Merlin Ruchti, The Buy-and-Build Strategy in Private Equity - A Study of Value Creation in Leveraged Buyouts, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Bachelor's Thesis)
I study the performance of 50 buy-and-build private equity funds with vintage years up to 2018 using the dataset of Preqin. A total of 778 platform and 2430 add-on deals are evaluated. I find an outperfor-mance of 33 per cent (average) and 23 per cent (median) compared to the S&P 500 over a fund’s lifetime, resulting in an annual outperformance of at least 3.83 per cent. I derive a series of value creation drivers through the case study with Ufenau Capital Partners that are unique to the buy-and-build strategy and explain outperformance. |
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Sascha Behnk, Ernesto Reuben, On Lies and Hard Truths, Frontiers in Psychology, Vol. 12, 2021. (Journal Article)
We run an experimental study using sender-receiver games to evaluate how senders' willingness to lie to others compares to their willingness to tell hard truths, i.e., promote an outcome that the sender knows is unfair to the receiver without explicitly lying. Unlike in previous work on lying when it has consequences, we do not find that antisocial behavior is less frequent when it involves lying than when it does not. In fact, we find the opposite result in the setting where there is social contact between senders and receivers, and receivers have enough information to judge whether they have been treated unfairly. In this setting, we find that senders prefer to hide behind a lie and implement the antisocial outcome by being dishonest rather than by telling the truth. These results are consistent with social image costs depending on the social proximity between senders and receivers, especially when receivers can judge the kindness of the senders' actions. |
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Gilles Hunter, The impact of sustainable investments during the COVID-19 crisis in Europe, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Master's Thesis)
Research on the US market shows that ESG activities help firms stock returns during the COVID-19 pandemic. This study finds that in the European market, the “ESG factor” does not influence stock returns during COVID-19. When controlling for certain factors, stock prices are even negatively impacted by the ESG score. Further results suggest that the commonly known accounting-based measurements of financial health (liquidity and debt) were crucial for stock price reactions in the pandemic, and that the negative impact on ESG was mainly driven by the governance score. |
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Amra Hrustanovic, CEO communication during extreme events, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Master's Thesis)
This thesis examines the relationship between the negative tone of CEOs and analysts in earnings conference calls and factors indicating firm-specific, respectively market-wide, extreme events. Earnings surprises deciles are used to define firm-specific extreme events, whereas the COVID-19 pandemic and the financial crisis provide periods of market-wide crises. The sample, consisting of 123,945 unique calls, reveals a convex, non-monotone relationship between negative tone and earnings surprise deciles and increased negativity levels during market-wide crises. Analyses of the impact of CEO negativity during extreme events on the market reaction and future firm performance reveal no event-contingent effects. |
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Redaktion, Steven Ongena, Alexander Wagner, Corona en financiële crisis – het verband, In: Veren of Lood, 6 June 2021. (Media Coverage)
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Alexander Wagner, Sechs unbequeme Wahrheiten über nachhaltige Investitionen, In: Finanz und Wirtschaft, p. 10, 5 June 2021. (Newspaper Article)
Nachhaltige Anlagen liegen im Trend. Doch wer langfristig investieren will, sollte sich einiger Mechanismen bewusst sein. |
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Sascha Behnk, Adam E. Greenberg, Alexander Wagner, When and why do ripple effects of dishonesty occur?, In: Swiss Finance Institute Research Paper, No. 16-45, 2021. (Working Paper)
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Lorenz Honegger, Alexander Wagner, Neue Studie: Warum in der Ära Trump ein direkter Draht ins Weisse Haus an der Börse Milliarden wert war, In: Neue Zürcher Zeitung, 6 May 2021. (Media Coverage)
Eine diesen Monat im renommierten «Journal of Financial Economics» veröffentlichte Studie beleuchtet, wie sich die persönlichen Beziehungen zum ehemaligen US-Präsidenten auf den Börsenwert von Unternehmen auswirkten. |
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Lorenz Honegger, Alexander Wagner, Stefano Ramelli, Alexandre Ziegler, Der Bumerang-Effekt: Anleger sahen über Donald Trumps Klimapolitik hinweg - und wurden dafür belohnt, In: Neue Zürcher Zeitung, 6 May 2021. (Media Coverage)
Der Zürcher Finanzprofessor Alexander Wagner beobachtete schon vor drei Jahren, dass die Aktien von Unternehmen mit klimafreundlichen Geschäftsstrategien auch unter Donald Trump überraschend hohe Renditen erzielten. Nun ist der Grund dafür klar. |
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Leandro Künzli, Yield components in Corporate Private Debt, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Master's Thesis)
The yield components of corporate direct lending are investigated. The OLS models reveal that yields for riskcongruent loans are approximately 100bps above syndicated loans. For loan and borrower characteristics which presumably increase risk, mostly significant relations with yields are found. Cyclical impacts are investigated for, observing relevant changes over vintage years. For a given observation, the risk is compensated independent of the seniority of the loan. Furthermore, European loans tend to be lower in the capital structure and therefore
face different risk exposure. Overall, the results imply what borrower characteristics are significantly correlated with the a priori calculated yield. |
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Michal Dzielinski, Alexander Wagner, Richard J Zeckhauser, CEO Clarity, In: Swiss Finance Institute Research Paper, No. 17-13, 2021. (Working Paper)
A key task for CEOs is to communicate with analysts and investors about their companies' past performance and prospects in quarterly earnings conference calls. Some CEOs speak fuzzily, frequently using words such as "approximately", "probably", and "maybe." Others rarely use such tentative words. That is, they speak clearly. We show that CEO clarity is a matter of personal style; it is not driven by fundamental uncertainty in the companies' business activity. Analysts and the stock market respond more strongly to earnings news conveyed by clear CEOs. Past performance does not explain the style of a newly appointed CEO. However, when a firm does appoint a more clear-talking CEO, Tobin's Q increases and analyst recommendations become more favorable. Overall, investors and analysts appear to value clear talk. |
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Rajna Gibson, Carmen Tanner, Alexander Wagner, Moral commitment: Does it reduce or enhance the response to social norms? Evidence from an experiment on earnings management, In: Swiss Finance Institute Research Paper, No. 15-01, 2021. (Working Paper)
Social norms play a powerful role in guiding managerial behavior. For example, prior work has established the power of injunctive (prescriptive) norms in areas where views on what is right and wrong widely differ, such as earnings management (EM). Existing work highlights the effects of social norms on the average norm addressee. However, little is known about individual differences in reactions to injunctive norms. That is, who is more malleable, and who resists more? In this research, we conduct an experiment on EM to study such potential differences in individual responses to social norms. We find that participants with a strong commitment to honesty react less to both EM-disapproving and EM-approving injunctive norms. These findings have implications for the theoretical and empirical analysis of managerial behavior and for the use of injunctive social norms as steering tools for truthful reporting. |
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Claudia Lanz-Carl, Marco Ceccarelli, Stefano Ramelli, Alexander Wagner, ESG-Ratings unter der Lupe, In: Finanz und Wirtschaft, 3 April 2021. (Media Coverage)
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Roopesh Rambeas, Asset Allocation – Decisions and behavior of Swiss institutional investors during COVID-19, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Bachelor's Thesis)
The thesis investigates how and why Swiss institutional investors changed their asset allocations during the COVID-19 stock market crash. The research is conducted through the design of an online survey that is distributed to pension funds, asset managers, and strategy funds. An analysis shows that the investors did not amend their investment strategy and did not use tactical allocation measures. The decisions are not motivated by emotions. Furthermore, Swiss institutional investors implemented at least one precautionary measure when first hearing about a potential pandemic. The investors’ short- and long-term market views have generally not changed due to the COVID-19 crisis. |
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Marc Arnold, Dustin Schütte, Alexander Wagner, Neglected Risk in Financial Innovation: Evidence from Structured Product Counterparty Exposure, European financial management, Vol. 27 (2), 2021. (Journal Article)
We investigate the compensation of counterparty exposure in the prices of structured products. Our analysis reveals that product issuers did not compensate retail investors for counterparty exposure before the Lehman default. Post-Lehman, retail prices have no longer neglected this risk. We also measure retail investor attention towards issuer credit risk. For a given level of issuer credit risk, counterparty exposure is compensated more when attention is higher. Furthermore, issuers tend to construct products with larger counterparty exposure. Overall, our results shed light on the conditions under which financial engineering generates neglected risk. |
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Rony Hartmeier, Krisenresilienz von Schweizer Aktien am Beispiel von COVID-19, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Bachelor's Thesis)
Die COVID-19-Pandemie hat zu starken Einbussen im Schweizer Aktienmarkt geführt. Einige Unternehmen wurden dabei stärker getroffen als andere. In dieser Arbeit wird mittels Regres-sionsmodellen untersucht, welche Faktoren zur Krisenresilienz von Schweizer Aktien beigetra-gen haben. In der Ausbruchsphase vom 24. Februar bis zum 20. März fielen die Durchschnitts-renditen aller Wirtschaftssektoren negativ aus. Die Resultate dieser Arbeit zeigen, dass in dieser Phase ein tieferer Leverage, eine höhere Profitabilität, eine tiefere Exposition sowie ein höherer Anteil an unterschiedlichen Nationalitäten im Management positiv zur Krisenresilienz beige-tragen haben. Auch die weitere Entwicklung der Aktienkurse im Jahr 2020 wurde beeinflusst durch die Resilienzfaktoren. |
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Thomas Dubach, Timing the Market vs. Buy-and-Hold, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Master's Thesis)
A total of 20 different equity indices were analysed with a theoretical framework, in which investors periodically invest at the worst, respectively best trading days. Our results suggest that investors should choose to invest periodically, utilize a passive investment strategy, and prefer a long-term investment over a market timing approach.
With a multivariate regression, factors were identified, and the effect of these factors on the difference between lucky and unlucky market timer was quantified. Increasing volatility, divi-dend yield, inflation rate, and uncertainty avoidance widens the difference while increasing GDP per capita and individualism narrow the difference. |
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Anna Amberg, Pay for Performance in Switzerland, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Master's Thesis)
This thesis tests the nexus between pay and performance of chief executive officers (CEOs) in
Swiss firms. A unique hand-collected dataset of 100 listed companies from 2007 to 2019 is used for this purpose. Major findings through a regression analysis indicate a positive association of pay with company performance. However, the relationship between remuneration and performance tends to be more pronounced in large companies and negligible in smaller ones. When compared to other sectors, CEOs in the financial sector are compensated less yet experience a stronger pay-for-performance sensitivity. Furthermore, CEOs are remunerated for external performance (luck), which is beyond their control. |
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Joël Gloor, Wie erfolgreich ist Market Timing?, University of Zurich, Faculty of Business, Economics and Informatics, 2021. (Bachelor's Thesis)
Mit erfolgreichem Market Timing können retrospektiv betrachtet hohe Überrenditen gegenüber einer Buy-and-Hold-Strategie erzielt werden. Entsprechend hoch ist der Anreiz
für Investoren, den Zeitpunkt des Ein- und Ausstiegs in Aktienmärkte erfolgreich zu timen. Wissenschaftliche Studien zeigen jedoch, dass Market Timing vielfach keine lohnenswerte Strategie ist. Anhand von drei Untersuchungsmethoden wird analysiert, ob
Market Timing in den letzten 25 Jahren in zwanzig verschiedenen Märkten eine erfolgreiche Strategie gewesen wäre. Die Resultate zeigen, dass der potenzielle Verlust in den meisten Fällen grösser ist als der maximale Gewinn und die Rendite längerfristig stark von einigen besonders volatilen Handelstagen abhängig ist. |
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Florian Eugster, Alexander Wagner, Earning Investor Trust: The Role of Past Earnings Management, Journal of Business Finance and Accounting, Vol. 48 (1-2), 2021. (Journal Article)
Does earnings management, even though legal, hinder investor trust in reported earnings? Or do investors regard earnings management as a way for firms to convey private information, or simply as a neutral feature of financial reporting? We find that past abstinence from earnings management increases investor responses to future earnings surprises. Importantly, this effect occurs in industries where investor trust has recently been violated, and where managers would in the past have had incentives and opportunities to misrepresent earnings. Overall, investors seem to interpret the extent to which management resists temptations for misreporting as a “litmus test” of trustworthiness. |
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