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NEWSLETTER of May 24, 2019

 

The following content has been added at finexpert:


Tutorials
QoD21

Question of doubt in corporate valuation QoD#21: What is the circularity problem and is a Newton approximation a good way to solve it? (Bernhard Schwetzler)

Working with the DCF-WACC approach in corporate valuation requires to assume the firm´s capital structure as weights for the cost of capital in market values. That implies a circularity problem as the market value of equity is what just is supposed to be calculated. A so called Newton approximation is sometimes recommended as a solution to this problem. This video shows how it works and discusses some pros and cons of this proposal. (May 24, 2019) >more


Studies > Performance

Deloitte

BANKING-ANALYTICS SURVEY

German banks and financial institutions are undergoing digital upheaval and are confronted with regulatory challenges. Ad-hoc enquiries and reporting are a central focus here and can be constantly simplified through the use of data analytics tools. The Banking-Analytics Survey focuses on the German banking market and surveys the current situation, the possible uses of analytics tools, necessary prerequisites for the integration of analytics solutions as well as the organizational embeddedness. The survey was conducted for the first time in Germany. For this, the assessments and expectations of top management (CEO, CFO, etc.) and IT executives of German financial institutions were collected. >more

Studies > Corporate Finance

Alix Partners

ENGAGING WITH ACTIVIST INVESTORS:  2019 EUROPEAN CORPORATE SURVEY

As European executives’ concern over activism rises, over half admit they lack a clear strategy to deal with activist approaches: Almost 70% of senior executives report concern about the rise of activism. 65% say that the importance of activism has increased – or dramatically increased - on companies’ priority lists over the last year. However, 53% admit that they lack a clear strategy for dealing with activism and only 10% rate their ability to meet the challenge as high. >more

Studies > Corporate Finance

Baker McKenzie

THE FUTURE OF EQUITY CAPITAL RAISING

Throughout 2019, equity capital markets will continue to be stalked, and perhaps even held hostage, by some of the same macroeconomic and geopolitical risks that conspired to derail benchmark indices and IPO activity at the end of 2018. From the threat of a prolonged global trade war and its impact on the global economy, to the impact of rising interest rates and potential economic disruption from Brexit, equity capital markets could again be buffeted by the volatility these risks provoke. But looking beyond what could happen this year, indeed, taking a three to five year view, what is the outlook for equity capital markets and for the IPO market in particular? Moreover, to what extent is the IPO market undergoing change? What are the factors driving this and what in turn does this mean for companies going public in the future? >more

Studies > Macro

A.T. Kearney

THE 2019 FOREIGN DIRECT INVESTMENT CONFIDENCE INDEX

Paradoxes permeate the results of the 2019 Foreign Direct Investment (FDI) Confidence Index, the latest edition of the annual executive survey that ranks the countries likely to attract the most investment in the next three years. Developed markets dominate the 2019 rankings, even as investors worry about rising political and economic risks within these markets. In frontier and emerging markets, average scores increased, yet not enough for more than a few to rank in the top 25. Cities play an increasingly important role in FDI decisions even in an era of rising nationalist sentiments. And despite investors consistently telling us in recent years that they plan to increase their levels of FDI, recorded levels of FDI fell once again in 2018. >more


Research Papers > Corporate Valuation

MARKET RISK PREMIUM AND RISK-FREE RATE USED FOR 69 COUNTRIES IN 2019: A SURVEY

Pablo Fernandez, Mar Martinez, and Isabel Fernández Acín
2019
This paper contains the statistics of a survey about the Risk-Free Rate (RF) and the Market Risk Premium (MRP) used in 2019 for 69 countries. We got answers for 84 countries, but we only report the results for 69 countries with more than 8 answers. Due to “Quantitative Easing”, many respondents use for European countries a RF higher than the yield of the 10-year Government bonds. The coefficient of variation (standard deviation/average) of RF is, on average, 2.75 times higher than the CV of MRP for 24 European countries. For the second time of this survey, 9 respondents provided — without being asked for — a different MRP for Spain and Catalonia (on average, 6.4% for Spain and 11.5% for Catalonia). >more

Research Papers > Corporate Finance

TECHNOLOGICAL DISRUPTIVENESS AND THE EVOLUTION OF IPOS AND SELL-OUTS

Donald E. Bowen III, Laurent Frésard, and Gerard Hoberg
2019
We show that the recent decline in IPOs on U.S. markets is related to changes in the technological disruptiveness of startups, which we measure using textual analysis of patents from 1930 to 2010. We focus on VC-backed startups and show that those with ex-ante disruptive technologies are more likely to exit via IPO and less likely to exit via sell-out. This is consistent with IPOs being favored by firms with the potential to carve out independent market positions with strong defenses against rivals. We document an economy-wide trend of declining technological disruptiveness since World War II that accelerated since the late 1990s. This trend predicts fewer IPOs and more sell-outs, and we find that roughly 20% of the recent dearth of IPOs, and 49% of the surge in sell-outs, can be attributed to changes in firms' technological characteristics. >more