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Question of doubt in corporate valuation QoD#17: In case of defaultable debt: Can a firm´s cost of debt exceed its cost of equity?

Bernhard Schwetzler
Junk bonds may have yields well above 15%. The video discusses whether in this case cost of debt can exceed cost of equity. It also analyses whether bond yields are appropriate measures for the firm´s cost of debt.
(November 16, 2018). >more

J.P. Morgan

2019 LONG-TERM CAPITAL MARKET ASSUMPTIONS

The 2019 estimate for real global GDP growth of 2.5% is unchanged from last year, and despite a few country-level adjustments, the secular growth outlook is stable and risks are balanced. Asset returns at equilibrium look reasonable by historical standards, but cyclical headwinds constrain return forecasts today and still present a challenge. Cyclical risks are building, many economies are operating above trend with little slack, and asset valuations are elevated. While long-term investors should consider returns over the whole cycle, the starting point matters greatly to the long-term outlook. >more

PwC

ASSET & WEALTH MANAGEMENT REVOLUTION: PRESSURE ON PROFITABILITY

The asset and wealth management (AWM) industry’s revolution is well under way. Assets under management (AuM) are increasing, as are costs and revenues. But even though costs have gone up, they have not risen as quickly as revenues for multiple reasons, including economies of scale and the slow adoption of new technologies. However, as investor and regulator pressures build and companies invest in infrastructure and talent, costs are likely to begin to creep up. >more

Bain & Company

INVESTING IN SOUTHEAST ASIA: WHAT’S BEHIND THE BOOM

Bain research shows that Southeast Asia’s investment ecosystem is entering a new phase of growth. By 2024, the region will give rise to at least 10 new companies with a market value of more than $1 billion each. More than 1,300 companies in Southeast Asia received a first round of seed financing since 2011, including 261 in 2017 — five times the level of 2011. Total deal value over the next five years is likely to reach $70 billion, double the level of the previous five years. >more

Ernst & Young

2018 GLOBAL ALTERNATIVE FUND SURVEY

Sweeping change has taken hold of the financial services industry: robotics and A.I are fundamentally changing the relationship that financial institutions have with end users, the vast proliferation of data is changing the way that institutions ultimately make business decisions, and the skill sets that are needed to drive the business forward are changing the mindsets of those that occupy the corner office, fundamentally changing the way that they conduct business. With this as a backdrop, it is a certainty that the pace of change will continue to gain momentum. And as with other segments of the financial services landscape, the alternative fund industry now finds itself at that defining moment as well – a tipping point in its evolution where disruptive technology represents a virtual signpost on the road to future success. >more

DOES CORPORATE SOCIAL RESPONSIBILITY REDUCE THE COSTS OF HIGH LEVERAGE? EVIDENCE FROM CAPITAL STRUCTURE AND PRODUCT MARKETS INTERACTIONS

Kee-Hong Bae, Sadok El Ghoul, Omrane Guedhami, Chuck C.Y. Kwok, and Ying Zheng
2018
Research on capital structure and product markets interactions shows that high leverage is associated with substantial losses in market share due to unfavorable actions by customers and competitors. We examine whether corporate social responsibility (CSR) affects firms’ interactions with customers and competitors and reduces the costs of high leverage. We find that CSR reduces losses in market share when firms are highly leveraged. By reducing adverse behavior by customers and competitors, CSR helps highly leveraged firms keep customers and guard against rival predation. Our results support the stakeholder value maximization view of CSR. >more

INITIAL COIN OFFERINGS (ICOS) TO FINANCE NEW VENTURES

Christian Fisch
2018
In an initial coin offering (ICO), new ventures raise capital by selling tokens to a crowd of investors. Often, this token is a cryptocurrency, a digital medium of value exchange based on the distributed ledger technology. Both the number of ICOs and the amount of capital raised have exploded since 2017. Despite attracting significant attention from ventures, investors, and policy makers, little is known about the dynamics of ICOs. This initial study therefore assesses the determinants of the amount raised in 423 ICOs. Drawing on signaling theory, the study explores the role of signaling ventures' technological capabilities in ICOs. The results show that technical white papers and high-quality source codes increase the amount raised, while patents are not associated with increased amounts of funding. Exploring further determinants of the amount raised, the results indicate that some of the underlying mechanisms in ICOs resemble those found in prior research into entrepreneurial finance, while others are unique to the ICO context. >more