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The education of an Internet entrepreneur - excellent read

Alan Taetle explores the dynamics of how VCs interact

discusses the issues involved with Internet companies securing debt

At a time when many barriers to global trade have fallen, countries all over the world are taking steps to harmonize their accounting standards and develop a truly global language of business. Under the lead of the International Accounting Standards Board (IASB), more than 100 countries have either implemented International Financial Reporting Standards (IFRS) or plan to do so. Yet while proponents of accounting harmonization say that IFRS will ultimately benefit firms and investors, Wharton accounting professor Luzi Hail says that there are reasons to be skeptical about these high hopes. He and three co-authors present their views in a new paper titled, "Mandatory IFRS Reporting Around the World: Early Evidence on the Economic Consequences."

describes Offroad Capital, a pioneer in online private equity placements

Some projects have become so important that companies are looking for new ways to measure their return on investment--or are dispensing with ROI studies completely

discussion by law firm Boult, Cummings, Conners & Berry

A general discussion, particularly useful to non-specialists; contains links to other resources

Gives a concise, basic overview on creating ongoing cash flow awareness in places of business; begins with two case studies, and continues with bulleted points listing ways in which forecasting can benefit companies, common cash flow problems, and basic objectives in cash flow forecasting. Finally, a short section reviews long-term and short-term forecasting methods and practices.

With a trade deficit of $400 billion, and a net foreign debt of $4 trillion, the U.S. is headed for monetary meltdown, says C. Fred Bergsten, director of the Institute for International Economics. Bergsten, predicted that the dollar will drop in value by 20% to 25% sometime during the next three years. His advice to the government: Do keep money in the bank and pay down debt; don't adopt the tax cuts proposed by Congressional Republicans. {free registration required}

A growing body of research at several business schools has been examining why many analysts prefer making buy or hold recommendations on stocks. In some cases, at least, analysts' recommendations may be biased by considerations that could well represent a conflict of interest.

Note: Business 2.0 is now part of CNNmoney and some older articles are no longer available

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Business 2.0 put this question to some of the New Economy's best and brightest. (incl. Mike Bloomberg, Jeff Bezos, Christine Comaford, Nicholas Negroponte, Steve Jurvetson, Geoffrey Moore, Rob Glaser, Patricia Seybold, Guy Kawasaki and more)

This .pdf file from the Financial Markets Center offers a closer look at the rise of stock options. The report "summarizes the key trends in the use of stock options and highlights the broader implications of this practice for measuring earnings and conducting national economic policy." Five points are discussed in this nine-page document, allowing readers to understand the basic principles and problems surrounding stock options.

This 117 page .pdf paper addresses the causes, consequences and implications of cross-border consolidation of financial institutions. It finds that, on average, domestic banks have higher profit efficiencies than foreign banks (with the exception of U.S. banks which operate efficiently at home and abroad). The results do not preclude successful international expansion but they do suggest limits to global consolidation.

This 33-page .pdf IMF paper provides an overview of recent theoretical and empirical research on herd behavior in financial markets. It addresses the following questions: What precisely do we mean by herding? What could be the causes of herd behavior? What successes hav existing studies had in identifying such behavior? And what effect does herding have on financial markets?

Business Week obtained rare access to E-Loan's IPO process and reports on it. "E-Loan's experience going public provides a peek into what any IPO prospect might now expect in this volatile market. Its IPO is a tale of giddy highs and exhausted despair, of surprising insights both corporate and personal. It's a story of how two founders, nearly broke less than two years ago, persevered against the odds and especially against their own doubts. Not the least, the IPO is a telling reminder of the vanishingly thin line between failure and success."

Article reviews findings of a report entitled E-Commerce and the CFO: A framework for finance in the new economy, by Andersen Consulting and the Economist Intelligence Unit (EIU) focusing on the impact of e-commerce on corporate finance.

When a credit card company changes interest rates or increases the credit limit of its consumers, how do these consumers respond? The answers are far from predictable, as David B. Gross of the University of Chicago and Wharton's Nicholas S. Souleles have found out. In a paper titled, "Consumer Response to Changes in Credit Supply: Evidence from Credit Card Data," Gross and Souleles examine the effects of changes in the credit limits and interest rates. Their study found that people starting at near their credit limit respond most sharply to changes in credit limits.

In the last two months alone, four European financial institutions have announced their interest in acquiring U.S. investment banks and brokerage firms. Why the sudden activity? And what are the chances these acquisitions will succeed? Two Wharton finance professors look at the companies involved and analyze the dynamics of the global underwriting business.

"It may not be the glory years, but buyout shops are back, raising billions--and heading into uncharted waters." An interesting look at the LBO world and the changes it is seeing. Discusses the idea of PIPE (private investments in public equities) and raises the question of whether LBO managers are out of their depth in the New Economy.

This complementary paper to Froot, Scharfstein, and Stein (1993) seeks to explore some of the corporate finance foundations of monetary economics. In particular, it investigates the impact of corporate risk management strategies on the monetary transmission mechanism. It employs a simple model of a financial accelerator (synonymously: a broad credit channel of monetary policy transmission) to argue that information asymmetries - which are at the heart of these models of the transmission mechanism - create incentives for corporate hedging programmes, that is, cash flow management. These policies, in turn, diminish the impact of monetary policy measures, which is reduced to the pure cost-of-capital effect.

Quite an impressive amount of recent academic research focuses on the idea that financial factors may cause or reinforce real fluctuations. In these models, it is typically a monetary policy shock that serves to lower the value of an asset which is used to secure a firm's borrowing, thereby generating broad credit channel effects of monetary transmission. We empirically investigate the impact of corporate risk management strategies on this specific transmission channel by using the seminal paper of Gertler and Gilchrist (1994) as a benchmark. A potentially important impact of corporate hedging is suggested by corporate finance models that generate hedge incentives by introducing asymmetric information into the credit markets, the assumption at the very heart of the available theories of a broad credit channel. The advent of liquid US interest rate derivatives markets in the mid-1970s should, therefore, serve as something like a turning point in the history of US monetary transmission. Credit channel effects should have been in operation prior to the introduction of these markets, while any such effect should have tended to vanish afterwards. In addition, we should be able to detect marked differences in the behaviour of small and large firms up to the 1970s in contrast to a broadly identical behaviour on the part of these firms in the period thereafter.

Choosing performance measures is a challenge. Performance measurement systems play a key role in developing strategy, evaluating the achievement of organizational objectives and compensating managers. Yet many managers feel traditional financially oriented systems no longer work adequately. A recent survey of U.S. financial services companies found most were not satisfied with their measurement systems. In an article on Oct. 16, in the Financial Times' Mastering Management series, Wharton accounting professors Christopher Ittner and David Larcker suggest that financial data have limitations as a measure of company performance. The two note that other measures, such as quality, may be better at forecasting, but can be difficult to implement.

This article first reviews methods of foreign exchange intervention and then presents evidence—focusing on survey results—on the mechanics of such intervention. Types of intervention, instruments, timing, amounts, motivation, secrecy and perceptions of efficacy are discussed.

A common accounting language-which measures gross profits the same way in London and Paris as in New York-is fast becoming necessary. As part of the process, a debate has erupted between supporters of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and the International Accounting Standards (IAS) that are widely used in Europe and other parts of the world. Which standard provides investors and regulators with a more accurate picture of corporate performance? What impact does that have on a company's ability to raise capital? Christian Leuz, a Wharton professor, ran an unusual horse race between companies using both U.S. GAAP and IAS standards in an attempt to find answers. The result may surprise you.

Though somewhat dated (Feb '00) this interesting article is useful for the larger question it raises about the power of the yield curve as an economic indicator.

This BusinessWeek article argues that the foreign exchange markets have shifted their dominating reliance on central bank actions (specifically interest rate interventions) to also consider equity markets and global M&A activity.

This article examines the new M&A wave involving foreign investors in Japan. Makes some interesting predictions and offers some useful statistics and analysis. We'll see how it unfolds going forward.

ABSTRACT: This article examines empirically the dynamic relationship between two key US money market interest rates - the federal funds rate and the 3-month Treasury bill rate. Using daily data over the period 1974-1999, we show that a long-run no-arbitrage relationship exists between these two rates. This relationship is shown to be remarkably stable across monetary policy regimes of interest rate and monetary aggregate targeting. Employing vector equilibrium correction models which allow for both asymmetric and non-linear dynamics, we find that most of the adjustment towards the no-arbitrage long-run equilibrium occurs through the federal funds rates. The results appear to suggest that, contrary to conventional wisdom, it is the Treasury bill rate, rather that federal funds rate, that 'anchors' the short end of the term structure.

Traditional budgets are odious to business managers and, worse, can undermine a company's strategic objectives. Here's how progressive companies are reengineering budgeting into a value-added process.