NEWSLETTER of February 24, 2023

The following content has been added at finexpert:

PwC
GLOBAL CEO SURVEY
CEOs worldwide are very pessimistic: 73 percent of business leaders expect global economic growth to decline. Just a year ago, this figure was only 15 percent. Only 18 percent of CEOs believe that global economic growth will increase this year (previous year: 77 percent). In Germany, CEOs are even more pessimistic: 82 percent of them expect global economic growth to decline in the coming year (previous year: 19 percent). >more

FTI Andersch
CORPORATE DEBT STUDY 2023
The third consecutive year of crisis after a decade of loose monetary policy and generous government aid programs during the COVID 19 pandemic is leaving its mark on European corporate balance sheets - the "zombie rate" as a KPI of this development is at a new record high of over 6%. Sectors of particular importance to Germany, such as mechanical engineering and automotive suppliers, show a negative KPI development at the European level of observation. >more

BDO
M&A SOFTWARE SECTOR UPDATE Q4-2022
In 2022, the global software sector was hit hard due to rising interest rates and increasing recession fears, hence share prices of our software universe dropped significantly across the board. For 2023, the outlook appears much better since the sector should benefit from stabilizing interest rates, cost reduction and the expectation of better prospects into 2024 which (hopefully) will become visible in H2-2023. >more

KfW Research
GERMAN PRIVATE EQUITY BAROMETER 4. QUARTAL 2022
Sentiment in the German private equity market developed positively in the fourth quarter of last year. The business sentiment indicator rose by 9.2 points to -30.8 balance points. While situation assessments deteriorated again, the decline was more than offset by improvements in business expectations. Economic optimism is bolstering sentiment. >more

CLIMATE RISK STRESS TESTING: A CONCEPTUAL REVIEW
Henk Jan Reinders, Dirk Schoenmaker, and Mathijs A. van Dijk
2023
Climate change has become highly relevant for central banks, with new methods to assess the impact of climate-related shocks on the financial system developing rapidly. This paper analyzes the conceptual steps in Climate Risk Stress Testing (CRST), which is a tool to assess the impact of climate-related shocks on the stability of the financial system. We do this by disentangling climate, economic, and financial modeling steps. We identify six types of climate shocks and four approaches to CRST (macro-financial, micro-financial, non-structural, and disaster risk). We find that existing CRST exercises may underestimate potential system-wide financial losses, due to their limited scope (not including all asset classes), omittance of certain types of climate shocks (such as Green Swan and Minsky-type events), incomplete modeling (lack of feedback effects), and a strong reliance on historically established relations that may not hold in the future. >more

THE ADOPTION OF ARTIFICIAL INTELLIGENCE BY VENTURE CAPITALISTS
Maxime Bonelli
2022
I study how the adoption of artificial intelligence (AI) by venture capitalists (VCs) to screen startups affects the funding of early-stage companies. Using global data on VC investments, I show that after adopting AI, VCs tilt their portfolios towards startups whose business is similar to those already tested by past startups. Within this pool of startups, AI- empowered VCs become better at picking those that survive and receive follow-on funding. At the same time, these VCs’ investments become 18% less likely to result in breakthrough success. I exploit plausibly exogenous variation in VCs’ incentives to automate screening from the introduction of Amazon’s Web Services to establish causality between AI adoption and the above effects. Overall, my results are consistent with AI exploiting past data that are not informative about breakthrough companies. AI adoption by investors may therefore reduce the capital directed towards innovation. >more