Contributions published at Finance (Kjell G. Nyborg)

Central banks are under increased scrutiny because of the rapid growth in, and composition of, their balance sheets. Therefore, understanding the processes that shape these balance sheets and their consequences is crucial. We contribute by studying an extensive dataset of banks’ liquidity uptake and pledged collateral in central bank repos. We document systemic arbitrage whereby banks funnel credit risk and low-quality collateral to the central bank. Weaker banks use lower quality collateral to demand disproportionately larger amounts of central bank money (liquidity). This holds both before and after the financial crisis and may contribute to financial fragility and fragmentation.

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The goal of this study is to examine the influence of private equity firms on the long-term aftermarket performance of IPOs by analyzing particular firm characteristics of private equity-backed and non-private equity-backed IPOs at the time of the offer for Germany and Switzerland. Private equity firms and their value creation model experienced a growing influence and media attention in Continental Europe over the last years. Although private equity firms have been a source of capital for decades in the US and in the UK, the role of private equity was rather small in other European countries until the mid-1990s. Since the global financial crisis and the fact that traditional lenders had to adapt to new regulatory frameworks, private equity firms play an even more important role in corporate financing. This higher activity of private equity firms has a direct effect on the IPO market with an increase in private equity-backed IPOs. Many studies in the US and in the UK show that private equity firms are able to create value in the long-term by making their portfolio companies operationally and financially more efficient. It is reasonable to expect that such value creation initiatives put in place during the time a company is under private equity control will be maintained for some time after an exit through an IPO. This is even more the case since private equity firms are responsible for the terms and the timing of the IPO and continue to be involved for a considerable time after the floating of the portfolio company. The continuous involvement beyond the date of the IPO may lead to a superior long-term performance of private equity-backed IPOs compared to IPOs that are not backed by a private equity firm.

When valuing the firm, one of the inputs with the most influence on the final result is the cost of capital, thus it is important to estimate it as precisely as possible. This thesis aims to provide the benchmark for asset beta, which is one of the inputs for the estimation. The analysis was performed on 20’519 companies from 53 countries. The results indicate considerable variation across countries and industry sectors, however certain sectors have a higher cross-border similarity. The final outcome of the thesis is a matrix of betas by countries and GICS, which could be used as benchmark value for various estimations.

While many studies have been conducted over past years trying to identify the most relevant factors influencing the variability of P/E multiples, most of them focus on actually observed P/E multiple. In my thesis, in order to isolate from market effects, I investigate the justified P/E ratio, i.e. I decompose the P/E multiple and use its fundamental components in order to answer the central question of my thesis, which is: where does the variability of P/E ratio within the same industry come from?

In this thesis I aim to address the role of Sovereign Credit Default Swaps (SCDS) in the European Sovereign Debt Crisis (ESDC). I divide this thesis in two parts. In the first one, I examine the origins of CDS and their main uses. Then I exhibit the market development before and after the global financial crisis which started in 2007. I continue by analyzing the role of CDS in the subprime crisis in the United States (US) and subsequently in the ESDC. In this part I also pay attention to the main directions of scientific work in the field of CDS and SCDS and I conclude by explaining and evaluating the European Union (EU) regulators’ ban on SCDS short selling.

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On September 6th, 2011, the Swiss National Bank introduced the currency floor (1.20 CHF for 1 EUR). This decision was in force until the 15th January 2015 and significantly benefitted the Swiss Economy (Zurbrügg (2015)). The purpose of the minimum exchange rate was to help the Swiss economy to find a situation of stability and security. Although it was commonly known that the SNB’s decision was not a permanent one (Fuster (2015)), the exchange rate was strongly affected nonetheless.

This paper introduces a methodology to estimate the re-use of collateral based on actual transaction data. With a comprehensive data set from the Swiss franc repo market we are able to provide the first systematic study on the re-use of collateral. We find that re-using collateral was most popular prior to the financial crisis when roughly 10% of the outstanding interbank volume was secured with re-used collateral. Furthermore, we show that the re-use of collateral increases with the scarcity of collateral. By giving an estimate of the collateral re-use and explaining its drivers, the paper contributes to the on-going debate on collateral availability.

Viele Staaten haben auch Jahre nach der Finanzkrise noch mit sinkenden Einnahmen zu kämpfen. In diesem Zusammenhang haben die teilweise sehr tiefen effektiven Steuersätze internationaler Unternehmen grosse mediale und politische Aufmerksamkeit erhalten. Diese tiefen effektiven Steuersätze werden einerseits durch Gewinnverlagerungen von Staaten mit vergleichsweise hoher Steuerbelastung in Staaten mit einer tieferen Steuerbelastung und andererseits durch das Ausnutzen von Diskrepanzen zwischen verschiedenen Steuerregimen erreicht. Ersteres wird als „Profit Shifting“ und letzteres als „Base Erosion“ bezeichnet. Die OECD wurde im Jahr 2012 von den G-20-Finanzministern beauftragt, dazu einen Bericht zu erstellen. Daraus ist das BEPS-Projekt entstanden. Dieses beinhaltet 15 übergeordnete Massnahmen, welche sich den verschiedenen Aspekten von BEPS widmen. Die finalen Berichte wurden am 05. Oktober 2015 publiziert. In dieser Arbeit geht es darum, die Auswirkungen von BEPS auf die Ansässigkeit und die Betriebsstätten internationaler Unternehmen zu untersuchen.

Die Stempelabgaben gehören zu den ältesten noch existierenden Steuerformen überhaupt. Sie werden in der Schweiz seit 1798 auf Kantonsebene und seit 1918 auf Bundesebene praktiziert. Der Bund erhebt heute drei Arten von Stempelabgaben: die Emissions- und die Umsatzabgabe auf die Ausgabe respektive den Handel von Wertschriften sowie die Abgabe auf Versicherungsprämien. In den vergangenen Jahren wurde von verschiedenen Seiten zunehmend die Abschaffung der Stempelabgaben gefordert. Besonders in der Kritik stehen die Emissions- und die Umsatzabgabe, da sie Wettbewerbsnachteile für den Finanzplatz und Kapitalmarkt der Schweiz erzeugen würden.

This thesis examines the relation between illiquidity of stocks and their returns. Illiquidity or a lack of liquidity means a weak marketability of a stock. Therefore, an investor who wants to buy or sell an illiquid stock may face difficulties when executing his order for example he might not find a counterparty or has to pay high transaction costs. These difficulties are anticipated and a higher return is demanded. This excess return is called liquidity premium. Firstly, the thesis tries to answer the question if this relationship between illiquidity and return holds in the Swiss stock market and secondly if stock returns can be explained by a liquidity factor.

The choice of payment method in corporate transactions is a critical decision. The majority of corporate transactions is made with cash or stock. This can include one method exclusively or a combination of both. By choosing a certain method of payment, the acquiring firm sends a strong signal to the stock market participants. In particular, it implicitly reveals the management’s perception about the firm’s current valuation, relative to its fundamental value. Under the paradigm of shareholder value maximization, management selects the most favorable method of payment. As a consequence, we expect an acquiring firm’s management to select stock as the method of payment if they think the firm is overvalued, and cash if they think the firm is undervalued. Assuming that stock market participants have fully adapted to this behavior, we might expect that stock acquirers underperform after the transaction, whereas cash acquirers overperform. Although there is no agreement in principle, existing literature provides strong evidence for the line of argument developed above.

In dieser Arbeit wird der Einsatz von niedrig besteuerten bzw. Offshore-Gesellschaften vor und nach Umsetzung des von der OECD lancierten BEPS-Projektes (Projekt gegen Gewinnverkürzung bzw. -verschiebung) analysiert. Zu Beginn werden die gängigsten Steuervermeidungsstrategien erläutert. Anschliessend werden einige im Zuge des BEPS-Projektes ausgearbeitete Massnahmen untersucht und deren zukünftigen Auswirkungen auf die Konzerne sowie die betroffenen Staaten beschrieben. Das Ergebnis dieser Arbeit zeigt, dass das BEPS-Projekt den Einsatz von niedrig besteuerten Gesellschaften einschränken wird. Allerdings muss in Zukunft noch viel zusätzliche Arbeit seitens der OECD und allen betroffenen Staaten geleistet werden, um die im Zuge des BEPS-Projektes festgelegten Ziele zu erreichen.

We use a survey approach to learn about valuation professionals’ choices and implementations of valuation techniques in practice. The survey design allows us to control for a respondent’s professional subgroup (e.g., consulting), education, experience, and valuation purpose characteristics. We find support for the “sociological hypothesis” that profession matters more than education; different professions have different valuation cultures. Other factors are less important. There are also many commonalities across respondents. Most use both multiples and DCF, but implement DCF in a way that almost turns it into a multiples exercise. Confusion reigns with respect to interest tax shields and the WACC. Higher educational levels do not reduce the confusion. Our overall findings matter because valuation professionals function as intermediaries in the capital allocation process. The relative unimportance of education raises questions about the role and benefit of higher level finance education.

Libor is a widely used survey-based reference that measures banks unsecured borrowing cost in the London interbank market. It also serves as a benchmark for a wide range of financial products with a gigantic notional value. The recent manipulation scandal, together with the dropping relevance of the unsecured funding interbank market, has raised several questions for its future role and reforms. This study discusses the sources that enabled manipulations, outcomes of recent investigations along with the prosecution and ongoing reforms to make Libor robust and appropriately used in future. In the empirical section, Euro Libor is matched and compared to its European cousin Euribor. The aim is to find differences and conspicuous patterns between the two benchmarks but also across the panel banks who submit for both reference rates.

Multinationale Unternehmen profitieren von Lücken in der internationalen Steuerlandschaft, um ihre Unternehmensgewinne möglichst tief zu versteuern. Sie reduzieren künstlich die Steuerbemessungsgrundlage in Hochsteuerländern (Base Erosion) und verschieben den Gewinn in Niedrigsteuerländer (Profit Shifting). Die OECD hat im Jahr 2015 einen 15-teiligen Aktionsplan zur Bekämpfung von Base Erosion und Profit Shifting erstellt. Die Action 13 gibt als einheitlichen Standard vor, eine dreiteilige Transferpreisdokumentation auf Länderbasis zu erstellen. Unternehmen sowie Steuerbehörden müssen sich auf einen erhöhten Aufwand vorbereiten. Anhand von Experteninterviews wird diskutiert, welche Auswirkungen die Action 13 auf den Standortwettbewerb und die Schweizer Wirtschaft haben wird.

„Ohne Rohstoffe geht nichts.“ Rohstoffe sind die essentielle Grundlage der Weltwirtschaft und damit Treiber des Wohlstands und Wirtschaftswachstums. Rohstoffhandelsunternehmen, welche durch den Handel mit Rohstoffen die Brücke zwischen produzierenden und konsumierenden Orten schlagen, leisten demnach als bedeutende Akteure der Rohstoffbranche einen wesentlichen Beitrag zur Funktionsfähigkeit der Weltwirtschaft. Die Rohstoffbranche und damit auch Rohstoffhandelsunternehmen stehen dennoch seit geraumer Zeit, unter anderem betreffend Praktiken zur Steuervermeidung, in der Kritik der Öffentlichkeit.3 Diese Problematik wird vor allem durch den international weitreichenden Aktionsplan der Organisation für wirtschaftliche Zusammenarbeit und Entwicklung [OECD] gegen die Aushöhlung der Bemessungsgrundlage und der Gewinnverschiebung alias Base Erosion and Profit Shifting [BEPS] aufgegriffen. Dieser Aktionsplan wird voraussichtlich die globale Steuerlandschaft massgeblich verändern und dadurch wesentlichen Einfluss auf Unternehmen und deren Standorte haben.4 Folglich werden voraussichtlich auch Rohstoffhandelsunternehmen, welche hinsichtlich Standortwahl weitgehend mobil sind, ihr Geschäftsmodell sowie ihre aktuellen Standorte unter Berücksichtigung des BEPS-Einflusses überdenken müssen.5 Die Thematik der Standortattraktivität für Rohstoffhandelsgesellschaften gewinnt damit an Bedeutung.

Central bank collateral frameworks are an often overlooked feature of monetary policy that play a key role in the monetary and financial system. Readers will discover how central banks conduct and implement monetary policy beyond merely setting interest rates, and develop their understanding as to how collateral policies may affect financial markets, financial stability, and the real economy. This book studies the collateral framework in the euro area in detail, and levers this analysis to provide an account of the euro crisis from the perspective of collateral policy. Readers gain access to a wealth of institutional and economic data and information with a level of density and accessibility unavailable elsewhere. This book, the first of its kind, is a valuable read for academic monetary and financial economists, those working in banking and policy-making financial institutions, and anyone who wishes to learn more about the role of central banks in society.