NEWSLETTER of October 25, 2024

The following content has been added at finexpert:

KfW Research | ifo Institut
KFW-IFO-KREDITHÜRDE Q3 2024
The difficult economic situation in Germany is also reflected in the corporate credit market. This is shown by the results of the KfW-ifo Credit Constraint Survey. On the one hand, demand for credit lost momentum again noticeably in the third quarter, after large companies had previously shown somewhat more interest in credit. On the other hand, banks also became noticeably more cautious about credit requests from companies. More than a third of large companies rated the behavior of financial institutions as restrictive. This was a new high for the second time in a row. Access to credit is similarly challenging for SMEs. At 31.5%, the KfW-ifo credit hurdle for SMEs was only just below the peak value from summer 2023. >more

Allianz Research
GLOBAL INSOLVENCY OUTLOOK: THE EBB AND FLOW OF THE INSOLVENCY WAVE
All in all this year, we expect double-digit increases in bankruptcies for half of the world. Year-to-date, the number of business insolvencies worldwide has increased by +9% and the rise has been broad-based across geographies and sectors. Two-thirds of countries are expected to surpass their pre-pandemic insolvency numbers, notably the UK and France. Our Global Insolvency Index will increase by +11% in 2024, ending the year between 10 and 15% above its 2016-2019 average (but -11% below its level during the Great Financial Crisis). This catch-up comes from the clearing of the backlog of insolvencies, especially companies that were shielded from going belly up thanks to support measures implemented during the pandemic and the energy crisis. Construction, retail and services have seen the strongest increases in business insolvencies in terms of frequency (the number of companies) and severity (the size of companies going bankrupt). >more

KfW Research
M&A-DEALS IM DEUTSCHEN MITTELSTAND – CORONA-SCHOCK NOCH NICHT VERDAUT
The coronavirus crisis has put a damper on the SME M&A market from which it has not yet recovered - this is shown by recent evaluations by KfW Research based on the Orbis M&A database. The number of M&A transactions targeting a German SME between 2020 and 2023 was around 35% below the pre-coronavirus level (2015-2019). Domestic investors and buyers were particularly cautious. Their share fell from 60 % to around 51 %. By contrast, foreign buyers - particularly investors from the USA and the UK - were proportionately more frequently represented in the SME M&A market in 2020-2023. SMEs in the information and communication technology sector - especially information service providers and software companies - were particularly in demand recently. The coronavirus crisis and the associated additional surge in digitalization have significantly increased their share of M&A transactions in the SME sector. >more

KfW Research
VENTURE CAPITAL-DASHBOARD Q3 2024
Going into the second half of the year, the German VC market sent out a positive signal, giving hope for a strong conclusion to the year in the coming quarter. In Q3 2024, the quarterly volume of investment in German start-ups exceeded the threshold of EUR 2 billion again for the first time in more than a year. Overall, German start-ups raised some EUR 2.5 billion from investors in 280 funding rounds. >more

Deutsche Bank Research
WEITERHIN RESILIENT
We forecast global economic growth of 3.2% for both 2024 and 2025 and continue to expect a soft landing in the US and the EU. Recession risks remain despite the easing cycle, as monetary policy could still have repercussions. Inflation has peaked, but upside risks persist as price pressure continues. The comparatively high vulnerability of supply chains is further increased by geopolitical risks. Geopolitical risks remain high in the Middle East and in the Ukraine/Russia region. At the same time, competition between the USA and China is intensifying. >more

Deutsche Bank Research
LOHNDRUCK LÄSST NACH
The sharp decline in consumer price inflation (September CPI: 1.6% yoy) and the observable cyclical slowdown on the German labor market (recently discussed on the basis of the Beveridge curve) are dampening wage pressure. This is shown by our wage pressure index, which correlates quite well with the annual growth rate of effective wages in the economy as a whole. Effective earnings (gross wages and salaries per employee) reflect what employees actually receive on their payslips. >more

MOVING THE GOALPOSTS? MUTUAL FUND BENCHMARK CHANGES AND RELATIVE PERFORMANCE MANIPULATION
Kevin Mullally, and Andrea Rossi
2024
We analyze changes to mutual funds' self-declared benchmarks using hand-collected data from funds' prospectuses. Under existing rules, funds can freely change their benchmark indexes and, implicitly, the historical returns to which they compare their past performance. Funds exploit this loophole by adding (dropping) indexes with lower (higher) past returns, which materially improves the appearance of their benchmarkadjusted returns. High-fee funds, broker-sold funds, and funds experiencing poor performance and outflows are more likely to engage in this behavior. These funds subsequently attract additional flows despite continuing to underperform their peers. >more

IS CAPITAL STRUCTURE IRRELEVANT WITH ESG INVESTORS?
Peter Feldhütter, and Lasse Heje Pedersen
2024
This paper examines whether capital structure is irrelevant for enterprise value and investment when investors care about environmental, social, and governance issues, which we denote ``ESG-Modigliani-Miller" (ESG-MM). Theoretically, we show that ESG-MM holds with linear pricing and additive ESG. ESG-MM means that issuing low-yielding green bonds does not lower the overall cost of capital because it makes the issuer's other securities browner. Hence, a firm's incentive to make a green investment does not depend on its financing choice. Empirically, we provide suggestive evidence of failure of ESG-MM, implying that firms and governments can exploit inconsistent ESG attribution or segmented markets. >more

KfW Research
M&A-DEALS IM DEUTSCHEN MITTELSTAND – CORONA-SCHOCK NOCH NICHT VERDAUT
The coronavirus crisis has put a damper on the SME M&A market from which it has not yet recovered - this is shown by recent evaluations by KfW Research based on the Orbis M&A database. The number of M&A transactions targeting a German SME between 2020 and 2023 was around 35% below the pre-coronavirus level (2015-2019). Domestic investors and buyers were particularly cautious. Their share fell from 60 % to around 51 %. By contrast, foreign buyers - particularly investors from the USA and the UK - were proportionately more frequently represented in the SME M&A market in 2020-2023. SMEs in the information and communication technology sector - especially information service providers and software companies - were particularly in demand recently. The coronavirus crisis and the associated additional surge in digitalization have significantly increased their share of M&A transactions in the SME sector. >more