One of the many negative consequences of the COVID-19 pandemic is that companies may default. Companies going bankrupt are indeed less important than deaths, but they still have human consequences. Employees lose jobs, suppliers lose customers (and then may themselves default), and investors lose money. We often downplay the third effect for two reasons. One …
The European Central Bank is launching a €750 billion bond buying program to address the COVID-19 pandemic. Will this work? We obviously can’t predict the future. But we can analyse the past and study how the last major bond buying program – which addressed the Eurozone crisis – played out. In doing so, we must …
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 myself about the Chinese economy, and earlier posted a summary of an excellent article on corporate governance in China by Professors Fuxiu Jiang and Kenneth Kim. This has turned out to be one of …
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 myself about the Chinese economy, and earlier posted introductions to corporate governance in China and capital markets in China. This post is an introduction to corporate finance in China – capital structure, corporate investment, …
John Cochrane of Stanford has written an excellent review of recent advances and future research directions in macro-finance. Macro finance studies the relationships between asset prices (e.g. the level of the stock market) and economic conditions (e.g. whether we’re in a recession or a boom). These relationships are important. For example, if investors are more …
How Macroeconomic Conditions Affect Stock Prices Read More »
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 companies to get away with high prices and low product choice, which is bad for consumers. But it may be that these companies have become large through offering great …
“Myopia [short-termism] is a first-order problem faced by the modern firm. In the last century, firms were predominantly capital-intensive, but nowadays competitive success increasingly depends on intangible assets such as human capital and R&D capabilities (Zingales (2000)). Building such competencies requires significant and sustained investment. Indeed, Thurow (1993) argues that investment is an issue of …
China will soon become the largest economy in the world, but many Westerners (myself included) know very little about it. Moreover, the vast majority of research on corporate governance is on the US. We often assume that these findings will apply throughout the world, but this assumption is unwarranted – the institutional setup is very …
We hear blockchains mentioned all the time, but very few people know what they actually are, how they work, and what effect they may have. The paper “Corporate Governance and Blockchains”, by David Yermack of NYU Stern is an excellent “go to” reference that answers these questions in a clear and non-technical manner. I summarize the …
Blockchains: How they work, and how they may transform the world Read More »