Knowledge and Training for Financial Decision Making!

NEWSLETTER of November 9, 2018

 

The following content has been added at finexpert:


Tutorials
QoD16

Question of doubt in corporate valuation QoD#16: Is there a general, more flexible „debt policy“ than MM and/or ME?

Bernhard Schwetzler
This week´s QoD video introduces a general debt policy for corporate valuation models; the policy adjusts the level of debt towards a certain target value by multiplying the realized future firm value with a constant leverage ratio every k periods. The two well-known debt policies “MM” and “ME” are two polar cases of this general model. The video shows a general equation for the tax shield calculation and also gives a link of the general debt policy to default probabilities.
(November 9, 2018) >more


Studies > Performance

European Banking Authority

2018 EU-WIDE STRESS TEST RESULTS

The 2018 EU-wide stress test involves 48 banks from 15 EU and EEA countries, covering broadly 70% of total EU banking sector assets. The objective of the exercise is to assess, in a consistent way, the resilience of banks to a common set of adverse shocks. The results are an input to the supervisory decision-making process and promote market discipline. >more

Studies > Corporate Finance

Lazard

REVIEW OF SHAREHOLDER ACTIVISM – Q3 2018

Activists targeted 174 companies in the first three quarters of 2018, surpassing 169 companies targeted in all of 2017. 26% more campaigns initiated YTD over 2017 YTD, representing capital deployment of $53.8bn, in-line with 2017 YTD levels. A record 130 activists were responsible for YTD campaigns, exceeding the level for all of 2017. >more

Studies > M & A

ValueTrust

EUROPEAN CAPITAL MARKET STUDY

This is the first edition of the ValueTrust European Capital Market Study. With this study, ValueTrust provides a data compilation of the capital market parameters that enables an enterprise valuation in Europe. It has the purpose to serve as an assistant and data source as well as to show trends of the analyzed parameters. >more

Studies > Alternative Investments

S&P Global

EMEA PRIVATE EQUITY MARKET SNAPSHOT

This issue leads with a review of EMEA’s struggle to attract new global PE investments as the year draws to a close. The negative trend, however, is stymied by the UK who had the highest number of deals in 2018 and represented 67% of the €17.4bn invested within the region. >more


Research Papers > Alternative Investments

INVESTING OUTSIDE THE BOX: EVIDENCE FROM ALTERNATIVE VEHICLES IN PRIVATE CAPITAL

Josh Lerner, Jason Mao, Antoinette Schoar, and Nan R. Zhang
2018
This paper undertakes a comprehensive analysis of alternative investment vehicles in private equity, using unexplored custodial data about 112 limited partners over four decades. We differentiate between alternative vehicles that are GP-directed versus those where the LP has some discretion. Of the roughly 5500 distinct investments made by the LPs in our sample, 32% of investments (17% of capital commitments) were in such alternative vehicles; the allocation increased by more than 10 percentage points over the last decade. Alternative vehicles were far more likely to be offered by larger and North America-based buyout funds. The average performance of these alternative vehicles lagged that of the GPs’ corresponding main funds. The best LP performance was among endowments, private pensions, and insurers. Finally, LPs with better past performance invested in alternative vehicles with better performance, even after conditioning on the GPs’ past records. This result suggests that bargaining between GPs and LPs leads to gradation in investment performance based on the parties’ outside options. >more

Research Papers > Risk Management

ONCE BITTEN, TWICE SHY: THE POWER OF PERSONAL EXPERIENCES IN RISK TAKING

Steffen Andersen, Tobin Hanspal, and Kasper Meisner Nielsen
2018
We study how personal experiences affect individual risk taking. To separate the intertwining effects of personal experiences and wealth changes, our identification strategy relies on the decision to keep or rebalance unexpected inheritances of risky assets. Experience derives from investments in banks that defaulted in the aftermath of the financial crisis. To differentiate the effect of personal experiences, we classify the degrees of experiences into first-hand experiences from personal losses, second-hand experiences from the losses of close family members, and third-hand experiences from living in municipalities where banks defaulted. We find that third-hand experiences result in marginally lower risk taking. Second-hand experiences have a relatively stronger negative effect, whereas the effect of first-hand experiences on risk taking is strongly negative. Overall, our results demonstrate that personal experiences aside from changes in wealth explain substantial heterogeneity in individuals’ risk taking. >more