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NEWSLETTER of October 26, 2018

 

The following content has been added at finexpert:


Studies > Performance

PwC

FINTECH-KOOPERATIONSRADAR

With a total of 562 FinTech cooperations, banks have entered into almost twice as many partnerships as insurers, who have entered into a total of 294 cooperations. The gap is even greater for operative cooperations: Here, the PwC study records 450 bank cooperations versus 192 insurance cooperations. One possible reason: banks started FinTech cooperations about two years earlier than insurance companies. >more

Studies > Performance

TXF / Allen & Overy

COMMODITY FINANCE MARKET REPORT 2018

The financing spectrum is more diverse with an increasing role for alternative lenders and innovative financing techniques, while a dexterous navigation of the legal and regulatory landscape remains a cornerstone of safe and successful deal-making. How traders view these shifts and challenges is key to determining the direction in which the industry travels. While market practitioners continue to have their ear to the ground with a number of market intelligence sources, the response to the inaugural TXF-Allen & Overy Market Report, last year, demonstrated the desire for an independent, authoritative report on the condition of the commodity finance market as detailed by commodity traders.  >more

Studies > Corporate Finance

Roland Berger Strategy Consultants

FINANZIERUNG VON FAMILIENUNTERNEHMEN IN DEUTSCHLAND

Many German family businesses are successful worldwide. In financial matters, they are regarded as rather risk-averse, solidly equipped with funds and often debt-free. They are often less dependent on banks or other financial backers than comparable companies. However, this is changing because upcoming investments - including digitisation and further internationalisation of their business - exceed their financial firepower. >more

Studies > Macro

World Economic Forum

THE GLOBAL COMPETITIVENESS REPORT 2018

The 2018 edition of the Global Competitiveness Report represents a milestone in the four-decade history of the series, with the introduction of the new Global Competitiveness Index 4.0. The new index sheds light on an emerging set of drivers of productivity and long-term growth in the era of the Fourth Industrial Revolution. It provides a much-needed compass for policy-makers and other stakeholders to help shape economic strategies and monitor progress. >more


Research Papers  > Corporate Valuation

EQUITY RISK PREMIUMS (ERP): DETERMINANTS, ESTIMATION AND IMPLICATIONS – THE 2018 EDITION

Aswath Damodaran
2018
The equity risk premium is the price of risk in equity markets and 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 >     M & A

ACQUIRER REFERENCE PRICES AND ACQUISITION PERFORMANCE

Qingzhong Ma, David A. Whidbee, and Wei Athena Zhang
2018
In a comprehensive sample of mergers and acquisitions, we find a reference price effect: Acquirers earn higher (lower) announcement-period returns when their pre-announcement stock prices are well below (near) their 52-week highs. This reference price effect is stronger in acquisitions of private targets, deals involving greater uncertainty, and acquirers with greater individual investor ownership, and it is reversed in the subsequent year. Further, acquirer reference prices affect bid premia and target announcement-period returns in deals with greater uncertainty in acquirer valuation. The overall evidence is consistent with investors irrationally using 52-week high prices as a measure of acquirer valuation. >more