Contributions published at Corporate Finance Theory (Michel Habib)

Executive Summary Thesis Question A number of high profile Initial Public Offerings (IPO) of social media companies in the United States have attracted worldwide attention in the last few years. Companies like LinkedIn (2011), Facebook (2012), or Twitter (2013) were the most prominent firms in the social media sector that went public in that time period. The very high valuations of these firms on their first trading day or shortly thereafter have raised the attention of analysts and other observers of the US stock market. The current situation in the US IPO market is reminiscent of the events dur-ing the dot-com bubble. Sceptics have pointed to the recent trend in the US IPO market, warning of the development of another asset bubble similar to the one in the technology sector in the late 1990s. Most recently, the US Federal Reserve (2014) stated in their Monetary Policy Report that the valuation metrics for companies in the social media industry seem to be substan-tially stretched. This paper’s objective is to analyse if the development in the IPO market in the United States is in-deed an indication of a potential bubble. In order to do that, key figures for US IPOs are studied. The analysis is carried out in two steps. In the first step, it examines whether the current overall IPO market shows signs of a bubble. The second step of the analysis focuses on social media com-panies, and examines the social media subsector for bubbles.

Executive Summary After the recent global financial crisis risk management has been blamed for having failed to anticipate and hedge that disaster. Quantitative risk models as well as qualitative judgments of risk managers have been called into question. This master thesis aims exactly at identifying the main shortfalls of risk management practices, eventually providing related suggestions for the future. In order to fulfil this aim, risk management developments are first studied from an historical point of view, more precisely during episodes of banking crises of the past. Then, a careful explanation of how risk management operates in every day life is provided and finally it is analysed the current banking regulation that affects banks’ risk management (Basel III). From the overall analysis it turns out that risk management gained importance only starting from the 1980s. For instance, during the Great Depression no risk management tool was available to banks and this surely contributed to exacerbate the crisis. As the years have gone by, banks started using CAPM model for portfolio choice and Black-Scholes- Merton’s model for pricing options. Nevertheless, during the “big five” crises a weak risk management of banks was always a factor blamed to have contributed causing them. Despite the improvements of risk assessments that followed, risk management had responsibilities even in the last global financial crisis. Indeed, due to complexity of new financial products, models in place were not able to compute the exact risk embedded in financial markets. Furthermore, by looking at current risk management practices it turns out that the existing models used for assessing risks nowadays carry some shortfalls too. Therefore, in order to ensure the financial stability of banks some improvements need to be implemented. For instance, risk management need to use more forward-looking measures of risk. Many quantitative models are in fact still based on historical data, thus being not able to account for tail events or extreme different future scenarios. Stress testing and scenario analysis are valuable alternatives to such mere quantitative risk models. However, they should be implemented at an integrated level and by setting multi-factor scenarios sufficiently extreme to be able to account for tail events. Furthermore, when testing scenarios it is important to account for the possibility of new risks in financial markets. Indeed, risks are in continuous evolution as well as their interdependencies and must be carefully controlled if we aim at avoiding the next financial crisis.

Executive Summary After the recent global financial crisis risk management has been blamed for having failed to anticipate and hedge that disaster. Quantitative risk models as well as qualitative judgments of risk managers have been called into question. This master thesis aims exactly at identifying the main shortfalls of risk management practices, eventually providing related suggestions for the future. In order to fulfil this aim, risk management developments are first studied from an historical point of view, more precisely during episodes of banking crises of the past. Then, a careful explanation of how risk management operates in every day life is provided and finally it is analysed the current banking regulation that affects banks’ risk management (Basel III). From the overall analysis it turns out that risk management gained importance only starting from the 1980s. For instance, during the Great Depression no risk management tool was available to banks and this surely contributed to exacerbate the crisis. As the years have gone by, banks started using CAPM model for portfolio choice and Black-Scholes- Merton’s model for pricing options. Nevertheless, during the “big five” crises a weak risk management of banks was always a factor blamed to have contributed causing them. Despite the improvements of risk assessments that followed, risk management had responsibilities even in the last global financial crisis. Indeed, due to complexity of new financial products, models in place were not able to compute the exact risk embedded in financial markets. Furthermore, by looking at current risk management practices it turns out that the existing models used for assessing risks nowadays carry some shortfalls too. Therefore, in order to ensure the financial stability of banks some improvements need to be implemented. For instance, risk management need to use more forward-looking measures of risk. Many quantitative models are in fact still based on historical data, thus being not able to account for tail events or extreme different future scenarios. Stress testing and scenario analysis are valuable alternatives to such mere quantitative risk models. However, they should be implemented at an integrated level and by setting multi-factor scenarios sufficiently extreme to be able to account for tail events. Furthermore, when testing scenarios it is important to account for the possibility of new risks in financial markets. Indeed, risks are in continuous evolution as well as their interdependencies and must be carefully controlled if we aim at avoiding the next financial crisis.

Executive Summary In recent years, there has been a growing interest of the financial community in the measurement of a firm’s technological knowledge. In this context, a market-based approach is applied in this Bachelor’s thesis, which estimates the marginal market value of an additional Dollar of investment in technological knowledge, using a set of heterogeneous firms as data points. The objective of this Bachelor’s Thesis is to analyze the effects of Research and Development (R&D) investment on the Tobin’s q of 770 firms from the global electronics industry using a database for the time period between 1993 and 2013. The analysis is conducted on an electronics industry sub-segment level, including besides North American and European also Asian firms. Compared to previous research a more complete and detailed picture on the market valuation of R&D is provided. Major findings were that the valuation of R&D in the global electronic industry is higher for Asian countries than for the U.S. These findings are persistent, even after accounting for firm-specific effects by applying a fixed effect estimator model. Furthermore, the valuation of R&D varies significantly across electronics industry sub-segments and over time. Hereby the highest values for R&D were found in the sub-segments with the lowest R&D intensity. Only an average R&D market valuation could be observed for high tech industries. In order to correctly quantify the analyzed effects of R&D investment on market value and compare them with the effects of ordinary investments in tangible assets of a firm requires a more complex and extensive model with a more accurate estimate of the technological knowledge. With more detailed data on a firm’s R&D activity a much richer analysis would be possible. Nevertheless, the Electronics industry with its short product life cycles, frequent disruptive innovations and emphasis on more recent R&D expenditures offers an attractive environment for future research on this topic.

Executive Summary On the 9th of February 2014, 50.3% of the Swiss population voted in favour of the “Against Mass Immigration” initiative. The aim of this Bachelor’s thesis is to investigate the reaction of the Swiss stock market to the announcement of this result and determine what impact this event had on quoted Swiss companies. How did the vote affect the value of Swiss firms? In order to answer this question, I conducted an event study analysis. This procedure is the most common instrument used in empirical capital market research to measure the impact of a new piece of information on stock prices. It allows the determination of whether the “Against Mass Immigration” initiative vote resulted in no news, good news, bad news or indefinable news for the Swiss stock exchange. In order to provide a better understanding of the context in which the event study is conducted, at the beginning of my thesis I mention the most important features of Switzerland’s “semi-direct democracy” and its legislation process. Additionally, I give an overview of the main demands in the initiative’s text. When the majority of the electorate accepts a popular initiative, an amendment to the Swiss Constitution is made and the Swiss Government is required to implement the new constitutional provisions. The Swiss People’s Party (Schweizerische Volkspartei, SVP) proposed the “Against Mass Immigration” popular initiative in order to redesign the Swiss immigration policy. The vote is very recent and it is still uncertain how the new constitutional articles might be implemented and what could be the concrete consequences for the country. This event can be defined as a market wide shock. In this environment of national and international political, social and economical implications of the “Against Mass Immigration” initiative, I look for significant evidence to assess if the event has created or destroyed value in the Swiss stock market. At the core of my thesis I outline the event study analysis. My aim is to analyse how the overall portfolio of all listed companies in the Swiss Performance Index (SPI) reacted to the event. Additionally, I want to determine whether or not the stock prices of companies with different features were affected in different manners by the event. Thus, I construct portfolios according to company characteristics, such as the size, the industry or the presence of the company in the Swiss market versus its international representation. When testing these portfolios separately, it is possible to conclude which have been the winners and which the losers. An event study is carried out in order to find significant evidence against the null hypothesis of no effect of the event on stock prices. To do so, the abnormal return of each stock in the sample is computed. The abnormal return is the difference between the actually observed return and the normal return, predicted for the case in which no event had taken place. I collected the data I needed from the Thomson Reuters Datastream database. I calculated normal returns over an estimation window of 250 trading days using the Market Model. Afterwards, I calculated abnormal returns for each company of the sample on each day of the event window, a time period of ±1 day around the event day. In order to test the reaction of different portfolios to the event, I aggregated abnormal returns accordingly. For these portfolios I implemented a parametric significance test. Since this thesis is about a regulatory event in a national market, the event day is the same for all securities and stock price responses are not perfectly independent within the sample. Thus, it is important to consider the presence of event-time clustering. In order to account for the bias caused by clustering, an extensive literature review has been performed. After having evaluated the evidence in favour of the adjusted Boehmer/Musumeci/Poulsen (1991) test statistic by Kolari/Pynnönen (2005/2010), I decide to implement this procedure, which accounts for clustering and event-induced variance. To conclude my thesis, I present the findings and their interpretation. When testing for an impact of the vote on the 9th of February 2014 on the overall sample of all SPI constituents, the null hypothesis of no effect cannot be refuted. The further analyses for portfolios constructed according to common characteristics of the firms do not display significant results either. To sum up, the lack of stock price reactions suggests that the event has been no news for the Swiss stock market. This is likely to be an indicator for the confidence of Swiss companies to support the possible consequences of the future implementation of the “Against Mass Immigration” initiative.

Executive Summary The motivation for this thesis stems from the dearth of transparency in venture capital performance and the often-observed and accompanying performance short- falls of investment in venture funds. The venture capital industry is rapidly growing amidst the current technology boom, with 185 new funds raising a total of 16.7 bil- lion US Dollars in 2013 alone (National Venture Capital Association 2014). Despite the large amounts of new venture capital being raised, the performance of venture capital investments have in many cases failed to beat public market performance benchmarks. In a recent report The Kaufmann Foundation determined that in their own portfolio of venture funds only a handful provided adequate returns (Mulcahy, Weeks and Bradley 2012). This is problematic, especially for certain institutional investors, as some of these (many endowments for example) face mandated capital allocation into venture funds. With this problem in mind, the research in this thesis focuses on the identication of a factor-based model to help explain US based venture rms' success. In contrast to other research, this thesis adopts a holistic approach by looking at a broad range of factors: both observable rm characteristics (number of funds, age of a rm, etc.), and partner characteristics (average age of partners, partner experience, etc.). In this thesis, a randomly selected sample with the addition of a handful of note- worthy venture rms were chosen as data points for analysis from 2003 to 2013. This data has been collected from a variety of publicly available sources such as Crunch- base and SEC Filings. From this data, a number of rm characteristic and partner characteristic factors were calculated including size, number of partners, average in- vestment deal size, age of rm, average partner age, average partner experience, gender ratio etc. These factors were chosen based on previous academic research and input obtained from professionals in the industry. They were then analyzed against the performance of each rm, using the estimated pooled internal rate of return as a measure. The analysis is broken down into three parts: a model consisting of solely rm characteristic factors; a model consisting of only partner characteristics; and a model consisting of a mix of the two. The results of the analyses are best modeled by a combination of both partner and rm characteristics. This is in line with the previous separate research done in the areas of partner and rm characteristics. The main factors - the number of partners and the average partner experience - both showed a large and signicant impact on performance signaling in the best model identied. It is important to note that in the course of this research a number of challenges arose. The predominant problems related to lack of data access, which ultimately led to a smaller sample size than initially hoped. This limits the inferences and generalizability of the results. Additionally the actual fund performance data and the pooled internal rates of return were not accessible; hence estimates had to be used. This is not ideal and has a probable impact on the results. Nevertheless, this thesis identies some interesting trends in venture capital performance. These results provide a great basis for future research. With an expanded sample size and more detailed performance data, a more rened venture rm performance model could be identied.

Executive Summary The thesis analyses intraday price behavior of the gold and silver market to identify consistent abnormal price movements. As a first step, the current academic literature is reviewed regarding price anomalies, other seasonality effects and other research in the field of the precious metals markets. Furthermore, the market characteristics of both metals are examined regarding its supply and demand structure. Besides the many qualitative similarities of both metals, there are many differences in quantitative terms. For instance, each metal is heavily used for jewelry as well as a financial asset, although the physically traded volumes in terms of USD are much larger in the gold market. The main part of the thesis is about detecting intraday price anomalies. Therefore, different time dimension combinations compared with each other. The first time dimension concerns the investigated total period from 10.09.2007 to 31.01.2014. This timeframe is further divided into three market phases, which are characterized by a positive, neutral and negative price trend. The second time dimension focuses on the time window of 24 hours to detect intraday price trends. The examined data points are the half-hourly updated gold and silver prices. This second dimension is further divided into regional exchange trading hours such as London, New York, Hong Kong and others. Finally, the last time dimension explores the single weekdays. In a first part, the descriptive statistical key figures of the half-hourly returns are analyzed. Moreover, the returns are tested for normality and additionally non-parametric inferential statistical methods are applied. The results indicate mostly non-normal distributed returns but also similarities between certain regional trading hours. Based upon the conducted tests the results suggests that a single trading day can be divided into two parts, which are distinct regarding various key figures such as the return mean and its distributional characteristic. Additionally the gold mean returns around the gold AM- and PM-fixing show the highest negative values of the whole trading day for all defined market scenarios. In the negative market environment, the silver mean is the highest around the silver-fixing time. The most distinct result regarding the division of the trading day into two parts shows the time between the opening trading hours in London until the gold PM-fix in comparison to the remaining hours until the next opening in London. Based upon these findings, possible trading strategies are defined for each market. A buy and hold investment in the corresponding underlying serves as a benchmark. In a first step, the cost structures of the strategies are evaluated and it is evident, that the implementation costs are the major issue. Due to higher spreads and lower liquidity in the silver market, the assumed costs are significantly higher than for all gold strategies. Although the return figures before costs consideration were much better, it changed greatly after including costs to the back testing. The best performing strategy for both markets is a short position during the Londoner opening until the PM-fix and subsequently change it to a long position until the next Londoner opening and repeat it for every day. This strategy yields a considerable positive excessive return to a simple buy and hold investment in every defined market period for both metals. Alternatively, a long-only - 2 - strategy in gold for the just mentioned long position timeframe also yields a very attractive return, which goes along with the lowest volatility and maximum drawdown values of all tested strategies. This is due to lower implementation costs and the avoidance of any exposure during the more volatile Londoner trading hours. Altogether, the price behavior is much more consistent across the different defined market environments and allows such a simple rule based investment strategy. Despite this, the intraday prices in the silver market behave much less stable and consequently such simple rule based strategies as explained above entail more risk and a more sophisticated risk management is required.

Executive Summary This thesis uses the quantitative linguistic analysis approach to study the sentiment of over 24,000 news articles on 126 European companies. Thereby, eight different media tone variables are derived, which are in turn employed in an innovative bankruptcy prediction model. Structured into four main parts, the study analyzes theoretical concepts of bankruptcy prediction and textual analysis, as well as their application into practice. In a first part, a short introduction to five major bankruptcy models, grouped into accounting-based and market-based, is given. In a second part, the related research in linguistic analysis, particularly in the area of finance, is presented. In a third part, an empirical study is conducted, in which media sentiment variables are constructed in four steps: (a) selection of adequate news sources and information collection, (b) pre-processing of the textual documents, (c) application of a suited dictionary, and (d) adjustment with the tf/idf term weighting scheme. The model is empirically tested using a logit regression approach. In a fourth part, the study is concluded by summarizing the main findings and suggesting further areas of research. This study finds that the tone in news articles contributes incremental information on the financial stability of a company. Bankruptcy prediction accuracy ranges from 76.2% to 82.5% in the 90 day period prior to the bankruptcy event, up to 57.1% 180 days prior, up to 55.6% 270 days prior and up to 54% 360 days prior to the corporate default. The sentiment variables significantly differ in predicting quality, with the model specification using the negative sentiment category forecasting bankruptcy best. The necessity of using explorative approaches in this research points to the occurring difficulties, particularly with the application of textual variables in the bankruptcy prediction model. This thesis identifies four main issues with the methodologies: (1) the limited size of the population, which constrains the number of possible samples, (2) the time intensity and error-proneness of manual data collection, (3) the ambiguity in texts (e.g., negations, information quality), which restricts the extraction of meaningful sentiment variables, and (4) the occurring statistical issues (e.g., quasi-complete separation, complete data bias).

This master thesis examines the perception of the Balance Sheet Based Bankruptcy Triggering Asset Value by the equity market empirically. As such, it closes the gap between the extensive theoretical research and the capital markets. Panel models, using various risk and capital cost measurements, are deployed to investigate a sample covering the years 1993 to 2012 for 50 US large cap companies. Overall, evidence was found for an influence of the Trigger Value on the credit risk premium of fixed income instruments. The perception by the stock market is somewhat ambiguously.

Executive Summary This master's thesis makes an empirical contribution to the pension fund governance literature from a Swiss perspective. The objective is to investigate whether there exists a connection between board structure and investment performance. The main variables examined are the board size, the women share, and the board turnover. As there did not exist a suitable data set for Swiss pension funds to investigate this question so far, a new and unique panel data set is compiled. The data is mainly collected from the Swiss Central Business Names Index as well as the annual reports of the pension funds. The panel data set contains data from 2006 to 2012. In the year 2012, it includes 131 Swiss pension funds with combined investments of CHF 318 billion or almost half of the whole industry. This data set is then used to conduct cross-sectional and panel regression analysis, regressing dierent performance measures on the board structure and control variables. I nd that the average board size is a little bit more than nine members, of which about every fth is a woman in 2012. Over a period of three years, three out of ten board members are substituted on average. Time trends show that the board size of Swiss pension funds is more or less constant over time. The share of women on a board as well as the board turnover increases over the period from 2006 to 2012. The empirical analysis shows that the board structure of a pension fund does have an impact on performance. Board turnover has a positive impact on pension fund performance. This result proves robust in cross-sectional and panel regressions with dierent performance measures. This relationship could follow from conservative decisions of board members with long tenures or an interest mismatch of older board members and younger pension fund bene- ciaries. Such explanations are supported by corporate governance literature and pension fund governance literature. I nd a positive relationship between the board size and pension fund performance. A possible explanation is that decisions are better discussed and are broadly supported in larger boards. This result is however not very robust and prone to a multicollinearity problem with the size of the whole fund. It is in contrast to corporate nance literature and also partly contrary to existing pension fund governance literature. Finally there is no evidence that the share of women on a pension fund's board matters. This result proves robust in all regressions. It is in contrast to corporate governance literature, but mostly in line with other pension fund governance literature. With these results, this master's thesis contributes to the still relatively new research topic of pension fund governance, which so far has only very inconclusive results. The new insights gained into this area hopefully serve as a basis for future research.

In the last few decades, Islamic finance (IF) has been rapidly growing. IF is subject to different restrictions, which are not known in cenventional finance (CF). The most important restrictions of IF are prohibition of Riba (interest, Gharar (risky or hazardous sale) and Maysir (gambling). According to Muslim scholars, implementing those restrictions would improve financial stability and enhance fair distribution of wealth among the poor and the rich. After emergence of the financial crisis in 2007, supporters of IF seem to have found confirmation for their arguments and often claim that this kind of development would at least be less probable under IF.

Executive Summary This thesis characterizes the risk factors of Swiss real estate funds. Factors that apply to individual properties are not considered, but only those that differentiate individual real estate funds from each other and from other investments. The characterization will be achieved by analysing the legal situation, taxes and regulatory framework. Risks of regulation changes are outlined and evaluated theoretically. The funds are set in contrast to the whole Swiss real estate market, and compared to other direct and indirect investment instruments. Moreover in a second, empirical part, factors that cause variation in the share premium between individual funds are identified. For this, a coefficient (Geo-Dist) is created that indicates the geographical distribution of a fund’s property portfolio. This coefficient is combined with a set of other factors; debt ratio (Leverage), fund size (Index Weight), and share of residential properties (Residential). These are then tested on their effects on the (liquidation-tax adjusted) premiums of all real estate funds listed on the SIX Swiss Exchange, by means of a multipleregression analysis. The results show significant effects of debt ratio (Leverage) and share of residential properties (Residential), but none for the other factors. Eventually, the returns of the real estate fund index is regressed on stock- and bond market indices to reveal the respective market risks. The results show minor but significant sensitivity to stock market risk, but none for bond market risk.

Executive summary The aim of this thesis is to determine whether investing in commodities benefits a diversified investor. In a world, which has become increasingly dynamic, leveraged and global, risks have significantly increased. Therefore, it is crucial for individual and institutional investors to find new strategies to reduce their portfolio risk. The first part of the thesis analyses the question of how an investor can get exposure to the commodity markets. This analysis is based on the differentiation of direct and indirect investments in the market. Direct investment types are characterized by the actual storage of a commodity or the future holding and its respective taking delivery of the commodity. Whereas the indirect ways are represented by investments done through financial vehicles (ETFs, indexes etc.). Furthermore, in this part different commodity market places are mentioned and explained. In the second part of the thesis the correlation between different commodities and commodity indexes to the traditional asset classes like equity, fixed income and cash market are analyzed to determine if diversification brings added value for an investor. For each asset class weekly prices for a range of consideration of 20 years, from 1994 until 2013 are applied. For the calculation two different types of correlations are adopted. The first is the static correlation, which analyses the correlation between the assets for each calendar year separately. The second one is the dynamic correlation, which shows always the relationship in ranges of 52 weeks, but for the next observation it will take in consideration the successive 4 weeks and leave out the first 4. The roll correlation moves forward in time. Both of these two methods are based on weekly absolute prices and delta prices. The results are disappointing, since for all asset classes there is no clear negative correlation over time. The correlations are characterized by extremely high volatility, moving from high 2 positive to high negative correlation. However, what can be concluded from the result is the increasing financialization of the commodity markets. After the year 2000 periods of high correlation predominated. The implied result is that gold actually is the best commodity for reducing the volatility of a portfolio. This brings a positive effect to the investor. Another interesting fact is that small equity indexes, like the SMI, tend to be more negatively correlated to commodities than large equity indexes like the S&P500 and MSCI World. Key words: Commodities, asset allocation, correlation, commodity markets and financialization.

1. Problem statement Over the years, Swiss politicians publically ensured and irreproachably guaranteed the Swiss banking secrecy, which was formally introduced in the Swiss legislation in 1934. Considering the fact that Switzerland does not own any scarce resources it could derive its wealth from, the country had to build its prosperity based on external businesses. In view of the fact that the Swiss financial sector accounts for over 10% of the country’s GDP, it obviously constitutes an important source of employment as well as a substantial factor for value creation. In truth, Switzerland developed a strong financial sector thanks mainly to its political stability, outstanding know-­‐ how and incredible discretion. Interestingly enough, foreign investors deposited their funds in Switzerland in order to benefit from high-­‐quality banking services despite the fact that interest rates were negative. Nevertheless, while assessing the importance of the banking secrecy to the Swiss economy it is important not to restrict its influence to the financial sector, as it most definitely has positive consequences on a wider set of industries such as tourism, luxury goods and many more. Swiss legislation encompasses an unconventional aspect, as unlike tax fraud, tax evasion is not considered a crime; this distinction often remained misunderstood by many foreign countries. The main issue arose because a substantial amount of funds deposited in Swiss banks by foreigners remained undeclared to the foreign tax authorities; thus, the banking secrecy allowed many individuals to evade tax and was therefore often denounced by foreign governments. Nonetheless, the Swiss financial sector would not be as advanced as it is today without its precious banking secrecy, which is fully recognized as a powerful advantage over analogous financial centers. The Swiss government succeeded in protecting its secrecy until 2009, when, following the UBS scandal, it officially counteracted its comparative advantage and released clients’ names to the US tax authorities. This breach opened the door to further foreign attacks, mainly arising from the European Union and the OECD; Switzerland was then constrained to weaken its secrecy and sign agreements such as the FATCA agreement with the US, the RUBIK agreements 2 with some European countries and the well-­‐known Multilateral Convention on Mutual Administrative Assistance in Tax Matters from the OECD. While Switzerland agreed to sign the OECD tax model after its creation, it refused to comply with article 26, which is relative to the exchange of information. Switzerland agreed to dismiss such reservations on March 13th 2009 in order to avoid being recorded on the OECD’s black list; this constitutes a crucial date in the history of the end of the banking secrecy. Even though it is extremely difficult to estimate the percentage of undeclared funds in the country’s assets under management, one can be certain that it is not negligible. Furthermore, considering that the Swiss government has been pursuing a ‘white money strategy’, which implies that undeclared funds are no longer allowed in Swiss financial institutions, Swiss banks are currently asking their foreign clients who are holders of undeclared money to leave their institutions if they do not wish to declare their funds to their home tax authorities. This is highly problematic for such clients as they only have a limited number of solutions. Even though one can certainly invest in valuable commodities or works of art, the resale options are then extremely limited. Alternatively one can declare one’s capital to the tax authorities; nevertheless, this option comes at a very high cost. Of course, storing the funds in a safe remains a valid alternative as long as the bills do not change in the future. Thus, the Swiss road to transparency implied by the end of the banking secrecy, as well as by the ‘white money strategy’, involves risks and costs; it is difficult to define the optimal solution for the foreign holder of undeclared funds. Swiss citizens who are owners of undeclared funds do not face such issues yet as the banking secrecy is currently still valid for them. Nonetheless, it may not remain the case for long as many professionals expect a fiscal amnesty in the near future. It is important to acknowledge the fact that Switzerland had no choice but to comply with international standards in tax matters and to improve its transparency as it was under such pressure from foreign governments. Moreover, in today’s interconnected world where trade between countries is highly developed, Switzerland could not afford to refuse international guidelines and isolate itself from the rest of the world. 3 This thesis aims at assessing the impact the end of the banking secrecy has on Swiss firms’ stock prices and more generally on the country’s economy. What will determine the long-­‐term effect on the Swiss prosperity depends greatly on the country’s capacity to accommodate to the requirements and its adaptation speed. In order to analyze what effect the Swiss government’s actions leading to the end of the banking secrecy have on the Swiss firms’ stock prices, the following hypothesis will be tested: H! : The Swiss government’s actions leading to the end of the Swiss banking secrecy have no impact on the Swiss firms’ stock prices H!: Else

The present thesis examines whether Small and Medium-sized Enterprises (SMEs) have been affected by the consequences of the credit crunch after Europe was hit by the financial crisis in summer 2008...

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Executive Summary I. Problem Definition The cost of capital is of central importance for firms that have raised or plan to raise money at the capital markets. The management has to ensure that the weighted average cost of capital (WACC) is lower than the return on the invested capital (ROIC). Otherwise, the firm will diminish in value. Moreover, the cost of capital is also a central factor for the valuation of firms, business segments and individual projects. Due to its significant influence on the result, it is a value driver. Consequently, the minimisation of the cost of capital has to be a primary goal for the management. The cost of capital is influenced by various different factors, such as the capital structure, the firm size and the beta. Another potential factor may be the disclosure quality of a firm. There already exists some research on the association between the disclosure quality and the cost of capital or, more frequently, on the cost of equity. However, there are different conclusions on whether this association exists or not. Many studies find evidence for a significant association between the disclosure quality and the cost of capital (or at least on the cost of equity) (Chen, Chen and Wei (2003); Hail (2000)), others only do so under certain restricting conditions (Botosan (1997); Botosan and Plumlee (2002); Lambert, Leuz and Verrecchia (2005)), and a minority does not find one at all (Daske (2004); Francis, Nanda and Olsson (2008)). This emphasizes the importance of further research on this association. It is obvious that conclusive evidence on this relation has important implications for firms. In case of a significant, negative association between the disclosure quality and the cost of capital, firms would have an additional tool to minimise the WACC. Moreover, only little of the existing research regards Swiss firms. This is relevant since the relation between the disclosure quality and the cost of capital may be varying for different countries. Furthermore, most of the research does not examine the effect on the overall cost of capital, but only on the cost of equity. However, the WACC should be the main interest for a firm since this is the total cost that has to be paid.

EXECUTVIVE SUMMARY For centuries, watches have been associated with Switzerland. The precision and quality of Swiss watches have exerted an insolent domination over the world markets. Moreover, it contributed greatly to the good reputation of Switzerland. Within Switzerland, the watchmaking industry is of utmost significance regarding exports and employment. Surprisingly, the general history of the Swiss watch industry is still unknown and not easily to access. Most literature focuses rather on a single enterprise or a region. The intention of this master thesis is to show and explain the economical development of the Swiss watch industry from its early beginnings in Geneva in the 16th century until the year 2012. Although Swiss watchmaking was challenged several times and was even on the verge of collapse during the watchmaking crisis of the 1970s and 1980s, it successfully adapted and achieved a dominant position – particularly in the luxury segment – due to its worldwide reputation of excellence, geographical well diversified outlets and its minor dependence on the exchange rate. The period from 1990 to 2012 is analyzed in more details and supported by various data about the exports, imports, outlets and structure of the Swiss watch industry. A shift toward the Asian continent in combination with a focus on expensive mechanical watches can be observed over the last two decades. Additionally, a trend towards vertical integration of production and distribution can be seen. This development is mainly a consequence of the supply bottleneck and will be reinforced with the new Swiss Made amendment. Although the prospects of exports are rather bright for the big watch groups, this is not the case for smaller and independent watchmakers. The reason for this lies in the aforementioned supply side shortage.

In 2012 Allianz Global & Specialty asked 150 of their risk experts around the globe that are the most important risks for industrial companies for 2013. The study forecasted that business interruption is the most feared risk in Switzerland for 2013. Business interruption may result in severe damages for a company. Not only in form of property damage, but also in form of not being able to continue production of goods for an uncertain period as well as reputation damage and loss of customers. Furthermore, an interruption of business might even threaten the existence of a company....

Does stock market development promote innovation? This paper investigates the role of stock market development on innovation. With a quasi-natural experiment I exploit the Big Bang, a large and exogenous shock to stock market regulation that occurred in the United Kingdom in 1986 and show that improved stock market conditions foster innovation in firms belonging to more external finance dependent industries.