NEWSLETTER of October 23, 2020

This week we welcomed our 2.100th finexpert-member!

The following content has been added at finexpert:

Deloitte
DIGITAL BANKING MATURITY 2020
Deloitte's global study examines the digital maturity level of banks. Digital Banking Maturity 2020 is the fourth edition of the world's largest benchmarking of digital retail banking channels and, with 318 banks in 39 countries on 5 continents, provides valuable insights into recipes for success in the digitalization race. >more

Oliver Wyman
PRIVATKUNDENGESCHÄFT AM SCHEIDEWEG
COVID-19 is changing the banking world in many ways: cashless payments are gaining in relevance, while some branches remain permanently closed. The short-term effects seem clear. But what is the medium-term situation for the German private customer business? Our analysis shows that the COVID-19 crisis will continue to be a catalyst for developments that are already on the horizon, and that three overlapping effects are coming together: the manifestation of a long-term negative/low interest rate environment, the acceleration of digitization and the foreseeable increase in loan defaults. The analysis forecasts a possible decline in total net income in Germany of up to EUR 8 billion. Given limited investment budgets, it will be even more important to adjust to digital normality, increase earnings power and profitability, and prepare for rising risk costs. >more

Andersch | HHL Leipzig Graduate School of Management
AUSWIRKUNGEN VON COVID-19 AUF PE-PORTFOLIOUNTERNEHMEN
The study 'Impact of Covid-19 on PE portfolio companies' was developed in cooperation between the management consultancy Andersch FTI and the Center for Corporate Transactions and Private Equity (CCTPE) at HHL Leipzig Graduate School of Management. The responses of 32 PE funds located in the DACH region to their current situation in the Corona crisis were evaluated. The focus was on PE funds with active portfolios with up to ten companies (66 percent). 41 percent of the funds are in the small-cap segment, 59 percent in the mid-cap. The survey was anonymized and conducted with standardized questions according to academic standards over a period of 3.5 weeks in August 2020. >more

Bank for International Settlements
BIS QUARTERLY REVIEW: SEPTEMBER 2020
This Quarterly Review looks at the financial market's recovery from March's acute stress, noting that the upturn has been uneven and corporate balance sheets remain fragile. It also analyses how lower interest rates affect stock prices and explores why equity investors have been negative towards banks even though they entered the pandemic well positioned to absorb losses thanks to post-2008 regulatory reforms. >more

SECURITIES LENDING AND CORPORATE FINANCING: EVIDENCE FROM BOND ISSUANCE
Jennie Bai, Massimo Massa, and Hong Zhang
2020
The security lending market allows institutional investors, such as insurance companies, to lend out their holding assets in exchange for cash collateral, an important but understudied source of funding to conduct off-balance sheet transactions. Since these lenders are also primary investors of corporate bonds, we hypothesize that their lending preference on certain types of bonds can influence corporate financing policies. Indeed, we observe that lenders’ preference for long-term bonds stimulates firms to issue more such bonds and helps boost bond prices. Analysis exploiting a quasi-experiment on the regulatory change of insurance companies in 2010 supports a causal interpretation. Our results shed new insight on the potential impact of security lending on corporate financing policies and bond pricing. >more

HOW DO FINANCIAL CONTRACTS EVOLVE FOR NEW VENTURES
Tim Jenkinson, Christian Rauch, and Danying Fu
2019
While previous papers have characterized various features of the financial contracts between entrepreneurs and venture capitalists, little is known about how the equity contracts evolve over the life of new ventures. Using the novel data set containing financial contract terms applying to different classes of stock, this paper is the first to focus on exploring the how the equity contract terms granted by the same investee private firms may vary across time, and determining the possible influencing factors. We find that there exists a default contract, for the terms adopt by different companies or used by the same companies in different funding rounds are surprisingly similar. Further, we notice, by analyzing the evolution patterns, that equity contracts change asymmetrically across different terms and at different stages of the investee firms. We also provide insights into the discussion on whether employing post-money valuation will definitely result in the over-valuation of start-ups. Our preliminary regression results show that the headroom, the new measure we developed as a proxy for the company’s financial flexibility, be negatively related to the dilution of common stockholders’ ownership of the company. >more