We often think of political connections as clearly favoring a company. Perhaps the most extreme example is Donald Trump owning around 500 businesses
What Drives the Cost of Default Insurance?
One of the many negative consequences of the COVID-19 pandemic is that companies may default. Companies going bankrupt are indeed less important than
Corporate Finance in China
China will soon become the largest economy in the world, but many Westerners (myself included) know very little about it. I've thus tried to educate
Are US Industries Becoming More Concentrated?
Industry concentration has increased substantially in the US over the last two decades. But is this a problem? The obvious answer is yes - it allows
Conflicts of Interest Among M&A Advisors
The Importance of M&A Mergers and acquisitions (M&A) are arguably the most important decision that a company makes. Successful mergers can
A Layman’s Guide to Separating Causation from Correlation … and Noticing When Claims of Causality are Invalid
Imagine you're the Minister for Education, deciding how large to make a school district. Larger school districts offer parents more school choice. You
CEOs Cut Investment To Sell Their Own Shares At High Prices
One of the most fundamental concerns with corporations is that they focus on short-term profit rather than investing for the long-term. This is a
Is Short Termism Really A Problem?
"Myopia [short-termism] is a first-order problem faced by the modern firm. In the last century, firms were predominantly capital-intensive, but
Corporate Governance in China
China will soon become the largest economy in the world, but many Westerners (myself included) know very little about it. Moreover, the vast majority
Dangers of Using a Company-Wide Discount Rate
Any Finance 101 class will emphasize that the appropriate discount rate for a project depends on the project’s own characteristics, not the firm as a
Why Banks Should Use Less Debt Financing
In the aftermath of the financial crisis, there have been numerous calls for banks to finance themselves less with debt and more with equity, to
How Corporate Credit Ratings Induce Short-Termism
Credit rating agencies were under particular scrutiny in the recent financial crisis, as critics argue they gave too high ratings to securities that