Musings on Markets

DECEMBER 21, 2022

Starting in late January 2023, I will be back in the classroom, teaching valuation and corporate finance to the MBAs and valuation to the undergraduates, and these classes will continue through May 2023. The class starts with a question of what the end game should be for a business (profitability, value, social good?)

Corporate Finance 99

Corporate Finance Finance Start-ups Marketability 99

Andrew Stolz

AUGUST 7, 2020

Within corporate finance, the agency problem is considered as the conflict of interest between the company’s managers and its stockholders. A secondary conflict is that managers want to re-invest profits in the business, while shareholders may prefer more dividends paid out. Definition of the Agency Problem.

Dividends 52

Dividends Corporate Finance Finance Banking 52

Musings on Markets

AUGUST 5, 2023

Corporate Finance : The role of the equity risk premium in determining the expected return on a stock makes it a key input in corporate finance, as well, because that expected return becomes the company's cost of equity.

Risk Premium 97

Risk Premium Equity Start-ups Treasury 97

Musings on Markets

DECEMBER 15, 2021

During my teaching lifetime, I have taught a wide swath of classes, ranging from banking to equity instruments, but in the last twenty years, my focus has been on three classes, c orporate finance, valuation and investment philosophies , with the last one taught only online. The place to start is with accounting. am - 11.50

Corporate Finance 70

Corporate Finance Finance Start-ups Technology 70

Essentials of Corporate Finance

AUGUST 10, 2022

As we showed in the text, dividends and stock repurchases affect a company and investors in much the same way. The tax may push companies toward dividends, although since the new tax wouldn't take effect until 2023, analysts are expecting large repurchases to be completed by the end of 2022.

Dividends 52

Dividends 52

Reynolds Holding

JUNE 16, 2024

Our article formalizes these insights, showing how fund fees, capital gains returns, dividend and capital gains distributions, and balance sheet effects shape institutional growth. We hand collect data on institutional ownership, distributions, fees, and reinvestment of dividends and capital gains directly from SEC filings.

Dividends 45

Dividends Covariance Equity Finance 45

Musings on Markets

JANUARY 12, 2021

Corporate Finance : Corporate finance is the development of the first financial principles that govern how to run a business. It is that mission that makes corporate finance the ultimate big picture class, one that everyone (entrepreneurs, investors, analysts, business observers) should take.

Corporate Finance 52

Corporate Finance Start-ups Finance Marketability 52

Musings on Markets

MARCH 8, 2023

This is the last of my data update posts for 2023, and in this one, I will focus on dividends and buybacks, perhaps the most most misunderstood and misplayed element of corporate finance. Viewed in that context, dividends as just as integral to a business, as the investing and financing decisions.

Dividends 102

Dividends Start-ups Corporate Finance Finance 102

Global Finance

SEPTEMBER 9, 2024

Corporates are hoarding cash, and that has meant a return to dividends and distributions but also more conservative cash management. “So we saw a lot of activity in terms of drawing down and moving monies around. One of the products of that is that cash is again king, as it was in the ’90s.”

Treasury 105

Treasury Banking Finance Dividends 105

Essentials of Corporate Finance

SEPTEMBER 14, 2021

In the textbook, we discussed how buybacks have a tax advantage over dividends because it results in a lower effective tax rate for shareholders. A new law being proposed in the Senate would levy a 2 percent excise tax on all funds used for share buybacks.

Dividends 40

Dividends 40

Essentials of Corporate Finance

NOVEMBER 15, 2021

Of course, you will never receive a dividend and have no say in the operations of the Packers. The Green Bay Packers are offering 300,000 shares of stock at a price of $300 per share.There are currently a little over 5 million shares of the Packers outstanding.

Dividends 40

Dividends 40

Musings on Markets

FEBRUARY 8, 2022

Risk and Hurdle Rates In investing and corporate finance, we have no choice but to come up with measures of risk, flawed though they might be, that can be converted into numbers that drive decisions. In corporate finance, this takes the form of a hurdle rate , a minimum acceptable return on an investment, for it to be funded.

Risk Premium 90

Risk Premium Beta Start-ups Equity 90

Reynolds Holding

NOVEMBER 30, 2023

On November 21, 2023, the staff of the Securities and Exchange Commission’s (SEC’s) Division of Corporation Finance issued eight new Compliance & Disclosure Interpretations (C&DIs), and revised two previously issued C&DIs, relating to the final pay-versus-performance (PVP) disclosure rules adopted last year. Answer: Yes.

Compliance 40

Compliance Total Shareholder Return Dividends Market Capitalization 40

Reynolds Holding

OCTOBER 10, 2022

trillion to buy back their shares, which is significantly more than these firms spent on dividend payments to their shareholders (Lazonick, Sakinç, and Hopkins, 2020). Agency costs of free cash flow, corporate finance, and takeovers. Stock repurchases are popular. Between January 2009 and 2018, S&P 500 firms spent $4.3

Finance 56

Finance Marketability Dividends Corporate Finance 56

Musings on Markets

NOVEMBER 4, 2022

That would have left you lagging the 181% price appreciation that you would have earned on the S&P 500 during the period, and even more so, if you consider the fact that you would have earned no dividends on Facebook, while generating about a 2% dividend yield, every year on the index.

Start-ups 105

Start-ups Market Capitalization Marketability Dividends 105

Valutico

APRIL 17, 2023

Determining a company’s “Cost of Capital” is vital in corporate finance and valuation, and the Weighted Average Cost of Capital (WACC) provides a specific way of doing so. Finally, tax rate (T) represents taxes associated with interest payments on debt or dividends on equity.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Valutico

APRIL 17, 2023

Determining a company’s “Cost of Capital” is vital in corporate finance and valuation, and the Weighted Average Cost of Capital (WACC) provides a specific way of doing so. Finally, tax rate (T) represents taxes associated with interest payments on debt or dividends on equity.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Valutico

APRIL 12, 2023

Determining a company’s “Cost of Capital” is vital in corporate finance and valuation, and the Weighted Average Cost of Capital (WACC) provides a specific way of doing so. Finally, tax rate (T) represents taxes associated with interest payments on debt or dividends on equity.

Weighted Average Cost of Capital 52

Weighted Average Cost of Capital Discounted Cash Flow Beta Risk-free Rate 52

Musings on Markets

FEBRUARY 27, 2022

A Life Cycle View If you have been reading my posts for a while, you know that I find the corporate life cycle a useful device in explaining everything from what companies should focus on, in corporate finance, to the balance between stories and numbers, when investor value companies.

Start-ups 98

Start-ups Equity Book Value Marketability 98

Brian DeChesare

AUGUST 31, 2022

For simplicity, I am ignoring the interest, dividends, borrowing costs, and other fees, but this example is the general idea with convertible arbitrage. Convertible Securities: A Complete Guide to Investment and Corporate Financing Strategies. billion, up from $4.7 The increased volatility is the key.

Banking 89

Banking Risk-free Rate Equity Start-ups 89

Brian DeChesare

APRIL 24, 2024

Energy Consulting to Asset Management: Consulting is closer to finance than engineering, but a pre-MBA internship would still be useful because AM firms recruit relatively few MBAs and normally want people with finance experience. With case studies, stock pitches, and modeling tests, focus on breadth over depth.

Start-ups 59

Start-ups Banking Finance Equity 59

Reynolds Holding

MARCH 5, 2023

The staff of the Securities and Exchange Commission’s (SEC’s) Division of Corporate Finance recently issued guidance to address open questions related to the final pay-versus-performance (PVP) disclosure rules adopted in 2022. However, it is not clear whether or how this informal guidance from 2014 applies to the PVP rules.

Equity 45

Equity Dividends Total Shareholder Return Corporate Finance 45

Harvard Corporate Governance

AUGUST 5, 2022

Share Repurchases on Trial: Large-Sample Evidence on Market Outcomes, Executive Compensation, and Corporate Finances. Tags: Capital allocation , Dividends , Executive Compensation , Firm performance , Incentives , Repurchases , Shareholder value. Posted by Nicholas Guest (Cornell University), S.P.

Capital Structure 210

Capital Structure Dividends Corporate Finance Technology 210

Musings on Markets

JANUARY 6, 2023

Check rules of thumb : Investing and corporate finance are full of rules of thumb, many of long standing. The second is that in my line of work, which is corporate finance and valuation, the numbers I need lie in micro or company-level data, not in the macro space. Dividend Payout & Yield 1. Return on Equity 1.

Risk Premium 52

Risk Premium Dividends Start-ups EBITDA 52

Brian DeChesare

JUNE 1, 2022

Traditionally, the sector was viewed as a defensive play for investors who wanted stable dividends and no drama. Companies tend to offer high, stable dividend yields, and they finance their massive capital expenditures primarily with debt , with the highest leverage ratios of any industry outside of financial institutions.

Banking 98

Banking Equity Book Value Capital Structure 98

Reynolds Holding

DECEMBER 10, 2023

As a capital allocation decision, share buybacks intersect all three of the main corporate finance activities of investing, financing, and dividends [1]. One of the deep-seated reasons for the splitting of opinion is that share buybacks transfer wealth between shareholders [2].

Dividends 45

Dividends Total Shareholder Return Corporate Finance Finance 45

Musings on Markets

JANUARY 31, 2024

Your answer to that question will determine not just how you approach running the business, but also the details of how you pick investments, choose a financing mix and decide how much to return to shareholders, as dividend or buybacks.

Equity 80

Equity Book Value Start-ups Corporate Finance 80

Musings on Markets

MAY 11, 2021

The Taxation of Investment Income In much of the world, income from investments (interest, dividends) is treated differently than earned income (salary, wages), by the tax code, and the reasons for the divergence are both practical and political: 1.

Dividends 52

Dividends Start-ups Risk Premium Treasury 52

Brian DeChesare

AUGUST 10, 2022

Complications arise because the dividend payouts do not necessarily follow this 2% / 98% split; there’s usually a set of “tiers” with performance incentives, and the split changes in each tier, similar to the real estate waterfall model. it’s after the interest expense and preferred dividend deductions).

Banking 98

Banking EBITDA Dividends Equity 98

Brian DeChesare

SEPTEMBER 11, 2024

Finally, many renewable energy debt deals take place within Project Finance teams at banks – but Project Finance and corporate finance are very different ! Dividend yields are frequently cited for these types of companies as well.

Banking 59

Banking Finance Start-ups Equity 59

Musings on Markets

JANUARY 9, 2021

The first is that I do not have a macro focus, and my interests in macro variables occur only in the context of corporate finance or valuation issues. If you use it at their jobs as corporate finance or equity analysts, I am glad to take some of that burden off you, and I hope that you find more enjoyable uses for the time you save.

Risk Premium 52

Risk Premium Market Capitalization Equity Start-ups 52

Musings on Markets

JANUARY 8, 2022

A few of these variables are macro variables, but only those that I find useful in corporate finance and valuation, and not easily accessible in public data bases. Rather than replicate that data, my macroeconomic datasets relate to four key variables that I use in corporate finance and valuation.

Risk Premium 99

Risk Premium Start-ups Market Capitalization Corporate Finance 99

Musings on Markets

JANUARY 5, 2024

I have also developed a practice in the last decade of spending much of January exploring what the data tells us, and does not tell us, about the investing, financing and dividend choices that companies made during the most recent year. Dividends and Potential Dividends (FCFE) 1. Dividend yield & payout 3.

Dividends 105

Dividends Risk Premium Equity Book Value 105

Musings on Markets

JANUARY 28, 2024

In particular, there are wide variations in how risk is measured, and once measured, across companies and countries, and those variations can lead to differences in expected returns and hurdle rates, central to both corporate finance and investing judgments.

Risk Premium 117

Risk Premium Beta Start-ups Equity 117

Global Finance

MARCH 7, 2025

The oil giant cut its dividend to balance shareholder payouts with rising capital investments amid lower crude prices and evolving market conditions. Saudi Arabian Oil, better known as Aramco, is recalibrating its dividend strategy as it navigates weaker oil prices and rising capital investment demands. billion from $121.3

Dividends 95

Dividends Finance Marketability Corporate Finance 95

Musings on Markets

MARCH 5, 2025

I also look at a clear and discernible shift away from dividends to stock buybacks, especially in the US, and examine both good and bad reasons for this shift. Some of that cash will be held back in the company as a cash balance, but the balance can be returned either as dividends or in buybacks.

Dividends 52

Dividends Start-ups Equity Corporate Finance 52

Musings on Markets

JANUARY 10, 2025

In corporate finance and investing, which are areas that I work in, I find myself doing double takes as I listen to politicians, market experts and economists making statements about company and market behavior that are fairy tales, and data is often my weapon for discerning the truth. Dividends and Potential Dividends (FCFE) 1.

Risk Premium 115

Risk Premium Dividends Start-ups Corporate Finance 115