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
With tax rules changing and interest rates set to rise globally, companies need to organize their operations around a new value equation.
Content: Article | Author: Liz Sweigart | Source: strategy+business | Subjects: Accounting, Finance
Ostensibly about Bitcoin, this is an excellent finance/economics article that explains the differences between assets, currencies, commodities and collectibles and the difference between trading (pricing) and investing (valuing).
Content: Article | Author: Aswath Damodaran | Subjects: Economics, Finance
When your company establishes a credible long-term strategy — including a way to play in the market and the capabilities to deliver — it sets up a high level of certainty. In valuation terms, your market value (your shareholders’ expectations) will more closely reflect your intrinsic value (the profits you consistently create). This is a tremendous source of strength, but it also triggers the paradox … [ Read more ]
Content: Article | Authors: Aaron Gilcreast, Larry Jones | Source: strategy+business | Subjects: Finance, Management, Strategy
Businesses with different financial profiles can tax managers and put performance at risk. When divesting isn’t an option, here’s how to manage the conflicts.
Content: Article | Authors: Dan P. Lovallo, Tim Koller, Zane Williams | Source: McKinsey Quarterly | Subjects: Finance, Management, Strategy
When it comes to corporate financial performance, we typically think in absolute terms, measuring ROA in percentage points. We are less accustomed to thinking of corporate performance in relative terms, but knowing a company’s relative performance is essential to setting and achieving performance improvement targets and, eventually, exceptional performance.
Content: Article | Authors: Michael E. Raynor, Mumtaz Ahmed, Rob Del Vicario | Source: Deloitte Review | Subjects: Best Practices, Finance, Management
Valuing companies is as important as it is dangerous. A miscalculation or faulty method can prove quite costly in negotiations and investing. Moreover, there is no single, foolproof method, and absurd results are often obtained, such as those cited by IESE’s Pablo Fernández in his document cataloging 204 mistakes in company valuations. The author organizes the common mistakes into seven groups – covering errors in … [ Read more ]
Content: Article | Author: Pablo Fernández | Source: IESE Insight | Subject: Finance
Shareholders are not the only ones to benefit from the value created by a firm. Employees, customers and suppliers reap rewards, too. Introducing a new tool to measure value creation dynamically, over time: the Value Creation and Appropriation (VCA) model. IESE’s Roberto Garcia-Castro and co-authors discuss its practical implications for firm strategy.
Content: Article | Authors: Marvin B. Lieberman, N. Balasubramanian, Roberto García-Castro | Source: IESE Insight | Subjects: Finance, Management, Strategy
Make a commitment to the function that knows your company best.
Content: Article | Authors: Andy Ruggles, Mark Schofield, Michael Shehab | Source: strategy+business | Subjects: Accounting, Finance, Taxation
If paying excessive CEO salaries is the most maligned use of corporate funds, stock buybacks may well take second place. Conventional wisdom is that CEOs buy back stock to manipulate the short-term stock price. They fund the buyback by cutting investment, and so firm value suffers in the long-term. As Senator Elizabeth Warren argued, “stock buybacks create a sugar high for the corporations. It boosts … [ Read more ]
Content: Article | Author: Alex Edmans | Source: Harvard Business Review | Subjects: Corporate Governance, Finance, Management, Strategy
When firms invest too heavily in buying back shares, there is likely to be trouble ahead.
Content: Article | Authors: Michael Olenick, Robert Ayres | Source: INSEAD Knowledge | Subjects: Corporate Governance, Finance, Management, Strategy
New research examines fair market value of startups worth over $1 billion and finds huge discrepancies in their purported worth.
Content: Article | Authors: Ilya Strebulaev, Shana Lynch | Source: Stanford University | Subjects: Entrepreneurship, Finance
The challenge of resource allocation is determining where the resources will bring the most value, how much money and talent to redistribute, and how to put those shifts effectively into action.
Content: Article | Author: Yuval Atsmon | Source: McKinsey Quarterly | Subjects: Finance, Management
Many consumer Internet business executives are loyalists of the Lifetime Value model, often referred to as the LTV model or formula. Lifetime value is the net present value of the profit stream of a customer. This concept, which appears on the surface to be quite benign, is typically used to compare the costs of acquiring a customer (often referred to as SAC, which stands for … [ Read more ]
Content: Article | Author: Bill Gurley | Subjects: Customer Related, Finance, Marketing / Sales
Shareholder primacy is causing secular stagnation.
Content: Article | Author: Robert Ayres | Source: INSEAD Knowledge | Subjects: Economics, Finance, Management
A four-part series that aims to guide you through the components necessary for building your own financial model from scratch:
Part 1: The Why and What of Financial Modeling
Part 2: Assumptions
Part 3: Income Statement and Custom Detail Tabs
Part 4: Cash Flow, Balance Sheet and Keeping the Model Updated
Content: Article | Authors: Troy Henikoff, Will Little | Source: Techstars | Subjects: Entrepreneurship, Finance
The paper describes how strategic decisions can benefit from analysis using techniques drawn from both real options and game theory. It explains the trade-off between flexibility and strategic commitment and offers a toolkit for making choices in competitive markets.
Content: Article | Authors: Jayanti Kar, Lenos Trigeorgis, Nelson Ferreira | Source: McKinsey & Company Inc. | Subject: Finance
When a business has a steady customer base, it’s easy for it to make estimations and projections. But that task is very difficult for companies that are non-contractual, meaning they have customers with inconsistent buying patterns. Wharton marketing professor Peter Fader and Wharton doctoral student Dan McCarthy are looking to close the data gap in their new research paper titled, “Valuing Non-Contractual Firms Using Common … [ Read more ]
Content: Article | Author: Peter Fader | Source: Knowledge@Wharton | Subjects: Customer Related, Finance
With these 10 principles for rethinking cost management, you can maximize value and avoid threats from Wall Street.
Content: Article | Authors: Deniz Caglar, Gary L. Neilson, Vinay Couto | Source: strategy+business | Subjects: Finance, Management
Data and business go hand in hand. And whether you’re analyzing a client’s data or using your company’s data to make executive decisions, your tools have to be able to handle the tasks you perform with that information.
If you’re a data analyst, most of the time you go through these stages of data analysis:
– Data Cleaning: Transform and rearrange the data in a way suitable … [ Read more ]
Content: Article | Author: Orlando Mezquita | Source: Investintech.com | Subjects: Finance, Productivity / Work Tips