According to economic experts, shareholder activism refers to a process through which an individual with equity in a publicly traded corporation attempts to use his or her shareholder rights to pressure the management team into making changes. Shareholders are partial owners of a corporation. Thus they have rights they can exercise to influence a change of behavior. However, achieving this feat is highly dependent on one’s share classification. Major shareholders have a greater influence over the running of a corporation compared to minority shareholders who only have limited options such as proxy battles, publicity campaigns, litigation, as well as writing formal proposals that are voted for during annual meetings. An activist shareholder focuses on pressuring the management to make financial and non-financial changes that range from the corporate policy, financing structure, disinvestment, adoption of environmentally conscious policies to cost-cutting measures, among others. Several publicly listed companies in the United States Continue reading
Global Investment Management
Bitcoin’s Role as an Alternative Currency System
Bitcoin fall in a broad form of monetary history. Bitcoin is a decentralized digital money that may be sent from user to user on the peer-to-peer Bitcoin network without intermediaries. Network nodes verify transactions via cryptography and are recorded in a distributed public ledger called a blockchain. A blockchain is a distributed digital database that records all cryptocurrency transactions. It is constantly expanding as completed blocks and new recordings are added. Each block includes the previous block’s cryptographic hash, a timestamp, and transaction data. Bitcoin nodes utilize the blockchain to distinguish valid transactions. Bitcoin transactions from attempts to re-spend coins that an unknown individual or organization under open-source. Bitcoin and cryptocurrency can revolutionize how people store, transfer, and create value in money. Naturally, money is believed to be a physical commodity that may be used as a medium of exchange, such as gold or silver. People consider money a unit Continue reading
Responsible Investment – Concept, Definition, Advantages, and Disadvantages
According to research, many corporations in the contemporary world have purposed to reorient their investment policies in line with the principle of the common good through responsible investment strategies. As a way of addressing the numerous challenges associated with globalization, responsible investment is one of the notable trends that corporations have taken up since the turn of the century. It refers to an investment approach that aims to integrate social, environmental, and governance elements into investment decisions with the sole purpose of improving risk management, as well as generating sustainable and long-term results. The social elements integrated into investment decisions include improving employee relations, diversity, health, safety, working conditions, as well as conflict management. Environmental elements include deforestation, resource depletion, waste management, pollution, and climate change. Governance elements include issues relating to tax strategy, executive pay, political lobbying, corruption, as well as board diversity and structure. The concept of responsible Continue reading
Syndicated Euro Credits
History of Syndicated Euro Credits Syndicated Euro Credits are in existence since the late 1960s. The first syndicate was organized by Bankers Trust in an effort to arrange a large credit for Austria. During the early seventies, Euromarkets saw the demand for Euro credits increasing from non-traditional and hitherto untested borrowers. The period after first oil crisis was marked by a boom phase. To cope with the increasing demand for funds, lenders expanded their business without undertaking due credit appraisal of their clients or the countries thus financed. Further, the European banks had short-term deposits while bulk of borrowers required long-term deposits. These landings were at fixed rates thus exposing these banks to interest rate risks. The banks evolved the concept of lending funds for medium longterm i.e. 7-15 years on a variable interest rate basis linked to the Interbank Rate (LIBOR). Revision of rates would take place every 3-6 Continue reading
Emerging Trends in International Capital Markets
Three interrelated developments in global capital markets are: The sustained rise in gross capital flows relative to net flows; The increasing importance of securitized forms of capital flows; and The growing concentration of financial institutions and financial markets. Taken together these trends may signal what some others have referred to as a ‘quiet opening’ of the capital account of the balance of payments, which is resulting in the development, strengthening and growing integration of domestic financial systems within the international financial system. Finance is being rationalized across national borders, resulting in a breakdown in many countries in the distinction between onshore and offshore finance. It is particularly evident and most advanced in the wholesale side of the financial industry, and is becoming increasingly apparent in the retail side as well. Taken together these three effects have contributed to a sharp rise in volatility — in both capital flows and asset Continue reading
Fama and French Three Factor Model
Capital Asset Pricing Model (CAPM) is the backbone of modern portfolio theory. According to CAPM, the expected return on stock is a function of its relationship with the market portfolio defined by its beta. However, Eugene Fama and Kenneth French (1992) brought together two more factors and found that stock return is based on a combination of not just market beta but also firm size and value. They came up with a new model known as Three Factor Model as an alternative to CAPM. What is Fama and French Three Factor Model? Fama and French three factor model expands on the Capital Asset Pricing Model (CAPM) by adding size and value factors in addition to the market risk factor in CAPM. This model considers the fact that value and small cap stocks out-perform markets on a regular basis. Fama and French attempted to approach and measure equity returns in a Continue reading