Wolfgang Gamma, Michel Habib, Christoph Wenk Bernasconi, Ascom unter der Lupe, In: Finanz und Wirtschaft, 24 February 2017. (Media Coverage)
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Michael Griesdorf, Michel Habib, Wo das EV/Ebitda helfen kann, In: Finanz und Wirtschaft, 22 February 2017. (Media Coverage)
20170222_FinanzundWirtschaft_Wo das EV Ebitda helfen kann_Prof. Habib.pdf
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Michael Griesdorf, Michel Habib, Was das KGV dem Anleger verrät, In: Finanz und Wirtschaft, 17 February 2017. (Media Coverage)
http://www.fuw.ch/article/was-das-kgv-dem-anleger-verraet/
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Michel Habib, Josef Falkinger, Principle or Opportunism: Discretion, Capital, and Incentives, In: Seminar / Nottingham University. 2017. (Conference Presentation)
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Yannick Bühlmann, What makes M&A transactions a success? - An empirical study, University of Zurich, Faculty of Business, Economics and Informatics, 2017. (Bachelor's Thesis)
This thesis analyses M&A activity in Switzerland on its profitability and on the factors, that effect their returns. This study found that M&As in Switzerland generally yield a negative return of -0.63%. However, this result remains statistically insignificant. Further, it is suggested that domestic deals and related deals are associated with high positive abnormal returns. In contrast, cross-border acquisitions and diversifying deals yield to a negative abnormal return. In addition, it is shown that there is a positive relationship between the abnormal return and the transaction value, respectively the enterprise value. |
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Julian Müller, Zurich’s financial institutions in the 18th century and the crises of 1798: Analysis on Leu & Company’s foreign investments strategy , University of Zurich, Faculty of Business, Economics and Informatics, 2017. (Master's Thesis)
The subject of this study is the presentation of Zurich’s state run financial institutions and their foreign investment strategy in the 18th century, which ended up in the economic and political crises of 1798 and the restructuring of Leu & Co. The impact and aftermath of the 1798 crises will be discussed on the basis of a detailed evaluation of original documents of Zurich Treasury Office, respectively from the archives of Leu & Co., publicly accessible since 2012.
The introductory chapter is focusing on the emergence of the City Republic of Zurich as one of today’s leading banking centers by tracing back the origin of banking to the 13th century. Furthermore, the impact of the Reformation 1525 on the state interest and loan policy towards the expanding textile industry, growing public wealth and its political ally France, is discussed. Another issue is the question concerning the influence of French and Italian Huguenots who migrated into Swiss Protestant towns after the revocation of the Edict of Nantes in 1685, becoming the founders of today’s well renowned domestic and foreign banks and playing an important role, e.g., in capital export transactions by state run financial institutions, in particular to France.
We note, that in the beginning of the 18th century, Zurich State Treasury had stopped the investments of any further money to the French Crown because of its preference for the Catholic Cantons and its severe financial crises caused by royal debts and the collapse of John Law’s Compagnie des Indes and Royal Bank of France in 1719/20. However, due to a great abundance of money there was a strong need for the state and private individuals to invest their money profitably abroad, since their own Countryside was saturated with cheap loans below 3%. Thanks to the analysis of the State Public Ledgers until the end of the 18th century (annexed to this paper), we are in a position to gain a detailed overview on the investments performed by Zurich’s Treasury Masters, who were forced to broaden their operational range of partnership to European monarchies, principalities, monasteries and limited companies.
In order to understand the establishment of the state run Interest Commission Leu & Co. in 1755, we are obliged to take a look back at the constitutional reform of 1713 and the following Interest Decrees initiated by the City Authorities. On the one hand, the latter were eager to create a supervisory body, the so-called “Interest Commission”, to stop the steadily undermining of the officially imposed minimum interest rate of 5%. On the other hand, we notice that in practice the Treasury Office was investing funds abroad being gained on the local financial market at a lower interest rate than legally permitted. In the light of such contradictory policies the Great Council followed Treasury Master J.C. Heidegger’s expert opinion to create a public bank endowed with an initial capital of 50’000 Gl, which was going to finance its foreign assets by issuing 3% bonds to the public and 3.5% bonds to institutions. It was agreed that the firm had to trade under the name of its largest bondholder, former Treasury Master J.J. Leu.
By means of a detailed compilation of information derived from general ledgers and minutes of Leu & Co. for the time period between 1755 and 1798 (annexed to this paper), an attempt is made to present the most accurate picture of the company’s foreign investment strategy including interest gain and losses.
From an economic point of view, these investments abroad had proven reliable and profitable as long as the political and legal environment remained stable. We try to explain, why Zurich Treasury and Leu & Co. reintroduced the massive granting of loans to France and created a new business line in the 1770s, despite of the outbreak of a severe financial crisis, which deteriorated with the French Revolutionary Wars in 1792 and the protectionist law on the “Repayment of the Public Debt” in 1797.
When in 1798 the Swiss Confederation was invaded by its traditional ally France and the Ancien Régime came to an end, there was reason to fear that the official character of Leu & Co. might have invited confiscation of its assets by the French steered Helvetic Republic – as it was happening with the Treasury funds. Therefore, under the title “Restructuring of Leu & Co”, the timely conversion of the company’s legal status as well as the implementation of the restructuring measures are discussed.
With the end of the Helvetic Government in 1803, Leu & Co. had overcome the worst of the economic and political crises. In chapter 7, we draw a conclusion on the aftermath of the 1798 crises by specifying the results of Leu’s step by step liquidation of its foreign assets, and draw a comparison with the foreign assets held by the former Treasury Office.
An outlook on the transformation of Leu & Co. into a mere mortgage bank until 1855, and its ranking among other banks in the course of the 19th century, conclude our considerations on this topic.
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Maria Maier, Corporate governance in Switzerland: A comparison of market participants’ views on corporate governance in Switzerland, University of Zurich, Faculty of Business, Economics and Informatics, 2017. (Bachelor's Thesis)
Swiss issuers and institutional investors were asked in a survey about their preferences and opinions on chosen topics in corporate governance. The survey included questions regarding voting rights, compensation, board of directors and payout, as well as other current topics. The focus of this work is set upon topics related to the composition and organization of the board of directors, and the exercise of shareholder's voting rights. The results of the different groups of participants are compared with each other and with previous surveys. The opinions among participants seem to differ on certain topics, while being fairly similar on others. |
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Elisabeth Megally, Three Essays on Managerial Compensation, University of Zurich, Faculty of Business, Economics and Informatics, 2017. (Dissertation)
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Francesco Demajo, An analysis of the Politecnico of Turin and the Politecnico of Milan spin-off companies, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
In order to enhance research and foster innovations, universities can either protect and exploit intellectual property, or they can stimulate the creation of spin-off companies. Although these two activities are strongly connected with each other, spin-offs have usually a more direct impact on the local environment compared to other methods of technology transfer. In this respect, spin-off creation does not only produce benefits for the local economy, it also gives young researchers the opportunity to enter in the entrepreneurial world and to commercialise technologies developed in an academic context.
The spin-off phenomenon is starting to get more attention, also in countries like Italy where investments in spin-off companies as a powerful mean for technology transfer started late compared to the US or other European universities. To assess the implications of this phenomenon for Italy, it is necessary to quantify the economic effect generated by these spin-offs. The basis for the evaluation within this thesis are spin-offs of two leading Italian universities, i.e. the Politecnico of Milan and the Politecnico of Turin. Data will be taken from different publicly available sources and it has therefore taken into account that all numbers presented in this work, e.g. concerning job creation or revenues, are underestimations of the real potential of all the existing spin-offs of these two universities, since data was only partially available.
Overall, spin-off companies of the Politecnico of Turin and the Politecnico of Milan did produce benefits to their local environment by surviving longer than national start-ups, by creating more than 2’500 jobs combined and by generating more than USD 200 millions revenues for each university. Besides quantitative factors, the growth of these spin-offs also fostered qualitative innovations, such as incubators or venture capitalists’ pools.
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Manuel Burbano Bermudez, Empirical Evidence of the Risk and Returns of Venture Capital Investments in Swiss Portfolio Firms, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
In the light of the "Zukunftsfond Schweiz"—a soon-to-be implemented parliamentary initiative encouraging Swiss pension fund managers to increase their allocations into Swiss Venture Capital (VC) investment—this paper provides the first study from returns of venture capital investments in Swiss portfolio firms. This paper analyzes 91 venture capital investments in Swiss portfolio firms from a high-quality dataset covering over 30,000 global venture capital investments between 1980 and 2009. The data includes all monthly cash flows between venture capital funds and portfolio firms, internal rates of return and investment multiples. Means, medians, and different percentiles of the internal rate of return (IRR) and the Total Value Paid In multiple (TVPI) are analyzed for the overall sample and across industry class, investment stage, status of realization of the investment and type of exit. The overall sample of investments has an attractive mean IRR of 65%, however, the 3% median IRR indicates that the mean is heavily influenced by tail events, which are as high as 1673%. Across industry classes, the Consumer Industry has the highest mean IRR (390%) followed by Health & Life Sciences (72%). Across investment stages, the Early stage has the highest mean IRR (111%), however, looking at the medians the Later stage presents the highest returns with a median IRR of 15%. Investments exited through an IPO have a mean IRR of 394%, i.e., more than double the mean IRR from investments exited through a direct sale (185%). The median IRR for investments exited through an IPO remains very high at 318% indicating that the majority of investments that are exited through an IPO have very high returns. Large standard deviations imply means in the sample are often not statistically different from zero---an issue common to returns presented in other papers as well, e.g. Cochrane (2005); Korteweg and Sorensen (2010). Overall, the existence of few investments driving up mean returns and numerous investments yielding low or negative-returns, suggests the necessity of smart money to profitably allocate funds within the venture capital asset class. |
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Eirini Rapti, Negative Interest Rate Policy: How Negative Interest Rate Policy Affected the Trade Balance Between the Eurozone and the United States, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
Since June 2014 five central banks globally adopted negative interest rates as a monetary policy tool to revive their economies. Governments have traditionally used interest rates in order to manipulate their currencies in search of competitive advantage with respect to their partners... This thesis suggests that the adoption of negative policiy rates does not seem to distort basic, and well-established through theory, economic concepts. |
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Ida Weber, Comparing Common Valuation Methods on Internet Firms before the Dot-Com Crash and Today, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
This study investigates how different types of valuation methods perform on Internet firms before the bursting of the dot-com bubble in 2000 and how do they perform today, when the firms have moved into a more mature business stage. With a comparative case study methodology eleven Internet firms listed on the Nasdaq stock exchange are valued using different valuation methods, belonging to three main approaches: multiple valuation, discounted cash flow valuation, venture capitalist valuation. The results of this study support the hypothesis that the valuation of Internet firms would become more homogenous as they moved into a more mature business stage. The results also show that the discounted cash flow valuation performed surprisingly well in the year 2000 when the market was said to be overvaluing the Internet firms. Because of that, the results in this study do not support the hypothesis that the market driven valuations would perform better in the year 2000.
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Rami Tageldin, Mario Draghi, Euro-zone Creditor Countries’ Friend or Foe? An event study assessment of the Euro-zone creditor countries’ markets’ response to the ECB’s January 2015 Quantitative Easing announcement., University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
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Tim Luginbühl, Commodity Futures and their Diversification Potential for a Swiss Investor - With an Application to the Glencore/Xstrata Merger, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
Commodity futures do not exhibit the same academic coverage as equities or bonds do. This master thesis aims to provide insights whether and to what extent commodity futures offer an attractive investment opportunity for a Swiss investor. Further on, the merger of Glencore and Xstrata is analysed under a portfolio optimization approach.
The analysis of an equally weighted commodity futures index over the last 45 years revealed major differences in the performance of commodity futures and commodities traded spot. Whereas spot indices barely kept pace with inflation, commodity futures outperformed inflation by yearly 5.62% in Switzerland, and by 8.86% in the United States. A comparison of the commodity futures index with stocks and bonds showed stocks clearly outperformed commodity futures and bonds in Switzerland. Stocks exhibit an annualized Sharpe ratio of 0.16, whereas commodity futures reveal a Sharpe ratio of 0.05. From the perspective of a US investor, commodity futures exhibit a higher Sharp ratio than stocks (0.29 vs. 0.26). The reason for this substantial difference in performance between the Swiss and the US index can largely be attributed to exchange rate developments.
Within a portfolio consisting of stocks, bonds, and commodity futures, the latter asset class can exhibit substantial weight if the portfolio is optimized regarding the ratio between expected return and standard deviation. The ability of commodity futures to boost the Sharpe ratio of such an optimized portfolio varies among the two countries.
From the perspective of a Swiss investor, commodity futures showed to offer better inflation protection than stocks and bonds. Whereas stocks and bonds tend to correlate negatively with inflation, commodity futures showed a statistically significant positive correlation with inflation, increasing with the holding period. Despite the negative excess return of 29 out of 36 index constituents, the index exhibits a positive excess return. This puzzling outcome arises partially from low correlations between the index constituents and from the embedded trading strategy in monthly rebalancing to equal weights.
The merger between Glencore and Xstrata in 2013 can partially be explained by a portfolio optimization approach. The merged portfolio meant portfolio improvement for Glencore, whereas Xstrata suffered in terms of optimality. This is consistent with the process of the merger and the paid premium to shareholders of Xstrata. The current financial difficulties of the merged company can partially be explained by commodity price evolutions in disadvantage of the consolidated portfolio.
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Yatin L. Shah, Comparative Analysis of Taxation Law in Poland, Romania, and Czech Republic, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
After the fall of the Soviet Union, Poland, Romania and the Czech Republic followed a dec-ade of transition into modern Western economies and the European Union. The taxation sys-tem was one of the keys to its success. The comparative analysis of taxation law in Eastern Europe, defines taxation regimes, gives an overview of the current taxation laws in relation to private banking customers, describes specific investment concepts within the countries and gives an overview on common international booking locations as well as on future develop-ments of regulations and measures against aggressive tax planning. |
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Louis L. Lehmann, Share Repurchase Programs in Switzerland: Different Buyback Methods and Market Reaction, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
The purpose of this thesis is to investigate whether Swiss share buyback programs carried through different repurchasing methods lead to a different market reaction. The Swiss framework is unique due to the scope of methods firms can choose from as well as their peculiarities created by the regulatory environment and the tax treatment of buyback programs. In Switzerland, firms can choose from five different methods to publicly repurchase shares. This study investigates the market reaction to share buyback programs using a second trading line, open market transactions, transferable put rights, and fixed price tender offer.
Switzerland's fiscal and regulatory environment are reviewed thoroughly as it has been shown that they impact both the repurchase activity as well as the market reaction. Furthermore, the peculiarities of the framework may induce bias in the way firms choose their repurchasing method.
Many previous studies find positive abnormal return around the announcement date as well as long-term abnormal return. Various hypotheses regarding firms' motives are reviewed and the expectations regarding the market reaction are built on each method's features.
Using the database from the regulatory body of share repurchase programs (the Swiss takeover board), information regarding public announcements of buyback programs is collected to create a sample of 287 share buybacks announced between December 5, 1997, to November 11, 2015.
In order to measure the market reaction to different methods, both a short and long-term event study are performed on the whole sample and subsamples clustered by methods. The short-term event study is implemented using cumulative average abnormal returns (CAAR) on an eleven trading days event window (-5;5) calculated with both a mean adjusted return model and a market model for robustness. The second trading line is the only method with significant positive abnormal return of 0.91\%, fixed price tender offer display slightly non-significant negative abnormal return (-0.64\%) whereas, open market transactions and transferable put rights are non-significantly positive (0.58\% and 1.95\% respectively). When compared to previous studies in the US, abnormal returns are relatively smaller, moreover, these results are contrasted as this study suffers from small sample bias. While the second trading line is the most popular method with 68\% of total share repurchase announcements, open-market, transferable put rights and fixed price tender offer account for 13\%, 10\% and 9\% respectively. Hence, the number of observations for these methods drops significantly. Preliminary results support the validity of the option value hypothesis for programs carried out through the second trading line. The announcements' cumulative abnormal returns are then regressed on repurchase characteristics contained in the announcement exclusively (the percentage of shares sought, the premium offered if available, and the rationale as stated in the announcement disclosure document). Contradicting previous research, the percentage of equity targeted has either a non-significant relationship with programs carried at market price (second trading line and open market) and a significant negative relationship with programs at fixed price (transferable put rights and fixed price tender offer). When capital structure optimization is stated as a motive to repurchase, the relationship is significantly positive only on the second trading line cumulative abnormal return and all the share repurchase programs irrelevant of the method. On the other hand, there is a significant positive relationship for open market programs stating price stabilization and undervaluation as a rationale.
The long-term event study is implemented using average buy and hold abnormal returns as this method is said to resembles the most investors' experience. The returns are computed over 36 months from the month following the share repurchase announcement. Second trading line, fixed price and open market method exhibit significant positive abnormal return, 11\%, 21\% and 12\% respectively. Thus confirming the market underreaction to share repurchase announcements. Programs executed through transferable put rights have on average significant negative abnormal return of -13\%, this result is unexpected and is not consistent with the beliefs formed in the literature review.
To conclude the analysis, share repurchase activity is regressed on the stock market using a logit model. I find that firms are more likely to buyback when the market is high in absolute terms but below the index 200 trading days moving average, it indicates that undervaluation is a consistent hypothesis to explain repurchase activity.
This research needs to be completed by further studies as it fails to assess whether the abnormal returns are the consequences of characteristics that are not contained in the share buyback program announcement's press release such as firms' size, market to book ratios, cash holdings, capital structure, and compensation plans which may have a better explanatory power.
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Michael Rohr, The Influence of Credit Ratings on Capital Structure Decisions: Empirical Evidence for Europe, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
Initial situation and objective. Credit rating agencies play an important role in the global financial markets, reducing information asymmetries. Even though they have an increasingly bad reputation because of their poor risk assessment in the emergence of the latest financial crisis and the Enron scandal, they are still included in capital requirement and investment regulations in Europe. This leads to the assumption that credit ratings might be a substantial influence on managers’ capital structure decisions. In his seminal work, Kisgen (2006) introduced the Credit Rating - Capital Structure Hypothesis (CR-CS) where he adds credit ratings to the traditional determinants of capital structure decisions. The hypothesis implies that managers are concerned with discrete costs (benefits) associated with different credit rating levels and therefore consider them in their capital structure decisions.
As Kisgen (2006) and most other papers on this matter focus on the US market, there is not much evidence as to what extent credit ratings influence capital structure decisions of European firms. The aim of this thesis is to empirically investigate the influence of credit ratings on capital structure decisions in Europe. To answer our research question, we adapt models proposed by Kisgen (2006) as well as refined tests introduced by Michelsen and Klein (2011).
Methodology. The review of the background of credit ratings as well as the two traditional capital structure theories, the trade-off and the pecking order theory, build the theoretical foundation of our study. For the empirical analysis we use yearly financial data and Standard & Poor’s Long Term Issuer Rating and Rating Outlook. The main sample consists of 214 European companies over the period from 2000 to 2015 (16 years). Multiple regression models with fixed effects are used to analyze the panel data. To assess changes in capital structure, the dependent variable Net Debt Issuance is defined. The influence of credit ratings is measured by using various credit rating dummy variables and control variables that are known to be major determinants of leverage. Whereas Kisgen (2006) uses long term ratings alone, Michelsen and Klein (2011) add the Rating Outlook to determine if a firm is close to a potential rating change. To be able to compare our results and to see which approach gives more significant results, we apply both of the described methodologies. Three different potential changes in credit ratings are considered in this thesis. Firstly, Micro Rating changes from any rating to another (e.g. BB to BB-). Secondly, Broad Rating changes from one Broad Rating category to another (e.g. BBB+ to A-). And lastly we analyze the borderline of special importance between investment grade and speculative grade ratings (between BBB and BB).
Results. The findings of this study only partially support the CR-CS Hypothesis. Including the Rating Outlook seems to be a more accurate way to determine a firm’s proximity to a rating change, returning more significant results. While most null hypotheses formulated cannot be rejected, we still get significant results indicating that managers are concerned with the costs of different credit rating levels. In contrast to Kisgen (2006), we do not find a symmetrical reaction. Firms seem to incur the costs of a potential negative rating change and issue approximately 1.4% less net debt relative to equity (as a percentage of total assets) than other firms in the subsequent financial year. Firms close to a positive rating change seem not to issue less net debt in order to incur the benefits of a higher rating. The results for Broad Rating changes are less significant. They show the same effect for negative rating changes as the Micro Rating tests. A potential upgrade to another Broad Rating level leads the average firm to issue more net debt relative to net equity (as a percentage of total assets) in the subsequent financial year. Being rated above the IGSG borderline seems to be of great importance with firms close to the borderline (above and below) issuing on average 2% less net debt relative to equity (as a percentage of total assets) than other firms in the subsequent financial year. This thesis adds to the existing capital structure theory showing that credit ratings do have an influence on capital structure decisions in Europe. Further research is needed to give conclusive evidence for the CR-CS or rather an adapted hypothesis.
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Stéphane Meyer, Assessment of the Current Start-up Financing Situation in Switzerland , University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
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Daniel Jungen, Base Erosion and Profit Shifting through Controlled Foreign Companies, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Master's Thesis)
The thesis discusses controlled foreign company rules within the broader topic of case erosion and profit shifting. Basis is the Action Step 3 of the OECD/G20 BEPS project. Action Step 3 contains the OECD's recommendation for effectively designing controlled foreign company (CFC) rules. The thesis of the three parts. The first part provides a general introduction to the CFC rules, describes how they work and lists the six building blocks CFC rules are made of. Also, it contains an explanation of the U.S. tax avoidance system working though Limitation on Benefits (LOB) clauses. The second part gives a detailed overview over the OECD's recommendation for CFC rules. It discusses policy considerations and recommendations on how to effectively design the six building blocks of CFC rules. The third part gives an overview over the CFC rules and regulations of the following jurisdictions: The United Kingdom, the United States, Germany, Switzerland, and Russia. In conclusion, the thesis raises the question if the effects of the 2015 OECD/G20 BEPS project are lasting and names three reasons why they are likely to be. |
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Jakob Raphael, Management overconfidence as a determinant of capital structure, University of Zurich, Faculty of Business, Economics and Informatics, 2016. (Bachelor's Thesis)
The underlying argumentation of the presented thesis is that management overconfidence leads significantely to a higher leverage, which increases the cost of financial distress. In order to get a well-diversified sample of non-financial Swiss companies the Swiss Performance Index (SPI) is being taken. The time period covers 7 years, from 30.12.2008 till 30.12.215. The overconfidence hypothesis is tested by using a random effect panel data model on the stock purchasing behaviour of insiders measured by the net buyer approach. Insiders are classified as overconfident, if the percentage change in their own company stock ownership is positive and exceeds the sample average in that given year.
We can conclude that overconfidence has statistically significant effects under certain circumstances on the leverage. However, the results show that the relationship between the proposed overconfidence measurement and leverage applied on the non-financial SPI members is vague.
This study further provideds evidence of firm specific factors and a macro-economic factor. There have been no statistically significant effect of industry group's on the leverage. The proposed bachelor thesis aims at combining findings made in behavioural finance and traditional corporate finance. |
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