NEWSLETTER of March 8, 2024

The following content has been added at finexpert:

AQR
IS YOUR EQUITY HEDGE FUND PORTFOLIO RESILIENT ENOUGH FOR UNCERTAIN TIMES?
Major asset classes have historically exhibited significant sensitivity to macroeconomic drivers, such as growth, inflation and volatility. With the outlook for macroeconomic uncertainty still heightened, these sensitivities may continue to have meaningful impacts on portfolio performance. We analyze the historical macroeconomic sensitivity of traditional asset classes and major hedge fund strategies. We show that the average hedge fund is unlikely to provide meaningful diversification during periods of macro uncertainty, which are also typically difficult for traditional assets. However, long/short low-risk strategies have tended to exhibit low macro sensitivity, offering the potential to mitigate the macro sensitivities found elsewhere in investors' portfolios. >more

Allianz Research
GLOBAL INSOLVENCY OUTLOOK: REALITY CHECK
As expected, 2023 recorded a high-speed and broad-based rebound in business insolvencies and 2024 started with insolvencies above pre-pandemic levels in most advanced economies. The number of business insolvencies rebounded in three out of four countries in 2023, with most recording a double-digit increase. Globally, the average increase in business insolvencies accelerated from +23% in 2022 to +29% in 2023, the fastest momentum since 2009 (+33%). The exceptions were mainly in emerging markets, notably the BRICS, but they account for a noticeable share of global GDP (30%) and thus our global insolvency index (38%), lowering the annual increase of our headline indicator. >more

KfW Research
BISHER NUR WENIGE KMU VON BANKEN AUF NACHHALTIGKEITSINFORMATIONEN ANGESPROCHEN – BEDARF DÜRFTE ABER ZUNEHMEN
The financial system plays an important role in the transformation of the economy towards climate neutrality. This is because the transition to a sustainable economy requires a corresponding mobilization of capital. Sustainability information will therefore also become increasingly important in lending. So far, this process has mainly involved credit institutions and their larger corporate customers, while requests for sustainability information are still relatively rare for SMEs in general. The results of a special survey for the KfW SME Panel in fall 2023 show that last year, only around one in six SMEs (16%) addressed the topic of sustainability in loan negotiations. This particularly affected larger SMEs, where the proportion was 45%. However, the need for information on the topic of sustainability is likely to increase further in the future and also include small and medium-sized enterprises. >more

BCG
WHICH ECONOMIES BENEFIT THE MOST FROM FREE TRADE AGREEMENTS?
In an era of global economic uncertainty and increasing protectionist sentiment, governments are relying more and more on specialized trade strategies to grow and diversify trade and secure a competitive advantage in end markets. As the WTO struggles to conclude a new round of multilateral liberalization, governments are increasingly turning to bilateral and regional free trade agreements (FTAs) as a means of achieving their different strategies and objectives. But not all FTAs are created equal, and with the stakes so high, it is fair to ask whether the growing number of FTAs are helping private- and public-sector organizations achieve the much-vaunted benefits. To obtain a view of the different approaches to FTAs and their impacts on competitive outcomes, Boston Consulting Group has analyzed the free trade agreements of over 100 economies and major trade blocs. >more

DISSECTING THE LONG-TERM PERFORMANCE OF THE CHINESE STOCK MARKET
Franklin Allen, Jun "QJ" Qian, Chenyu Shan, and Julie Zhu
2024
Domestically listed Chinese (A-share) firms have lower stock returns than externally listed Chinese, developed, and emerging country firms during 2000 to 2018. They also have lower net cash flows than matched unlisted Chinese firms. The underperformance of both stock and accounting returns is more pronounced for large A-share firms, while small firms show no underperformance along either dimension. Investor sentiment explains low stock returns in the cross-country and within-A-share samples. Institutional deficiencies in IPO and delisting processes and weak corporate governance in terms of shareholder value creation are consistent with the underperformance in stock returns and net cash flows. >more

DIRECTORS: OLDER AND WISER, OR TOO OLD TO GOVERN?
Ronald W. Masulis, Cong Wang, Fei Xie, and Shuran Zhang
2023
An unintended consequence of recent governance reforms in the U.S. is firms’ greater reliance on older director candidates, resulting in noticeable board aging. We investigate this phenomenon’s implications for corporate governance. We document that older independent directors exhibit poorer board meeting attendance, are less likely to serve on or chair key board committees and receive less shareholder support in annual elections. These directors are associated with weaker board oversight in acquisitions, CEO turnovers, executive compensation, and financial reporting. However, they can also provide particularly valuable advice when they have specialized experience or when firms have greater advisory needs. >more