance

INSTITUTIONAL SHAREHOLDERS AND CORPORATE SOCIAL RESPONSIBILITY: EVIDENCE FROM TWO QUASI-NATURAL EXPERIMENTS

Tao Chen, Hui Dong, and Chen Lin
2019
Whether the sustainable investments are offered just in name, or institutional shareholders are making real efforts to generate social impact outcomes? Our paper investigates this question using two distinct quasi-natural experiments: 1) exogenous changes in institutional holdings in Russell Index reconstitutions; 2) exogenous shocks to shareholder attention. We find consistent evidence that both higher institutional ownership and more concentrated shareholder attention induce corporate managers to invest more in CSR activities. The effects are more pronounced in consumer oriented industries, in financially constrained firms, and in firms with inferior corporate governance. Further, we show that institutional shareholders influence CSR investments through shareholder activism, as evidenced by the increased amount and likelihood of CSR-related shareholder proposals. >more