Finance

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    How the media influence investors’ reactions to corporate misconduct

How the media influence investors’ reactions to corporate misconduct

What happens to corporations that misbehave? Are they all punished? Are they all punished in the same way? Despite the cases that attract significant media attention and the potential legal consequences of misconduct, there is no guarantee that all corporations that misbehave will face the same punishment (or even any punishment).

One of the more visible types of punishment, and […]

August 9th, 2018|Finance|0 Comments|
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    Don’t dismiss the possibility of a cut in the Bank of England’s policy rate

Don’t dismiss the possibility of a cut in the Bank of England’s policy rate

Bank of England’s policymakers have unanimously voted to raise the policy rate from 0.5 per cent to 0.75 per cent. The hike, which was widely anticipated by the financial markets, made critics of Bank of England Governor Mark Carney rethink their accusations that the Governor behaves like an “unreliable boyfriend” in the sense that he keeps hinting an interest rate […]

August 4th, 2018|Finance|0 Comments|
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    The 1971 UK banking deregulation had a positive effect on firms

The 1971 UK banking deregulation had a positive effect on firms

Starting in the 1970s, various countries deregulated their banking systems and abandoned the strict rules that governed financial institutions since the Great Depression. Deregulation was intended to increase competition in the credit market, improve consumers’ welfare but it has been indicated by many observers to be at the roots of the 2008 financial crisis. Despite the large interest in […]

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    How Norway’s sovereign wealth fund protected UK jobs after the 2008 crisis

How Norway’s sovereign wealth fund protected UK jobs after the 2008 crisis

Sovereign Wealth Funds (SWFs) are investment funds set up by national governments as a means of saving – potentially across generations – a proportion of foreign exchange inflows, typically as a result of windfalls from natural resources, but also, in some circumstances, from manufactured goods export booms and/or even agricultural surpluses. They may also serve as a stabilisation device […]

June 27th, 2018|Finance|0 Comments|
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    Two corporate governance mechanisms: activism and hostile takeovers

Two corporate governance mechanisms: activism and hostile takeovers

Hostile takeovers have long been considered the quintessential disciplinary governance mechanism. A similarly confrontational strategy has lately come to prominence by way of activist hedge funds that buy into poorly run firms and use the threat of hostile tactics to pressure management into accepting specific proposals to improve shareholder value.

Our paper compares these two governance mechanisms within a unified framework where any outside investor […]

Tackling non-performing loans in the euro area

The European Commission is increasing its pace towards completing the European Banking Union. A European Deposit Insurance Scheme (EDIS) should be the Banking Union’s third pillar. Germans are very sceptical of EDIS, in part because Germany has never had a single deposit insurance scheme. Instead, cooperative banks, savings banks and private banks administer their own deposit insurance systems without […]

May 30th, 2018|Finance|0 Comments|
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    The quality of financial information explains why stocks and bonds co-move

The quality of financial information explains why stocks and bonds co-move

The sensitivity of corporate bond returns to changes in the value of equity is a fundamental input for portfolio asset allocation. Since imperfect correlation of asset returns is a key assumption in portfolio theory, stock-bond return co-movement is important to determine the diversification benefits of bonds, and to hedge common exposures across the two asset markets. Because bonds exhibit […]

Bond prices both reflect and influence the fundamentals

Most economists assume that bond prices merely reflect fundamental factors such as the bond’s interest rate, its face value and the likelihood that the bond issuer defaults. Bond issuers that are more likely to default will have to offer a higher interest to compensate the buyer for the higher risk.

Most economists stop here. However, for real-world bonds, it is […]

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    Private firms as global borrowers: foreign and domestic lenders need equal protection

Private firms as global borrowers: foreign and domestic lenders need equal protection

The period 1990 to 2009 has witnessed private firms being promoted as independent borrowers in the global capital market. For a sample of 85 emerging market economies, in terms of percentage measures, the private sector publicly non-guaranteed share of total external debt on average increased from less than 5 per cent in 1990 to about 17 per cent in […]

January 9th, 2018|Finance, Xiang Gao|0 Comments|

What causes asset price bubbles?

Why do asset price bubbles in real markets happen? Experimental asset markets have pursued the reasons for a long time. Our research clarifies them by distinguishing between two effects, confusion and strategic uncertainty.

The asset price bubbles observed in real markets are often regarded as irrational exuberance, as pointed by Professor Robert Shiller (Nobel laureate in 2013). However, we succeed […]

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    Why are fewer German companies choosing to join the stock market?

Why are fewer German companies choosing to join the stock market?

An article by Kathleen Kahle and René M. Stulz on LSE Business Review analyses the shrinking number of public corporations in the US. We  find this phenomenon also in Germany. In our study, we find a decline in the number of listed companies in Germany driven by a decline in initial public offerings (IPOs) and an increase in delistings:

While […]

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    A minor change in market trading rules could save taxpayers billions of dollars

A minor change in market trading rules could save taxpayers billions of dollars

Society could save billions of dollars every day if trading in commodities, energy and securities was made more competitive and efficient through a minor rule change. That is the topic of my new research paper.

Every day, auctions and exchanges around the world trade bonds, stocks, currencies, electricity, metals, commodities, securities and financial instruments worth trillions of dollars. Thus even […]

November 29th, 2017|Finance, Pär Holmberg|0 Comments|
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    Dark markets: does private information make price formation less efficient?

Dark markets: does private information make price formation less efficient?

Speaking in January 2014, Michel Barnier (then the European Commissioner for Internal Market and Services and now the Commission’s chief negotiator with the UK over Brexit) justified new rules on securities exchange, which will come into full force in January 2018, in the following way:

‘The MiFID II reform means that organised trading of financial instruments must shift to multilateral […]

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    Bubbles and crashes: A vicious cycle of self-fulfilling investor sentiment

Bubbles and crashes: A vicious cycle of self-fulfilling investor sentiment

What causes financial bubbles? Before the 2008 crisis, this question was often neglected, but after the recent meltdown of the global financial market, it has attracted renewed attention among academics and policy-makers.

Before the crisis, the majority of economists assumed that investors trade financial assets at the so-called fundamental price, which reflects the “real” economic value of companies. In fact […]

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    Tech start-ups need a different approach to financial management

Tech start-ups need a different approach to financial management

We find ourselves today at the start of an industrial revolution. There have been others of course. The first revolution happened 250 years ago. Its engine was mechanisation. Another, about a hundred years ago, was all about electrification and mass production. Then 50 years ago, electronics and automation started a third revolution.

Right now, our physical and virtual worlds are […]

Success attracts new players to private equity

Private Equity is a fringe asset class no more; it has evolved, matured and refined its way into the mainstream. Yet, I foresee major changes for the industry and, fully aware that forward-looking statements have a tendency to dramatically stray from future reality, wish to dare a glimpse of what may come.

Success spawns imitators, and businesses have started to […]

The shrinking number of public corporations in the US

In his famous Harvard Business Review article titled “Eclipse of the public corporation,” Jensen (1989) argues that public corporations are inefficient organizational forms because private firms can resolve agency conflicts between investors and managers better than public firms. His prediction initially appeared invalid. As shown in Figure 1, the number of public firms increased sharply in the first half […]

Can Twitter sentiment predict stock market behaviour?

The stock markets are an incredibly competitive environment and nowadays hedge funds and investment managers are rushing to find innovative ways to produce profits for their investors and their institutions. In addition to therefore understanding the impact of macroeconomic events or regulatory constraints on specific investments, they are looking at new datasets as main sources of competitive advantage.

Someone is […]

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    UK finance needs radical reform to upgrade the post-Brexit economy

UK finance needs radical reform to upgrade the post-Brexit economy

At a recent event marking the 10-year anniversary of the financial crisis, the Governor of the Bank of England Mark Carney said the UK’s banking sector could be “15 to 20 times GDP” in just a “quarter of a century”. But such proclamations beg a big question: what is the value of all this activity and wealth to the rest of […]

The US should not roll back financial regulation

In the United States, the House of Representatives has passed the Financial CHOICE Act (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act). This bill is intended to replace the financial market regulation of the Obama era, the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was a response to the global financial market crisis of 2008.

One […]

September 6th, 2017|Finance, Markus Demary|0 Comments|