Finance

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    Most countries in the ’10 most likely’ to adopt bitcoin are in the developing world

Most countries in the ’10 most likely’ to adopt bitcoin are in the developing world

Which markets have the greatest potential for bitcoin adoption?

With over $250m of venture capital invested in bitcoin startups to date, much is at stake in understanding which markets will prove most fertile for bitcoin. In addition, many governments and regulatory agencies are seeking to better understand the economic opportunities presented by bitcoin along with the perceived risks.

The new Bitcoin Market Potential Index […]

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    Shareholders’ votes on CEO pay focus mostly on top-line figures

Shareholders’ votes on CEO pay focus mostly on top-line figures

We examine the impact of enhanced executive remuneration disclosure rules on the voting pattern of shareholders under UK regulations. The key findings are that shareholders guide their vote by top line salary only, and appear to disregard the remaining – substantial – body of information provided to them.

Our paper can be seen against a backdrop of numerous policy initiatives […]

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    Startups working with venture capital firms perform the best

Startups working with venture capital firms perform the best

It’s a familiar idea that venture capitalists, or VCs, are the “money of invention” and fund firms with high growth potential, helping bring their products to market. However, entrepreneurs have many options when considering funding. There are corporate venture capitalists (CVC), which typically work within a larger corporate structure and seek to acquire innovative startups that would blend well […]

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    Some mutual funds do business with firms whose shares they own

Some mutual funds do business with firms whose shares they own

Major decisions in public corporations are subject to a democratic process: Proposals for change are presented at annual general meetings (AGMs), company managers indicate their preferred outcome, and shareholders then vote. Mutual funds have significant voting power by virtue of their extensive shareholdings. They also often have business ties with firms held in their portfolios because they manage company […]

CEOs strategically time news releases for their own benefit

More and more firms seek to set long-term incentives for their managers. One way to do so is to restrict executives from selling stock and options for a certain period, typically three years. When such stock and options finally become available (“vesting”), many executives are eager to sell.

One easy way to boost short-term stock prices is to release news. Even […]

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    Institutions that settle market transactions need strong corporate governance

Institutions that settle market transactions need strong corporate governance

There have been a variety of systemically important banking issues making the headlines since the global recession of 2008, but the challenge to mitigating credit risk during settlement seems to be a constant frontrunner. This article discusses the importance of effective liquidity management, particularly from the sphere of timely payment settlement via financial market utilities (FMUs), defined as “multilateral systems that […]

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    Company news affects the way in which a stock’s returns co-move with those of other firms

Company news affects the way in which a stock’s returns co-move with those of other firms

It is well known that the release of new information about a firm affects its stock price, as investors update their expectations about the firm’s fundamentals and future profitability. For example, unexpectedly good earnings news cause price increases, while negative surprises cause drops in prices. However, little is known about the impact of news on the co-variance structure of […]

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    How investment analysts frame information matters to their careers

How investment analysts frame information matters to their careers

Institutional Investor’s All-American ranking is the Oscars of sell-side securities analysis. Sell-side analysts work for investment banks or independent research firms to gather, interpret, and disseminate knowledge about a particular industry. Unlike buy-side analysts, who make actual investment decisions, sell-side analysts offer their audience of institutional investors – such as chief investment officers and portfolio managers of money management […]

How is big data transforming the financial sector?

Using big data for finance is a trend at the centre of the UK financial sector. The emerging financial services sector is commonly termed ‘fintech’ and while it includes firms in retail financial services, risk analytics and aspects of extensive payment systems, a major element of it focuses on the use of big data and the algorithms appropriate to […]

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    The Brexit question will increase financial market volatility

The Brexit question will increase financial market volatility

In late February, UK Prime Minister David Cameron announced that the referendum on the country’s continued membership of the European Union (EU) would be held on 23 June. Over the following weekend, a number of leading Conservative MPs announced their support for the campaign to leave the EU – ‘Brexit’. The pound sterling declined as trading opened on the […]

What will the bank of the future look like?

Lionel Barber, the editor of the FT, summed it up at Davos: “Nobody wants to be in banking, everyone wants to be in fintech”. Fintech – or financial technology – has reached the mainstream, but what does this mean for the banks?

The Fourth Industrial Revolution is taking hold in banking. The rise of fintech came about over the last […]

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    Some currency trading positions yield increased returns around Fed announcements

Some currency trading positions yield increased returns around Fed announcements

Announcements by the Federal Open Market Committee (FOMC), which occur regularly at pre-specified dates, are one of the most highly anticipated events by investors around the world. Through these announcements, the Federal Reserve communicates monetary policy in the form of setting the target federal funds rate which is the interest rate at which financial institutions lend to each other […]

European banking union: should the ‘outs’ join in?

The ultimate rationale of banking union

Banking union was conceived as a reply to one of the root causes of the European debt crisis: the sovereign-bank loop. To break the loop, euro-area leaders decided to move responsibility for banking supervision and resolution to the European level.

Banking union consists of the SSM (Single Supervisory Mechanism) and the SRM (Single Resolution Mechanism). […]

Overconfident CEOs prefer short-term debt

Debt maturity represents an important dimension of corporate financing policies. Inferior debt maturity structure can lead to suboptimal liquidation of the firm. The impact of firm characteristics on the choice of debt maturity structure is well understood. More recently, studies have turned to examine how the personal characteristics of corporate executives affect debt maturity decisions. This makes intuitive sense […]

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    Venture capital increases a startup’s chances of issuing stocks or finding a buyer

Venture capital increases a startup’s chances of issuing stocks or finding a buyer

An ultimate challenge for technology entrepreneurs is the need for capital to continue to innovate, sustain, and commercialise their innovation. The considerable risks associated with the technological feasibility, business model credibility, and product or service viability severely limits access to capital, yet angel investors and venture capitalists fill this need by investing in startups in exchange for an equity […]

Socially connected fund managers share investment ideas

Despite the important role professional money managers play in financial markets, and decades of academic study, relatively little is known about how they generate investment ideas. Some choices are likely driven by information gathered through connections to particular firms. Previous research has shown that managers invest in companies headquartered nearby and in companies to which they are linked through […]

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    When firms increase advertising spending, their stock prices climb in tandem

When firms increase advertising spending, their stock prices climb in tandem

Recent research has found that advertising has an important impact on the liquidity and breadth of ownership of stocks. This is intriguing as advertising is intended to increase the awareness of a firm’s products rather than its securities. Nevertheless, there appears to be a spillover effect. In a recent paper, I start by providing evidence of the spillover effect […]

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    The individual style of audit partners influences how firms are rated

The individual style of audit partners influences how firms are rated

We examine the persistence and economic consequences of variations in reporting style across audit partners in individual engagements. Based on an analysis of audits performed over a six-year period by the Swedish subsidiaries of the Big 4 accounting firms (Deloitte, Ernst & Young, KPMG, and PwC), we find that:

aggressive or conservative reporting is associated with the particular engagement partners […]

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    In search of greater regulatory freedom, some banks resort to cross-border acquisitions

In search of greater regulatory freedom, some banks resort to cross-border acquisitions

The recent global financial crisis, caused in part by systemic failures in bank regulation, has sparked, among other things, a strong push for both stricter capital requirements and greater international coordination in regulation. For example, seven of the 10 recommendations of the 2011 Report of the Cross-Border Bank Resolution Group of the Basel Committee for Banking Supervision (BCBS) propose […]

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    Investment in life sciences leads the growth of the UK start-up market

Investment in life sciences leads the growth of the UK start-up market

As large investors in the UK become more willing to inject capital in less liquid assets, the investment in the UK’s fast-growth company sector has been growing at increasing speed. It has now become obsolete to talk about recovery – we should now be talking about growth in unqualified terms.

In our study of the UK equity investment market, we […]