Knowledge@Wharton -- Finance and Investment

Private Equity: Fact, Fiction and What Lies in Between

Wed, 08 Feb 2012 16:28:54 EST

What good is private equity, anyway? Critics say these investment pools make money the wrong way -- buying "target companies," slashing jobs, piling on debt and selling the remnants, which by then are doomed to fail. Defenders say PE is a strong creator of jobs and value, and a vital source of outsized returns for pension funds, university endowments and other investment pools that serve ordinary people. Who's right?

The Unexpected Early Winners of the Arab Spring

Tue, 03 Jan 2012 12:51:53 EST

After toppling long-standing regimes, destabilizing others and grabbing the world's attention, the Arab Spring's protestors most likely remain amazed at the far-reaching effects of their actions in early 2011. Although their demands in Tunisia and Egypt were focused squarely on long-term economic and political betterment, they also had an immediate impact on investment prospects in two countries that are geographic bookends of the Middle East -- Morocco and Iraq.

Microfinance's Latest Challenge: Cutting Back on Over-indebtedness Among Its Poorest Clients

Wed, 07 Dec 2011 15:00:31 EST

Whereas poor entrepreneurs were at one time unable to get even one loan, now they frequently can get three or four. And that's a problem, according to participants in the 3rd Annual Women's World Banking Advanced Leadership Program, which took place last week at Wharton Executive Education. Too many loans can cause clients to "drown themselves in debt by borrowing from multiple institutions," noted one member of a roundtable set up by Knowledge@Wharton to discuss the challenges and successes of microfinance.

Will a Eurozone Recession Put a Damper on the World's Fragile Economic Recovery?

Wed, 07 Dec 2011 15:00:31 EST

If large parts of Europe fall into a recession, as many experts are predicting, it is likely to have negative, although varied, effects on economies around the world. As European leaders hammer out yet another package of solutions this week, Wharton faculty weigh in on the impact of a eurozone recession, as well as the pros and cons of the recovery measures that are up for debate.

Zvi Eckstein: A Former Central Banker's View of Economic and Social Hot Spots

Mon, 28 Nov 2011 15:52:29 EST

Fragile stability probably best describes how visiting Wharton finance professor Zvi Eckstein sees the world. From Cairo's Tahrir Square to Wall Street and beyond, the former deputy governor of the Bank of Israel recently shared his thoughts with Knowledge@Wharton about the world's economic and social hot spots. As 2011 draws to a close, people around the world -- including those in his home country, Israel -- face numerous challenges whose solutions are hardly easy.

'Finance & Accounting' for the Rest of Us: A Conversation with Richard A. Lambert

Fri, 18 Nov 2011 14:34:54 EST

Many managers are not comfortable reviewing the financial data that finance and accounting staffs provide them. Yet according to Wharton accounting professor Richard A. Lambert, financial statements reveal information that managers cannot afford to ignore because of what they show about a company's opportunities and risks. In his new book in the Wharton Executive Education Essentials Series, Lambert demystifies financial statements and shows managers how to use the data to create and refine strategy and make better long-term business decisions.

Not a Level Playing Field: How Big Investors Benefit from Selective Access to Top Management

Wed, 16 Nov 2011 14:51:29 EST

The title of a research paper by Wharton accounting professor Brian J. Bushee and two colleagues is in the form of a question: "Do Investors Benefit from Selective Access to Management?" The answer, the paper strongly suggests, is yes. Bushee and co-authors Michael J. Jung and Gregory S. Miller define selective access as the opportunity to meet privately with management at invitation-only investor conferences. That access, the researchers say, can result in profitable trading opportunities for big investors.

Should Sovereign Credit Rating Be Outsourced to China? Not So Fast ...

Wed, 09 Nov 2011 15:16:32 EST

China's Dagong Global Credit Rating Co. recently announced plans to create a so-called super-sovereign credit rating firm. In part, this is because the Big Three U.S. ratings agencies -- Moody's, Standard & Poor's and Fitch -- are believed to be too closely tied to Wall Street. Will Dagong succeed? In this opinion piece, Anastasia V. Kartasheva, a professor of business and public policy at Wharton, argues that Dagong will face an uphill task in establishing credibility. She also explains that the downgrade of a country's credit rating can have major consequences throughout the economy.

'Collapse of Confidence': The European Crisis Grows

Wed, 09 Nov 2011 15:16:32 EST

Financial markets have shown no sign of calming down following Italian Prime Minister Silvio Berlusconi's announcement on Tuesday that he would resign once a series of austerity measures are passed by the Italian parliament. The big risk for Italy – and for the world financial system -- is that it falls “over the cliff” before efforts to right the ship can be worked out, experts at Wharton say. In this special report, Knowledge@Wharton offers insights on the latest developments in Italy, the reasons why the European debt crisis has become so acute, and what it would take to bring about a possible recovery.

The Euro Zone of Denial Hits the Wall

Tue, 01 Nov 2011 10:59:28 EST

The eurozone’s efforts to fence in Greece’s debt problems have consistently lagged events. And now Italy's financial crisis has entered high gear, despite Prime Minister Silvio Berlusconi's pledge to resign. Another big worry: Creditors could lose all confidence in Europe’s ability to fix these problems, leading to a collapse in Europe’s banking system and other parts of the global economy. Knowledge@Wharton spoke with Wharton finance professor Franklin Allen and Wharton management professor Mauro Guillen about barriers to long-term solutions and the cultural differences that always lie under the surface.

Will the U.S. and Europe Rise Again -- or Sink Together?

Mon, 31 Oct 2011 12:38:04 EST

In today's highly interconnected global economy, problems in one country often lead to difficulties in another. The United States and Europe are experiencing that reality up close as leaders try to deal with debt problems, investment-shy business sectors and seemingly intractable unemployment. At a recent presentation attended by Wharton board members, professors Franklin Allen, Richard Marston and Kent Smetters warned that a true recovery for either region will take time, and that conditions could get worse before they get better.

Is It Time for a Trading Tax?

Wed, 26 Oct 2011 14:21:51 EST

To its advocates, the idea is a no-brainer: Charge a tiny tax on each stock, bond or derivative trade to raise badly needed revenue, discourage dangerous short-term speculation and make Wall Street help clean up its own mess. But critics of the financial transaction tax concept say that it would actually make markets less efficient, hurting ordinary investors by raising costs. Wharton faculty and investment experts weigh in.

The Great Deleveraging: Will Consumer Spending Ever Recover?

Wed, 12 Oct 2011 14:52:54 EST

U.S. households are a critical contributor to economic health. But the financial downturn of recent years has hit consumers hard, and they are more hesitant than ever to spend, borrow or seek access to credit. Although a more debt-conscious outlook has positive implications for the individual, experts say the widespread deleveraging is making it difficult for the business sector and the economy as a whole to get back on its feet.

Pointing Fingers: Can Europe and the U.S. Work Together to Solve the Financial Crisis?

Wed, 12 Oct 2011 14:52:54 EST

Even as U.S. officials and investors watch Europe struggle to shore up its financial system and avert another shock to the global economy, signs of a subtle transatlantic "blame game" have surfaced. Experts from Wharton and elsewhere note that although there are no immediate answers to the mounting crisis -- and its impact on capital markets in the U.S. -- it's clear that any finger pointing needs to be replaced by a sense of urgency and mutual cooperation.

Fair -- or Unbalanced? Decoding the Buffett Rule Debate

Wed, 28 Sep 2011 13:16:47 EST

Is the tax system in the United States fair? It's a question brought to the forefront by President Obama's call for a "Buffett Rule" (named for legendary investor Warren Buffett) to make sure the wealthy pay a percentage of income in taxes at least as large as that paid by the middle class. Opponents say raising taxes on the wealthy is unfair because the rich already pay far more in actual dollars. Underlying the fairness debate is a practical issue: Can the federal government get its fiscal house in order without raising taxes?

The Choice Between Voice and Exit: The Effect of Liquidity on Shareholder Commitment

Wed, 14 Sep 2011 15:07:07 EST

Most stock market experts believe shareholder input is good because it presses managers to do their best to maximize returns. But how does liquidity -- the availability of shares to buy and sell -- affect that shareholder involvement? "It's something that has inspired both academic debate and policy debate," says Wharton finance professor Alex Edmans, who has co-authored a paper on how liquidity affects governance.

Is the End Near for the Eurozone?

Wed, 14 Sep 2011 15:07:07 EST

Warning signs are flashing red. Bond markets are projecting a 98% chance of default on Greece's debt. Stock prices for French banks, heavily invested in that debt, have plunged 10% in recent days. Has the European debt crisis hit the breaking point, with Greece -- and perhaps others -- soon to exit the eurozone? Or, will officials once more cobble together new agreements that keep Greece in the club and prevent a huge contagion effect likely to cripple an already slowing global economy? Wharton finance professors Franklin Allen and Bulent Gultekin offer their insight.

Can South Africa Help Usher in a Continent's Economic Renaissance?

Wed, 31 Aug 2011 15:20:29 EST

South Africa occupies a unique position on a continent that is undergoing a boom. The country is an economic bridge that pairs Western investors with burgeoning business opportunities in sub-Saharan Africa, and it is also a source of ideas for other developing countries eager to learn how a fledgling democracy can work in the wake of a trying past. Knowledge@Wharton spoke with South Africa’s ambassador to the United States, Ebrahim Rasool, about the economic strength of the region, its challenges and the common cause South Africa shares with other countries.

Questions and Answers about 'The Wizard of Lies'

Tue, 09 Aug 2011 12:23:30 EST

Diana B. Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust, expands on why Madoff decided to grant her two interviews from prison, how he used social networks and whether his family knew about the Ponzi scheme before it unraveled.

Author Diana Henriques Reports on Bernard Madoff, 'The Wizard of Lies'

Tue, 09 Aug 2011 12:23:12 EST

Bernard "Bernie" L. Madoff's massive Ponzi scheme has had devastating consequences for countless victims, and several initiatives have recently cropped up as a result. These include the U.S. Securities and Exchange Commission's centralized TCR Database for tips, complaints and referrals. But in a recent presentation to the Knowledge@Wharton advisory board, New York Times reporter Diana B. Henriques, author of The Wizard of Lies: Bernie Madoff and the Death of Trust, argues there is still more "this epic crime might teach us."