Preparing for a financial crisis
Companies can do much to avoid falling victim to sudden national financial emergencies. Although the tally of such events is rising, many businesses remain unprepared for them.
Content: Article | Authors: Dominic Barton, Gregory Wilson, Roberto Newell | Source: McKinsey Quarterly | Subjects: Finance, International
When Labor Has a Voice in Corporate Governance
Employees may not make good owners after all! Faleye,Mehrotra,and Morck study firms where there are large blocks of employee owned shares that ARE VOTED. Their findings may surprise some people: “Relative to otherwise similar firms, labor-controlled publicly traded firms invest less, take fewer risks, grow more slowly, create fewer new jobs, have worse free cash flow problems, and exhibit lower labor and total factor … [ Read more ]
Content: Article | Authors: Olubunmi Faleye, Randall Morck, Vikas Mehrotra | Source: Social Science Research Network (SSRN) | Subjects: Corporate Governance, Finance
Too Much Cash
Companies are awash in cash. When will they finally start spending it?
Editor’s Note: includes the 2004 Cash Management tables, a cash management scorecard that shows the companies in 37 industries with the least and most excess cash per sales.
Content: Article | Author: Ronald Fink | Source: CFO Publishing | Subjects: Finance, Industry Specific
Foolproofing Treasury Functions
Financial reporting is under a magnifying glass, but many companies still integrate treasury data from different banks manually, leading to inaccuracies that impede compliance.
Content: Article | Author: J.B. King | Source: Business Finance Magazine | Subjects: Finance, IT / Technology / E-Business
Will Micropayments Make It Big?
Daniel Okrent
Some companies that have lived through the free fall of their market value have learned to reprice with the frequency of a fat man visiting the refrigerator. It’s always defended as a way to keep employees, yet no one ever seems to ask: If they feel entitled to share so lavishly in the upside yet not bear any responsibility for the downside, do you think … [ Read more ]
Content: Quotation | Source: eCompany Now | Subjects: Finance, Human Resources
New Concepts in Value-Based Management: TRS Mapping and Total Economic Profit
Most company executives have an explicit goal for increasing returns to their shareholders. However, while many companies focus on current operations metrics, such as earnings per share, net income, and economic profit, these often only have a modest impact on shareholder value. This research note introduces several new concepts to help executives in achieving their ultimate objective of increasing shareholder return, including the Accenture Total … [ Read more ]
Content: Article | Authors: Brian McCarthy, John J. Ballow, Michael J. Molnar | Source: Accenture | Subjects: Finance, Management
Dividend Policy, Agency Costs, and Earned Equity
In a well done and interesting work, DeAngelo, DeAngelo, and Stulz tie dividend policy and agency costs (particularly the free cash flow problem) together. Their main point is that if firms did not pay dividends, managers would have too much cash at their disposal.
The authors begin by asking the question “why do firms pay dividends.” To answer the question they examine what would happen if … [ Read more ]
Content: Article | Authors: Harry DeAngelo, Linda DeAngelo, René M. Stulz | Subject: Finance
Volatility: An Eerie Calm
The fact that implied — ie, expected — volatility in financial markets is so low should give investors everywhere pause for thought.
Editor’s Note: though topical, this article introduces an interesting and useful concept many will be unfamiliar with…
Content: Article | Sources: CFO Publishing, The Economist | Subjects: Economics, Finance
Enriched Performance Data
Activity-based management improves business performance management processes by providing insight into costs, but few companies are combining the two disciplines. Here’s why.
Content: Article | Author: Tad Leahy | Source: Business Finance Magazine | Subjects: Finance, IT / Technology / E-Business
Time and Money Web Tutorials and Tools
Links to lots of useful resources (tutorials, downloadable Excel worksheets, etc.) for learning about time and money…
Content: Online Resource | Sources: Analysis Site, NRCS Economics, U.S. Department of Agriculture (USDA) | Subjects: Courses / Tutorials, Finance
Remuneration: Where We’ve Been, How We Got to Here, What are the Problems, and How to Fix Them
In many ways, Murphy and Jensen’s 1990 paper on CEO pay may have been one of the most influential finance papers written in the past 15 years. It showed not only how CEOs were being paid, but also stressed the importance of incentive based (pay for performance) pay. As I wrote in the summary of that paper for my classes: This is a classic work … [ Read more ]
Content: Article | Authors: Eric G. Wruck, Kevin J. Murphy, Michael C. Jensen | Source: Social Science Research Network (SSRN) | Subjects: Corporate Governance, Finance
Full Disclosure
The SEC’s Regulation FD, which required companies to share all important data with all investors – rather than with analysts – has proved controversial. Critics said it would impair analysts’ ability to forecast earnings and create havoc in the markets. Supporters argued that it would merely level the informational playing field. Who was right? One of the first efforts to measure the quantitative effects of … [ Read more ]
Content: Article | Authors: Partha S. Mohanram, Shyam V. Sunder | Source: STERNbusiness (NYU) | Subject: Finance | Industry: Investing
Cards ‘More Popular than Cash’ in UK
Agency Costs of Overvalued Equity
Jensen’s 1986 Free Cash flow paper showed that too much cash is bad. Now he shows that a stock price can be too high. Why? “A stock price that is overvalued is caused when investors have overly optimistic expectations. Thus, if the investors were to learn the truth, the stock price would fall. This creates an incentive to hide information from investors. … [ Read more ]
Content: Article | Author: Michael C. Jensen | Source: Social Science Research Network (SSRN) | Subjects: Ethics, Finance
The Reality of Real-Time Reporting
New, superfast 8-K rules under the Sarbanes-Oxley Act could spawn problems with mergers, loan covenants, and share prices. Needed: a solid risk-management plan.
Editor’s Note: a topical and US-centric article, but one that raises interesting questions about the implications of more timely and full disclosure…
Content: Article | Author: David M. Katz | Source: CFO Publishing | Subject: Finance
Forecasting Improves, While Closing Cycles Suffer
Socially Responsible Investment: A Global Revolution
With a focus on corporate governance and business ethics, this timely book covers the evolution of socially responsible investing over time and around the world. Author Russell Sparkes is a U.K.-based authority with a bird’s eye view on the global perspective. Chapters cover Britain’s historic 2001 SRI regulations, as well as what Japan and Europe at large are doing in the field of SRI. Interestingly, … [ Read more ]
Content: Book | Author: Russell Sparkes | Subjects: Finance, Social Responsibility (ESG) | Industry: Investing
The Role of Central Banks in Fostering Efficiency and Stability in the Global Financial System
Fed Vice Chairman Roger W. Ferguson stressed the important role Central banks play in the global financial system and also provided a great look at the changing landscape of commercial banking. This one would make a great introduction or conclusion to a Money and Banking course! [FinanceProfessor.com Annotation]
Content: Article | Author: Roger W. Ferguson | Source: Federal Reserve Board (FRB) | Subjects: Economics, Finance | Industry: Finance / Banking
When Do Companies Outgrow Their Spreadsheets?
There comes a time at every smaller, growing company when managers perceive a need for more sophisticated software tools than spreadsheet-dependent planning, budgeting, and forecasting.
Content: Article | Authors: Russ Banham, Sam Knox | Source: CFO Publishing | Subjects: Finance, IT / Technology / E-Business | Industry: Information Technology