Contributions published at Corporate Finance Theory (Michel Habib)
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Fulvia Fringuellotti, Three Essays on Bank Lending, University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Dissertation) |
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Patrick Goncalves da Costa, Sector Specialization and Low-Risk Strategies, University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Master's Thesis) The existence of the low-risk effect cannot be denied and the popularity of low-risk stock portfolios is increasing. The master thesis aims at answering the research question whether the low-risk effect is observable in the S&P 500 and S&P 400 Financials and Health Care sectors from February 1998 to October 2017. For the market and for each of both sectors, two optimization-based and two ranking-based low-risk portfolios are back-tested, on the basis of either the variance or the target semi-variance. The results show that the low-risk effect is observable for optimization-based low-risk portfolios in the market and in both sectors. |
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Sébastien Badet, Value-Based Care in Switzerland: utopia or dystopia? , University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Master's Thesis) In international standards, Switzerland has a highly praised and top-notched healthcare system. Nonetheless in accordance with most mature economies, the country faces huge pressures with rising costs and must find innovative solutions to maintain its sustainability. This thesis sheds light on the major barriers to entry in the Swiss landscape of a ground-breaking healthcare strategy. The value-based care is a patient-centric and systematic cost-efficient approach to enhance value creation for patients. The research contributes to the scarce literature assessing Swiss healthcare with regards to value-based care. The study has been built upon a comparative analysis between the high-profile features of the system at present time and the value proposition of the overarching framework. The mandatory statutory health-insurance system, preliminary remuneration changes, and the high reliance on market-based competition are pillars providing strong foundations for a value-based approach. Nevertheless, four main barriers have been identified. The global satisfaction of the Swiss population, the legislative structure of the country, the limited usage of digital health, and the absence of consistent measurement and transparency are likely to underpin the ease of preliminary enabling stages. |
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Elia Dotti, A comparison of IPO Underpricing Between Fintech and Traditional Firm in US and Europe, University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Master's Thesis) In this thesis the phenomena of underpricing at IPO has been studied. In addition to a detailed presentation of the IPO process, theories of information asymmetry have been developed to set the basis for the empirical research. Through the introduction of the uncertain Fintech industry in the study of underpricing phenomena, has been possible to enforce the role of information asymmetry as the major player affecting the high abnormal returns recorded at IPO. Traditional companies and Fintech firms have been analysed in two of the major financial center in the world: the US and Europe. Different factors have been analysed and interpreted to explain why Fintech perform a higher degree of underpricing at IPO. The study has been implemented on 448 and 292 traditional firms in the US and Europe respectively, while the Fintech samples count 103 and 37 observation. The number of bookrunners involved in the deal, the proportion of shares available to the public and the location of the offer price compared to its price range have been found to be the main drivers of the higher performance of Fintech over traditional companies at IPO. |
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Stefania Rubin, The global trend towards tax transparency in banking: an analysis of the implementation of the Foreign Account Tax Compliance Act (FATCA) in selected Swiss banks , University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Master's Thesis) A global trend towards tax transparency is becoming increasingly important in the tax regulatory environment of the banking sector. This has been manifested through reg-ulatory changes in various financial centers, e.g. in Switzerland, and beyond. In this context, this thesis aims to investigate the implications of the introduction of a United States (US) tax regulation in the Swiss banking sector, namely the Foreign Account Tax Compliance Act (FATCA). In particular, the thesis explores the implementation actions undertaken by four Swiss banks in order to deal with the new requirements. For this purpose, a multiple case study design has been utilized, focusing on four se-lected Swiss banks of different types. Interviews were conducted with bank employees along Freij’s theoretical framework (2017), which focuses on changes in products, processes and technology and the use of external providers. In general, the findings revealed substantial changes in processes and technology and additional consequences for employees and customers. In contrast, no significant impact was found in terms of new products. Furthermore, depending on the type of bank and the FATCA due-dili-gence and reporting requirements, differences were found regarding the degree of use of external providers and the level of integration of new and existing processes and technology. Finally, the results highlighted that FATCA facilitated the implementation of another tax regime within the four banks, namely the Automatic Exchange of Infor-mation. This sort of facilitation was and is considered an opportunity in the context of the global trend towards tax transparency that is currently shaping the banking industry but also of potential future, even more far reaching regulations. |
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Mirko Ghezzi, Returns to Swiss Bidding Firms in Cross-Border Mergers and Acquisitions, University of Zurich, Faculty of Business, Economics and Informatics, 2019. (Master's Thesis) Mergers and acquisitions (M&A) have significantly increased over the last decades. Cross-border activity intensified in the 1990s following a rapid globalization. In Switzerland, in-ternational deals exceed purely domestic ones. In contrast to target companies which often gain considerable excess returns, the literature on the outcome of a cross-border takeover for a bidding corporate diverges. After a theoretical introduction of the main aspects con-cerning M&A, this study investigates the stock market reaction to M&A announcement by Swiss bidders involved in a cross-border deal post 2007-2008 crisis. The event study meth-odology is applied to derive abnormal returns, which are tested for statistical significance by four parametric and two nonparametric tests. |
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Manthos Delis, Fulvia Fringuellotti, Steven Ongena, Credit and Income, In: CEPR Discussion Papers, No. 13468, 2019. (Working Paper) Using a unique data set of business loan applications to a single bank from individuals who are majority owners of small firms, we study how bank credit origination or denial affects individuals' income. The bank cutoff rule based on the applicants' credit score creates a sharp discontinuity in the decision to originate loans or not. We show that loan origination increases recipients' income five years onward by more than 10% compared to denied applicants. The effect is more pronounced in rural and low-income areas. Our results suggest an important role for banks` credit decisions on the distribution of income. |
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Manuel Trbovic, Tesla’s Stock: An Event Case Analysis, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) The automotive pioneer Tesla revolutionised the way consumers perceived electric cars and forced the whole industry to face the upcoming electric vehicles revolution, influencing major carmakers to develop serious commitment with related projects in the short- to mid-term horizon. Thus, Tesla played a fundamental role in bringing to light products that not only appeal to a broad segment of people, but that also minimise the adverse impact on the environment. At the same time, despite several consecutive quarterly losses, Tesla has achieved a market capitalisation, which sizeable growth in valuation has overcome the ones of major long-established car manufacturers in the automotive industry. In light of this information, this study seeks to respond to the core research question, namely: “How can exceptional performance of Tesla’s stock be explained?” Presenting an up-to-date overview of the context that emerges from a multitude of studies, the analysis encompasses the comparison between Tesla and traditional players in the car industry, the event analysis of Tesla’s stock which is compared to major carmakers by means of abnormal returns, in order to unveil the significance of the effect that news stories might exert on valuation changes and explain the market discrepancies within the automotive sector, in relation to investors’ sentiment. Therefore, linking the qualitative and quantitative research methodologies and identifying the broader context in order to explain Tesla’s market capitalisation. The findings illustrate that the consolidation of a multitude of elements can clarify the rare circumstances under which Tesla has been able to achieve enormous fame from entering successfully the highly competitive automotive industry as a start-up only 15 years ago and overcoming long-time established car manufacturers in the market valuation comparison. Possible forthcoming disruptive scenarios with disparate prospects, offer incommensurable opportunities that extend far beyond the sole car business as of today. At this conjecture, Tesla’s market capitalisation is primarily justified through the information that is available to the public eye and being gathered via open source capabilities, thus investors being able to anticipate those scenarios and market conditions in which the company might benefit from its business model and the competitive and technological advantages in the long run, when compared to traditional car companies. Consequently, it is fair to assess that the findings might further the depth and totality of a particular phenomenon capable of assisting the formation of guidelines, and provide information regarding the present situation. Hence, this study might underpin the basis for progression towards key findings and object of recommendations for further research. |
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Francesco Demajo, Between Ego and Success: Naming the Company after Yourself as the Ultimate Naming Strategy?, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) Based mainly on the paper “Eponymous Entrepreneurs” (Belenzon, Chatterji and Daley 2017a), this work deals with the relationship between naming a company after its respective owner (a process or strategy which is called “eponymy”) and its profitability in emerging markets. Contrary to the findings of the above-mentioned paper, the author of this thesis was not able to identify a positive link between eponymy and a firm’s performance in a dataset of Western European companies. Given a sample of more than 30’000 companies from 24 emerging countries, and after taking several empirical models into account, this work concludes eponymy seems, in general, not to have an influence on a company’s profitability in emerging countries. Under some circumstances, the financial performance may even be significant and negative for companies named after their founders, with -2.7% of Return on Equity. These results may be influenced by the composition of the dataset: 80% of the analyzed companies in the sample originated from just three countries and almost all of these firms are private ones which generally affects the transparency of the available financial information on these organizations. Nevertheless, the signaling model presented in the reference paper, according to which eponymy should signal the superior quality of a company’s products or services to customers by risking the respective owner’s own reputation, may not apply to a highly uncertain environment, such as can be currently found in emerging economies. Informational asymmetries seem to be just too high to overcome, even by a naming strategy that usually should help in being able to do so. |
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Yuriko Sugiyama, The Impact of Japanese Foreign Direct Investment in China on Shareholder Wealth, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) This study examines the short-term impact of the announcements of Japanese FDI in China on shareholder wealth. Investigating a sample of 76 Foreign Direct Investment announcements made by Japanese listed companies between 2010 and 2017, it is found that on average, there is no significant wealth effect on or around the announcement day. In the same event study results, the size of initial investment and the type of FDI are found to influence the magnitude of wealth effect. The wealth effect is larger if the announcement is about the small-sized initial investment. Also, the larger wealth effect is associated with the Sino-Japanese Joint Venture announcement, which is justified to be a linear relationship by the cross-sectional regression result. |
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Cédric Meier, The Issuance of Contingent Convertible Bonds and Risk-Taking Behavior , University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) Contingent convertible (coco) bonds gained in importance with the increased regulatory capital requirements following the financial crisis. The Basel III framework allows banks to meet a certain degree of the capital requirements with coco bonds. These financial instruments have various design features which lead to a heterogeneous variability of instruments. In a first part, this thesis discusses the design features and examines the respective incentives they provide based on existing literature. A main characteristic of coco bonds is the loss absorption mechanism. This mechanism is activated, once a certain triggering threshold is breached. Depending on this loss absorption mechanism, the triggering event potentially leads to wealth-transfers between coco bond investors and shareholders. Thus, wealth may either transfer from coco bond investors to shareholders or vice versa or not at all. In an empirical investigation, this thesis finds that the majority of examined coco bonds would lead to a wealth-transfer from coco bond investors to shareholders. This finding implicates that moral hazard arises and coco bond issuers are incentivized to take more risk after a coco bond issuance. This thesis finds that the average coco bond issuer takes more risk than expected in the year after the coco bond issuance. This effect is stronger for the average issuer of a principal write-down coco bond compared to the average issuer of coco bonds with a mandatory conversion. However, this thesis finds no statistically significant relation between the coco bond’s estimated wealth-transfer and the abnormal risk the issuer takes. |
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Nicola Branzoli, Fulvia Fringuellotti, The Effect of Bank Monitoring on Loan Repayment, In: -, No. -, 2018. (Working Paper) We investigate the effect of bank monitoring on loan repayment. Using granular loan-level information from the Italian Credit Register, we build a novel measure of bank monitoring, which is based on bank requests for information on their existing borrowers. We perform a causal analysis, exploiting the Italy Regional Production Tax, IRAP, as a source of exogenus variation in bank monitoring. Our approach is supported by a theoretical model predicting that a decrease in the tax rate improves bank incentives to monitor borrowers. We find that an increase in the number of requests for information, as driven by a 1 percentage point decrease in the IRAP tax rate, reduces the probability of loan distress by 4 percentage points two quarters ahead. |
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Simone V. Dietisheim, Bilateral Investment Treaties Affecting International Taxation - Correlations and Impacts on Arbitration Tribunal Practice Applied to Switzerland , University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) Due to globalization the amount of cross-border transactions and foreign direct invest-ments (FDIs) has recently increased significantly. FDIs are put at different political and economic risks such as discrimination and expropriation by the host states of their for-eign investments. This recently led to several developments trying to mitigate such risks for foreign investors by strengthening investor protection on the domestic and interna-tional level, inter alia by Bilateral Investment Treaties (BITs). BITs are mostly negotiated between a developed, capital-exporting, and a developing, capital-importing, country. They have the aim to protect foreign investors and their investments from discrimination, uncompensated expropriation, and arbitrariness. Therefore, most BITs cover a broad range of investments including movable and immovable properties with any related property rights, various types of interests and participations in companies, joint ventures, claims to money, and intellectual property rights. Further-more, in a lot of BITs also indirectly held and non-controlled investments are covered. BITs establish protection clauses for private investments, as beforementioned, made by natural and juridical persons of one contracting state in the other and provide the foreign investors with the unique investor-state dispute settlement (ISDS) mechanism. This pos-sibility grants investors, whose rights under the BIT have been violated, the right to di-rectly have recourse to international arbitration as dispute party, instead of suing the host state in its own courts. Due to BITs’ broad definitions of investments and investors covered and their wide scope and often relatively openly formulated protection clauses, under BITs investors can bring disputes across a wide range of international, political, and economic areas to arbitration, therefore, also regarding taxation. Recently, an increasing number of taxation-related investment disputes arose, showing that the levy of taxes has become an important issue in international investment arbitra-tion and that various BIT clauses against the discrimination of FDIs can be applied to taxation. Tribunals frequently confirmed the coverage of taxes under BITs, allowing investors to accuse taxation measures directly, as dispute party, via ISDS and sanction-ing host states for BIT breaches due to taxation. The present master thesis questions if and to what extent BITs can interrelate with taxa-tion and whether the governments’ tax sovereignty is restricted by such interactions. As Switzerland, as capital-exporting country, was the first state after Germany to enter into BITs and has currently the world’s third largest network of BITs with 115 BITs in force, the focus is placed on the impacts for Switzerland. Therefore, BITs clauses are studied and up to date research literature regarding BITs and taxation is put together to analyze BITs and the ISDS mechanism as well as their potential interrelations regarding taxation measures. These findings are applied to Switzerland by analyzing the Swiss BIT network and protection scope. Furthermore, tribunal awards are discussed to evalu-ate the interrelations between BITs and taxation in practice and to draw conclusions regarding the possibility that BITs limit host states’ tax sovereignty. It was found that mainly the following BIT standards can cover taxation measures: fair and equitable treatment (FET), national treatment (NT) and most-favored-nation treat-ment (MFN), and expropriation. The FET standard relates to procedural aspects and includes fundamental principles of law such as transparency, legal stability, protection of legitimate expectations, and prohibition of disproportionate and discriminatory measures. Regarding taxation an overlap might mainly arise concerning the guarantee to maintain a stable legal framework, not tolerating certain changes in taxation practice as they violate the investors’ legitimate expectations. The NT and MFN standards require contracting states to not treat investors of the other party less favorably than its own or third-party investors, which are in the same circum-stances. This standard can be applied regarding discriminatory taxation measures such as tax benefits granted only to domestic companies operating within the same circum-stances as foreign investors not receiving the benefits. As the relative protection stand-ards NT and MFN provide a very wide range of protection covering any unequal taxa-tion of investors within a like situation, most BITs include a tax carve-out clause ex-cluding taxation measures from the NT and MFN provisions. Regarding expropriation is was found that the expropriation clause can provide protec-tion, for example regarding excessive and unreasonable taxation significantly destroying the substance of an investment. Concerning arbitration tribunal practice, in very little taxation claims the tribunal con-cluded that the host state violated a BIT clause by its taxation measures. Most disputes included claims regarding different changes of tax laws and practices such as the abol-ishment of value added tax (VAT) refunds, exemptions, and other benefits. Mainly vio-lations of the BIT protection standards FET and expropriation were claimed. Regarding the FET provision, legitimate expectations play an important role. It is often argued that legitimate expectations necessarily vary with the surrounding circumstances and that a foreign investor cannot expect the taxation framework to stay unchanged during the whole time period of its investment. Cases in which changes in tax law were qualified as violations of investors’ expectations were mainly claims concerning changes of taxation granted within special agreements which were made or in force at the time when the investment decision was made. Therefore, the FET standard might, in cases of clearly unexpected and significant taxation changes, have an impact on the tax sovereignty of host states as it provides a huge scope of interpretation and can, depend-ing on the broadness of its interpretation by the tribunal, cover taxation measures and qualify them as breaches of the BIT. The NT and MFN standards are less important regarding limiting tax sovereignty of host states as they do very often exclude taxation measures respectively tax benefits due to different DTTs from their application scope. Furthermore, these provisions overlap with other national and international legislations as well as with the principle of non-discrimination under DTTs and the FET standard under BITs and, therefore, do not lead to further limitations of the tax sovereignty of host states. Nevertheless, if no such other national or international legislations are in force, the NT and MFN standards can have significant impacts on taxation. They provide a very wide scope of application and also include third-countries and not only the two treaty parties. Concerning the analyzation of a possible breach of the NT and MFN clauses, the interpretation of the term “in like situations” seems to be the key factor. If the tribunal uses a broad interpretation, the NT and MFN clause can be breached more easily and, therefore, have an impact on the host state’s tax sovereignty. Regarding expropriation it was found that the tribunals often require a lot of criteria which have to be met to qualify a taxation measure as expropriation. It has, for example, to be unsuitable, excessive or lead to a loss of control or operability of the investment. Furthermore, retroactivity is a criterion for unlawful expropriation. Additionally, the claimant has to prove that the damages and losses the investor suffered directly resulted from the expropriation of its investment. Generally, expropriation can have a huge im-pact on host states’ tax sovereignty as it is included in almost every BIT and as taxation represents a sort of expropriation. Nevertheless, in arbitration tribunal practice taxation measures were hardly ever qualified as expropriation as the tribunal often required a lot of criteria for such a qualification. Therefore, the impact on tax sovereignty of the BIT provision regarding expropriation is limited to very obviously, hardly, and permanently expropriating taxation measures. Some BITs include taxation carve-out clauses. Most of these clauses exclude taxation measures from the protection scope of the NT and MFN standards, very few generally exclude taxation from the whole BIT scope. Tribunal practice shows that such carve-out clauses do not always protect the host state from being judged regarding its taxation and, therefore, from limitations regarding its tax sovereignty. This is mainly the case as most carve-out clauses do not clearly define what qualifies as “tax measures”. Further-more, in many BITs only taxation benefits based on DTTs are excluded from the BIT provisions. In such cases, problems regarding the definition of nationality as well as the question whether indirect taxation measures are excluded by such a formulation might arise. Generally, it can be concluded that taxation measures can fall under the scope of BITs’ protection. Arbitration tribunal practice frequently confirmed this coverage and judged several taxation measures as breaches mainly under BITs’ FET and expropriation claus-es. Even though the beforementioned conclusions were derived from cases without Switzerland involved as dispute party, they are applicable for potential future Swiss disputes, as Swiss BITs include the same protection clauses. Furthermore, it can be ex-pected that within future disputes, tribunals will judge the case and interpret the BIT clauses based on previous awards. Switzerland, as capital-exporting country, tries to protect its investors abroad and, there-fore, uses a wide scope of applicability and broadly formulated protection clauses within its BITs. This increases the risk of limitations regarding the Swiss tax sovereignty by BITs, especially due to the FET standard. The expropriation clause, therefore, represents less risk as, generally, normal taxation practices in well governed countries, such as Switzerland, are very rarely seen as expropriation. Also the standards NT and MFN do not have a huge impact on Swiss taxation as they do in most Swiss BITs exclude taxation measures. Furthermore, a capital-exporting country is not expected to be often involved in BIT disputes as host state, but rather as home state. Therefore, the limitation of Swiss tax sovereignty due to BITs exists but can be expected to be of minor significance. |
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Erhan Babac, South Africa’s Broad Based Black Economic Empowerment (B-BBEE): A Performance Blessing or Curse for Listed Companies? , University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) This Master’s thesis extensively evaluates the historical background of apartheid and the development of a controversial policy called B-BBEE Act 53 of 2003, which aimed to eradicate social inequalities created during apartheid regime. By fading out the impact of B-BBEE Act 53 of 2003 on social structures, this thesis solely examines its impact on the financial success of companies operating in South Africa. A comprehensive quantitative analysis aims to indicate whether non-compliant entities display a higher financial success reflected by a higher market capitalization in comparison to firms which contribute to the social transformation by complying. By doing so, the thesis contributes to the comprehensive research field regarding the B-BBEE policy, and to also facilitate the investment decision of public and private investors. Evaluating the relationship between the market capitalization of the firms with their respective price-to-book value, price-earnings ratio and their closing share price, the multilinear regression approach points out which variables create or destroy value. In addition, the two types of companies are set in comparison to determine if compliance with B-BBEE Act 53 of 2003 is beneficial or harmful to its market capitalization. The inter-sectoral analysis challenges the hypothesis since half of the analyzed sectors show the opposite result of what was expected. On the contrary, the results of the general study across all sectors emphasize that non-BEE firms achieve a higher financial success compared to BEE compliant companies ratifying the hypothesis on a higher level. |
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Thomas Sierro, The Drivers of the Recent Surge of Chinese Overseas M&As and Evidence of Value Creation in the Recent Big Transactions Implying Public Swiss Companies , University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) Of late, China’s outbound M&A activity has experienced significant growth, reaching a record volume of USD 217 billion in 2016. It appears that Chinese enterprises have withstood the financial crisis better than Western companies and, since then, have become major players in the global M&A market. This surge of Chinese cross-border M&As must be explained. It stems from a broad range of factors including, the shift of the Chinese economy from an export-oriented to a more consumption-driven model, the decrease in domestic growth, a favorable financing environment and strong political impulses like the One Belt One Road Initiative. The motivations of Chinese enterprises for the acquisition of foreign assets have been driven by the desire to acquire strategic resources and enter new markets. However, Chinese acquisitions have focused lately on advanced technologies and capabilities to up-grade Chinese industries and serve China’s rising middle-class, which is expected to drive Chinese economic growth in the future. To that extent, Switzerland has been a favorable target nation. Major acquisitions have taken place, including ChemChina’s acquisition of Syngenta (the biggest overseas acquisition of a Chinese company to date) and HNA’s acquisitions of Swissport and gategroup. On top of that, the stability of Switzerland’s institutions, the safe-haven characteristic of the CHF in times of global macroeconomic and political uncertainties and the Swiss excellence in innovation and research, reflect Chinese motivation to acquire Swiss companies. The results of my event-study, whose methodology assesses the financial impact of unanticipated events on stock prices, indicates that Syngenta’s shareholders benefitted from the ChemChina’s public tender offer. Abnormal returns hit 5.20% at the effective announcement date of the merger [t=0] and exceeded 15% during my entire event window of 40 days prior and after the announcement [t=-40; t=+40]. However, since Monsanto’s unsolicited tender offer in April 2015, Syngenta’s stock prices already incorporated information of a potential acquisition. Therefore, the results of the event study do not reflect the entire effect of the acquisition as it was not fully unanticipated. With respect to the bidders, no strong conclusion can be inferred from the CAR analysis of ChemChina and HNA. In brief, my thesis first focuses on the explanation of the key drivers of the recent surge of Chinese outbound M&As, which I define as the Chinese 2015-2016 M&A wave. To do that I start with an analysis of the financial theories driving M&As and the theoretical explanations for M&A waves in the first part of my paper. Also, I present some specificities of Chinese listed companies and stock markets, such as the proportion of government ownership – whose motivations differ from minority shareholders. The second part of the thesis introduces the event-study methodology and interprets the quantitative regression results of the recent big Chinese takeovers in Switzerland. |
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Michel Habib, Josef Falkinger, Principle or Opportunism? Discretion, Capital, and Incentives, In: Seminar / Tilburg University. 2018. (Conference Presentation) null |
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Andreas Reimann, Payment Disruption: Banks Under Threat by Tech Giants, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) This thesis investigates the link between digital disruption by multinational tech compa-nies and incumbent banks. This is done through an event analysis that shows, whether investors take the threat of the new competitors serious. In order to do that, various an-nouncements by tech companies were selected, where they reveal to enter a new market. The aim of this thesis is to find an e˙ect on bank stock prices (abnormal returns) due to adjusted expectations about future profits of banks as soon as a launch is announced. The scope is limited to payment solutions by multinational tech companies and their influence on banks from the United States, United Kingdom and Switzerland. Two types of event studies were conducted; the classic type, where abnormal returns are captured within the residuals of the model, and a second type, where the abnormal returns are modeled into the regression model via dummy variables. The study reveals significant results on a aggregated level (particularly average abnormal returns) that provide evidence of negative reactions of bank investors to new informa-tion regarding the launch of new payment solutions. However, these e˙ects could not be proven to be sustainable over several days. |
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Jérôme Simon, An analysis on the factors influencing M&A premiums in the banking industry - Evidence from the European Union , University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Bachelor's Thesis) This thesis investigates the effects of profitability, capitalization and regulations on acquisition premi-ums for a sample of European banking mergers and acquisitions between 1997 and 2007. Up until the financial crisis in 2008, the banking sector experienced a stellar growth fueled by deregulation, financial innovations and favorable market conditions. Deregulation in the European Union lowered the barriers of expansion for banks, allowing them to expand to new countries, gain in size and serve a larger pool of customers. It also increased competitive pressure, forcing banks to rationalize their capital either through releasing new products or through mergers and acquisitions. Consequently, mergers & acquisi-tions gained in popularity in the 1990s, which reinforced the consolidation trend of European banks, especially in the largest European countries. One way to investigate banks’ motivations is to analyze the different factors influencing the pay-ment of the premium. The factors influencing the premiums are not solely of financial nature, but can also be of regulatory nature, such as the effect of a low level of regulatory strength of a country. The main critique echoed after the crisis towards banks, were that they took excessive risks and did not hold enough capital, which ultimately forced their respective states to bail them out. These developments raised issues about bank supervision, bail-out funding and deposit insurance schemes that are of central importance to a functioning financial sector. These considerations motivate my focus on profitability, capitalization and regulatory factors for this thesis. The results of my empirical analysis echo the findings of the literature, with profitable and lower capi-talized banks fetching higher premiums. Paying a premium for an unprofitable bank could effectively penalize the bank’s stock and decrease shareholder value in the mid-term, due to the signal that such an action sends to the market. Moreover, gathering support to pay a premium for a profitable bank should - for bank managers - come easier than for an unprofitable one. Regarding capitalization, it appears that high capital ratios are often viewed as an inefficient use of capital in banking and are interpreted as a sign of high risk aversion, which would not encourage the payment of a premium. The obtained result on capitalization illustrate the role of capital levels in banking, which are comparatively lower than in other industries. Regarding the regulatory variables, my results do not show evidence that these variables have an impact on the premiums. In that sense, the evidence in favor of strict regulation having a negative effect on premiums is ambivalent. |
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Marco Samsinger, Is the future market for soybeans efficient? Forecasting soybean prices using time series models, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) This thesis examines the market efficiency within the soybean futures market. Efficiency is important for market participants as well as policy makers. Researchers have found mixed results on the efficiency of the soybean market. Using cointegration methodology, the short and long run efficiency of the soybean market is determined. In addition, the forecasting performance of the soybean futures market is analysed and compared to out-of-sample forecasts by an error-correction model, random walk model, and Support Vector Regression model. Based on Data of future soybean contracts from the Chicago Mercentile Exchange (CME) between 2007-2017, the results of the cointegration test provide evidence that the future market for soybeans is efficient in the long but not the short run. Model predictions do not outperform forecasts implied by future prices, indicating that market participants can rely on future prices as predictors of future spot prices. |
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Philip C. Spahni, The Role of Private Markets in Sustainable Investing, University of Zurich, Faculty of Business, Economics and Informatics, 2018. (Master's Thesis) Sustainable investing has experienced enormous growth in recent years and can by no means be dismissed as a niche phenomenon. Even though its origins date back quite some time, the present form is still relatively young and is still undergoing change. While sustainable investment is generally known for its application in public markets, this master thesis is devoted to the question of what contribution private markets can make in this area. Existing academic literature is mainly concerned with the efficiency dimension of sustainable investment, measured in terms of returns, whereas this thesis addresses the aspect of effectiveness. The aim is to clarify the hypothesis whether certain characteristics make private markets better suited to the needs of sustainable investment than public markets. In addition, a practical example shows how an established private market asset manager can launch a fund that is dedicated to sustainable investments. First, the evolution of sustainable investment is examined more closely. This shows that investors who consider sustainability aspects, generally pursue the same goals as other investors, but actively include this aspect when making investment decisions. An analysis of current data indicates that the overall growth of such sustainable strat-egies continues steadily, although in relative terms this is most pronounced in strate-gies that may be directly related to private markets. Consequently, the focus is on the development and characteristics of private markets, which have created the favorable conditions for the consistent pursuit of sustainable investment strategies on a large scale. Given the importance of institutional capital, it is essential that large amounts of capital can be absorbed and deployed in a goal-oriented manner, if sustainable strategies are to be pursued actively. In this respect, it becomes apparent that it is due in particular to the institutionalization which has shaped private markets in recent years and continues to do so, that institutional investors are increasingly able to make consistent use of alternative asset managers for the implementation of sustainable investment strategies. In addition, the effects of the shrinking universe of public stocks, shortcomings of ESG screening in public markets, the dilemma of short-termism, and the effect of governance structures on the suitability for sustainable investments are examined. It should be noted that many phenomena lead to the con-clusion that public markets alone cannot be optimal for implementing sustainable investment strategies for institutional investors in a meaningful way in the long run. Rather, private markets in their current form offer previously untapped opportunities and significantly expand the investment universe in terms of sustainable investments. In this respect, it is essential that sustainability oriented investors maintain their good ambitions in public markets, but at the same time recognize private markets as an opportunity to implement their strategy consistently and effectively. Based on these findings, a real-life case study illustrates how an established manager of private market investments, which has undergone the aforementioned institution-alization, can design and launch a private markets fund focused on sustainable in-vestments. This involves assessing customer demand, systematically integrating sus-tainability aspects into the unique private markets investment process and clarifying the positioning and choice of the fund model before finally launching such a product. |