NEWSLETTER of December 1, 2023

The following content has been added at finexpert:

Allianz Research
OUTLOOK 2024: TARGETING OPPORTUNITIES
As interest rates begin to level off, a new investment environment is emerging with opportunities that may not have existed in years. Diversifying portfolios – and making bold, conviction-led decisions – could be essential as performance diverges between companies, asset classes and economies. Uncertainty remains high, with the potential for an oil-price shock and the implications of November’s US election adding to the mix. But the good news is investors may be rewarded for taking risk again. >more

Thinking Ahead Institute
THE ASSET OWNER 100 - 2023
The Asset Owner 100 is a Thinking Ahead Institute study which gathers data on the total assets of the top 100 asset owners around the world. Though not included in the ranking, the study also presents the total assets for the top 10 insurers and the top 10 foundations and endowments. The study reveals the world’s 100 largest asset owners are now responsible for US$ 23.4 trillion as of the end of 2022; experiencing a decline of nearly 9% compared to the previous year when this stood at US$25.7 trillion for the largest 100 asset owners at the time. Pension funds only just retain the majority share of AUM among the largest 100, with the combined assets of pension funds making up 52.8%. By contrast, sovereign wealth funds have seen their share rise and now make up 38.9% of total assets among the world’s largest 100 asset owners.  >more

UBS | Art Basel
THE ART MARKET 2023
The seventh edition of The Art Basel and UBS Global Art Market Report provides a comprehensive, macro-economic analysis of the state of the global art market in 2022. The Art Market 2023 looks closely at how the lingering effects of the pandemic continue to affect the market and forecasts what trends could be seen entering 2023. The Art Market 2023 is written by cultural economist Dr. Clare McAndrew, founder of Arts Economics, and published by Art Basel and UBS. >more

FTSE Russell
THE COP28 NET ZERO ATLAS
Our third annual Net Zero Atlas provides an updated analysis of G20 countries’ climate targets, mitigation strategies, and physical risk exposures. The report outlines a refreshed evaluation of the ‘temperature alignment’ of national climate commitments and actions for G20 countries. Critically it includes expanded analysis that considers the latest physical impacts of climate change on G20 countries and systematically assesses their approaches to adaptation planning.  >more

CONTRACTING COSTS, COVENANT-LITE LENDING AND REPUTATIONAL CAPITAL
Dominique C. Badoer, Mustafa Emin, and Christopher M. James
2023
Using a large sample of leveraged loans, we provide evidence that, despite having fewer creditor control rights, covenant-lite loans have similar recovery rates and significantly lower spreads than loans with maintenance covenants. We find that the propensity to borrow covenant-lite is related to various proxies for the reputational capital of a borrowing firm’s private equity sponsor. We construct a simple model to illustrate the relationship between reputational capital, covenants, and loan spreads in the leveraged loan market. Our model illustrates how reputational capital can substitute for covenants in mitigating agency costs of debt, leading to lower loan spreads for covenant-lite loans. >more

BOARD REFORMS AND M&A PERFORMANCE: INTERNATIONAL EVIDENCE
Muhammad Farooq Ahmad, Nihat Aktas, Douglas J. Cumming, and Guosong Xu
2023
This research employs a difference-in-differences framework to study the impact of major board reforms on the performance of mergers and acquisitions (M&As). Using an international sample of board reforms implemented in 61 countries from 1985 to 2021, we document a drastic redistribution of wealth from target shareholders to acquirer shareholders after the board reforms in target countries. This effect is most pronounced in M&A transactions that involve the sale of controlling shares, thereby supporting the hypothesis that corporate board reforms mitigate the private benefits of control in the target firm. Furthermore, these reforms increase expected deal synergies, in that deal-level announcement returns are higher after the implementation of the reforms. When country-level institutional quality and legal protection of shareholders are greater, it reinforces the reform effects. Overall M&A activity remains unchanged following the reforms, yet financial bidders complete fewer transactions, implying a reform-induced squeeze-out of financial bidders from the M&A market in the target country. Collectively, these international results are consistent with the predictions of the private benefits of control theory and underscore the role of institutional quality and investor protection in reinforcing the effects of board reforms worldwide. >more