NEWSLETTER of July 24, 2020

The following content has been added at finexpert:

UBS
OWN YOUR WORTH 2020: WOMEN, WEALTH, AND THE PATH TO FINANCIAL INDEPENDENCE
According to UBS Global Wealth Management’s latest Own Your Worth report, 74% of men and 82% of women see joint participation in long-term financial decisions as a necessary step to create gender equality. The report, which surveyed 1,825 high-net-worth investors in the US, found that a significant majority believe equal participation helps women to feel financially secure, avoid future financial surprises, and feel more secure about leaving bad relationships. >more

White & Case
EUROPEAN REAL ESTATE FINANCE: MARKET UPDATE - Q2 2020
The governments across Europe have introduced fiscal stimulus measures and liquidity measures to help companies through these difficult times. These measures can also have a drastic impact on the real estate finance markets, especially with measures such as mortgage payment holidays; a hiatus on the serving of eviction notices for rental properties and an inability for landlords to forfeit business leases due to non-payment of rent for a period of time. >more

Warth & Klein Grant Thornton
REPORTING 4.0: ANFORDERUNGEN AN EIN ZEITGEMÄßES INTERNES REPORTING
In a joint study, Warth & Klein Grant Thornton and the Ruhr West University of Applied Sciences are investigating what modern internal reporting must achieve. Particularly against the background of the Corona crisis and the associated expectations of recession, the study shows how much the digital requirements for internal reporting have increased. Controlling in particular is subject to enormous pressure to change, with time reference, input, output and the underlying processes being of central importance. >more

Goldman Sachs
DAUNTING DEBT DYNAMICS
Government deficits, debt issuance and debt levels are set to surge as countries race to ease the economic impact of the coronacrisis. This raises many questions: who will finance this debt, will it force a market repricing and/or an eventual growth or inflation problem, and would greater use of negative rates help avoid any of these risks? At the same time, whether corporate bankruptcies could derail the economic recovery is a key concern. In short, how disruptive the recent, dramatic shift in debt dynamics might be is Top of Mind. >more

EXECUTIVE COMPENSATION AND CORPORATE RISK TAKING: EVIDENCE FROM PRIVATE LOAN CONTRACTS
Yongqiang Chu, Xinming Li, Ming Liu, and Tao Ma
2020
We examine how management stock options affect corporate risk taking. We exploit exogenous variation in stock option grants generated by FAS 123R and use loan spreads to infer risk taking. Using a difference-in-differences approach, we find that the spreads of loans taken by firms that did not expense options before FAS 123R (treated firms) significantly decrease after FAS 123R relative to firms that either did not issue stock options or voluntarily expensed stock options before 123R (control firms). We also find that the effect is stronger for firms with high agency conflicts associated with risk-shifting. Furthermore, loans taken by the treated firms are less likely to contain collateral requirements and are less likely to have covenants restricting capital investment post FAS 123R. >more

ECONOMIC POLICY UNCERTAINTY AND SHORT-TERM FINANCING: THE CASE OF TRADE CREDIT
Ranjan D'Mello, and Francesca Toscano
2019
We examine the impact of policy uncertainty on trade credit. We document a decline (increase) in accounts payable and receivable during periods of high (low) policy uncertainty. The relation is robust and holds after controlling for endogeneity, economic and political uncertainties, and the Great Recession. Additionally, the impact of policy uncertainty on trade credit is long term, affecting short-term borrowing and lending in the following year as well. The reduction in trade credit during periods of high uncertainty is driven by a decrease in supply; firms that are most likely to lend, reduce credit to customers during these periods. There is no evidence that firms with access to alternative sources of funding reduce their borrowings during periods of high policy uncertainty. For the subset of firms that have limited access to external funds, there is an increase in accounts payable in high uncertainty periods suggesting that these firms view trade credit as a substitute source of financing during difficult times. Finally, industry competitiveness impacts the relation; suppliers (customers) in competitive industries have higher (lower) levels of accounts receivable (payable) during high uncertainty periods. >more