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The Closed Bank, Edoardo Matania, 1870s (Courtesy: Dorotheum www.dorotheum.com)

Crowdfunding Still Attracts Local Investors to Local Ventures

Idea posted: April 2016
  • Finance
  • Innovation & Entrepreneurship

Entrepreneurs seeking funding through crowdfunding Internet platforms must still overcome the ‘home bias’ of investors — that is, their preference for funding projects located close to their homes.  

Idea #593
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Stakeholder-Focused Accounting: Value Creation and Risks

Idea posted: December 2015
  • Strategy
  • Finance

Current accounting methods inadequately represent and reward stakeholder value creation. Value-creation stakeholder accounting (VCSA) — which combines the disciplines of accounting, value creation and stakeholder theory — is the theoretical foundation for new stakeholding-focused accounting. The best mechanism for implementing the theory is through value-creation stakeholder partnerships (VCSPs), derived from partnership accounting (as opposed to traditional entity convention accounting). 

Idea #571
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‘Circle reflect wikipedia 2’ by Dachris, 2006 (Source: Wikimedia Commons)

The Rise of Integrated Corporate Reporting

Idea posted: October 2015
  • Strategy
  • CSR & Governance
  • Finance

Creating an integrated report enables companies to communicate an holistic picture of their prospects, one that is broader than offered by traditional financial reports. Integrated reports cover strategy, governance, performance and forecasts. A new framework for ‘Integrated Reporting’ (IR) has been created to help organizations bring these elements together. Integrated reports benefit both external stakeholders and leaders within the organization.

Idea #555
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Stoughton Wisconsin Tornado of 18 August 2005 (Source: NWS/NOAA, Wikimedia Commons)

The Connection Between Disasters and Less Risk-Averse CEOs

Idea posted: October 2015
  • CSR & Governance
  • Finance
  • Leadership & Change

CEOs who have lived through disasters resulting in significant loss of life are likely to be risk-averse executives. Those, on the contrary, who live through disaster that did not result in significant loss of life tend to be less sensitive to the consequences of risk — and thus more risk-tolerant than the norm.

Idea #561
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Beware of Over-Optimistic Investors Skewing High-Risk Stock Prices

Idea posted: September 2015
  • Strategy
  • Finance

Investor sentiment has a, sometimes erroneous, effect on stock market valuations. There is evidence that higher risk stocks become overpriced in periods of optimistic sentiment and undervalued when sentiment is pessimistic. Optimism attracts equity investment by unsophisticated, overconfident, retail investors in risky opportunities while such traders are less active in pessimistic periods. Thus sentiment can wrongly influence company share prices, and both investors and CFOs planning financial strategy should be wary.  

Idea #549
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The board of directors of the Leipzig-Dresden Railway Company in 1852 (Source: Wikimedia Commons)

Non-Executive Board Members More Risk Averse than Executives

Idea posted: June 2015
  • CSR & Governance
  • Finance
  • Leadership & Change

When it comes to investment, CEOs are perceived to be the most risk tolerant, followed by CFOs and non-executives. However, recent research, measuring risk perception and return demands, shows that CEOs and CFOs are more aligned than previously thought, while non-executives are consistently risk-averse. CEOs will perceive more risk in an investment than CFOs, but don’t act on this perception: they don’t demand a higher minimum return on the investment, contrary to the minimum requirements demanded by non-executives. 

Idea #524
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Investors Complain Proxy Statements Unclear on Executive Pay

Idea posted: June 2015
  • CSR & Governance
  • Finance
  • Leadership & Change

Proxy statements are often unclear on major issues, notably executive pay questions such as the appropriateness of compensation size and structure, according to a new survey of major asset managers and owners. They also lack clarity on pay ratios, corporate political contributions, corporate social responsibility and sustainability and CEO succession planning.

Idea #528
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Five gantry cranes, built at ZPMC, destined for Hamburg, on the vessel Zhen Hua 20, 2007 (Source: Wikimedia Commons)

A Lesson from China: Growth Is Not Eternal So Be Prepared

Idea posted: March 2015
  • Strategy
  • Finance
  • Leadership & Change
  • Marketing

Shanghai Zhenhua Heavy Industries (ZPMC) was a high-flying builder of large-scale container cranes whose decisions — such as lifetime guarantees on all parts and ambitious diversification — reflected a belief that growth would last forever. It didn’t.

Idea #495
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High CEO Pay Leads to Overconfidence and Poor Results

Idea posted: December 2014
  • CSR & Governance
  • Finance
  • Leadership & Change

A new study shows a negative correlation between high executive incentive pay and company performance: the higher the pay, the worse the future results. This study also pinpoints the culprit behind the negative correlation: CEO overconfidence. The overconfidence of higher-paid CEOs leads to poor investment decisions and unsuccessful M&A initiatives. 

Idea #469
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Good News and Bad News,  John Bagnold Burgess, 1876, courtesy Russell-Cotes Art Gallery & Museum, Bournemouth

Overreacting to Bad Financial News Can Lead to Poor Investment Decisions

Idea posted: November 2014
  • Finance
  • Learning & Behaviour

A University of North Carolina experiment involving investment choices confirms the neuroscience research that reveals how people learn differently from good vs. bad outcomes and when being exposed to positive vs. negative news. The result, the experiment shows, is a bias to too much pessimism when investors experience negative outcomes.

Idea #459
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The Good and Bad Reasons Corporate Cash Is Trapped Overseas

Idea posted: November 2014
  • CSR & Governance
  • Finance

Policy makers are worried that U.S. companies are using Permanently Reinvested Earnings (PRE) as a tax loophole rather than legitimately trying to grow their overseas operations. They are also concerned about cash trapped overseas instead of being invested in the U.S. economy. The SEC is focused on whether companies are using the rules concerning PRE as a means to overstate their profits. New research shows that a majority of companies are serious about overseas growth rather than looking for tax loopholes. However, cash trapped abroad is still a problem for the U.S. economy. 

Idea #458
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Strategic investors. Dr. Stephan Goetz, Warren Buffett (on video link) and Baronin Ariane de Rothschild at the Munich Film Festival,2012 (Source: Wikimedia Commons)

Investors’ Strategies for Wealth Creation

Idea posted: April 2014
  • Finance

Strategy, whether for business, military or political ends, involves the optimal use and deployment of resources in order to achieve an objective. In this Idea, using strategy for wealth creation is explored, in the context of individual investors.

Idea #361
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The Boyhood of Raleigh 1870, Sir John Everett Millais, The Tate Gallery , London

Storytelling for Entrepreneurial Endeavour

Idea posted: February 2014
  • Finance
  • Innovation & Entrepreneurship
  • Learning & Behaviour

Good stories can increase legitimacy and persuade investors and valued employees to commit to your organization. At the same time, an inauthentic story could be worse than none at all. In this Idea, six strategies that executives can employ to create, refine and deliver their stories are outlined. Read on to learn more.

Idea #324
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Investment Banking: Technology and the Decline of Trust

Idea posted: February 2014
  • CSR & Governance
  • Finance
  • Innovation & Entrepreneurship
  • Leadership & Change

‘Up or out’ promotion policies and reward systems that encourage ‘star’ bankers to ‘shine’ by taking unacceptable risks were significant factors in the 2007-2009 financial crisis. But they need to be viewed in a broader context. The seeds of trouble were sown decades previously, when a trend towards ‘transactional’ models, powered by technology, began to transform investment banks.

Idea #325
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The Green Investment Gap — And How to Close It

Idea posted: October 2013
  • CSR & Governance
  • Finance

Private investment in renewable energy technologies is increasing but remains below the level required to meet greenhouse gas emission reduction targets. Solving the problem could depend on a new approach from policy makers. Recently published research on the European market sheds new light on the ‘drivers’ of investment decisions — and suggests that financial factors and government subsidies are not the only drivers.

Idea #243
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Money for Nothing: The Truth About Investment Consultants

Idea posted: October 2013
  • CSR & Governance
  • Finance
  • Learning & Behaviour

Widely used by retirement plan sponsors and pension fund trustees, investment consultants advise on institutional assets worth trillions of dollars. But their influence is not matched by their performance. New research finds no evidence that they add value to plan sponsors — or provide higher returns for pension scheme investors.

Idea #230
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U.S. Social Security Administration early accounting operations in Baltimore circa 1936 (Source: Wikimedia Commons)

Computer Says ‘Yes’ – The Impact of IT Investment

Idea posted: September 2013
  • Strategy
  • Finance

The impact of information technology on an organization’s profitability can be significant but it needs to be strategically managed, from the top down. View your IT management as a corporate rather than a departmental issue.

The key message for today’s leaders is, choose the right kind of IT projects, spend your money wisely, and focus on growth over cost savings. 

Idea #219
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Trust, Fraud and the Financial Markets

Idea posted: August 2013
  • CSR & Governance
  • Finance
  • Learning & Behaviour

Markets cannot function without relationships, and relationships cannot function without trust. But the mechanisms for building trust can be ‘faulty’. Bernard Madoff’s infamous Ponzi scheme, which ruined thousands of investors, depended on a series of ‘trust-producing’ factors that combined to conceal it from victims and the authorities. Understanding these mechanisms can help prevent similar frauds and abuses of trust.

Idea #195
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Twitter- 1000 Words / Shutterstock.com

How Twitter Levels the Information Dissemination Playing Field

Idea posted: May 2013
  • Strategy
  • Finance
  • Innovation & Entrepreneurship
  • Marketing

All businesses want to increase their visibility, but for small businesses this is even more of a concern. Could Twitter be the key to getting your firm noticed by investors? According to new research, small businesses that use Twitter to communicate with investors may experience an increase in the demand at market value of their stocks, helping to level the playing field between them and larger firms.

Idea #140
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Warren Buffett the ultimate private equity investor

How Private Equity Can Boost Company Performance

Idea posted: February 2013
  • CSR & Governance
  • Finance
Institutions: HEC Paris

Companies with private equity investors have several advantages over those with only hands-off family or corporate shareholders. Private equity investors become more involved in company strategy and governance than some family or large corporate shareholders, and by keeping a tight control on management and setting clear objectives, these investors can help companies achieve higher market valuations. 

Idea #100
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Signing the contract

Narcissistic CEOs – A Signature for Poor Performance

Idea posted: January 2013
  • CSR & Governance
  • Finance
  • Leadership & Change
  • Learning & Behaviour

Have you ever worked for a bit of a self-obsessed boss? You weren’t imagining it; corporate narcissism is an actual and not unusual phenomenon. It can even eventually diminish firm performance and is therefore something to look out for. Now, research suggests that the size of a CEO’s signature may give a clue as to how big their ego is. 

Idea #080
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