New proposed restrictions on companies buying back their own stock would likely backfire.
Content: Article | Authors: Alice Bonaimé, Theo Vermaelen | Source: “INSEAD Knowledge” | Subject: Finance
Buybacks are under attack as a short-term stock price manipulation scheme, allowing insiders to cash out at inflated stock prices. This manipulation hypothesis predicts that, as a result of buybacks, companies will underinvest, undermining long-term performance and shareholder value. Recent research tests this hypothesis using an international sample that contains approximately 10,000 buyback announcements made by U.S. firms and 10,000 made by non-U.S. firms … [ Read more ]
Content: Article | Author: Theo Vermaelen | Source: “INSEAD Knowledge” | Subject: Finance
INSEAD professor Theo Vermaelen makes his case for CSR equity carve-outs.
Content: Article | Author: Theo Vermaelen | Source: “INSEAD Knowledge” | Subject: Social Responsibility (ESG)
Finance professors often get criticised by ethics professors because they tell their students that the goal of the firm is to maximise shareholder value. Financial scandals such as Enron, Tyco and others are regularly blamed on the excessive focus on shareholder value maximisation. Theo Vermaelen, Professor of Finance at INSEAD, says this critique is misplaced and reflects a lack of understanding of what we teach … [ Read more ]
Content: Article | Author: Theo Vermaelen | Source: “INSEAD Knowledge” | Subjects: Ethics, Finance
In this case study, Professors Pierre Hillion and Theo Vermaelen use Log On America’s decision to issue a floating-price convertible preferred stock to discuss optimal capital structure. You are asked to compare this financial innovation with alternatives such as equity financing, debt financing and convertibles with a fixed conversion price. Then you’re asked to support (or undermine) the legal case of LOA against the banks … [ Read more ]
Content: Case Study | Authors: Pierre Hillion, Theo Vermaelen | Source: “INSEAD Knowledge” | Subjects: Entrepreneurship, Finance | Industry: Investment Banking | Company: Log On America