Tag Archives: Economics

The Feedback Effect: How the Financial Markets Affect Decisions in the ‘Real Economy’ – Knowledge@Australian School of Business

Small business need-to-know.  The study shows why measurements at different times have different weight and how to really use the information for specific purpose

Excerpt: … there is much more to it than that, according to a new study by two Wharton faculty members and one former one. Their paper, “The Real Effects of Financial Markets,” explores the subtle relationships between the share price, the company’s health, and decisions made by its executives and other players, such as lenders, investors, customers, directors, employees and regulators. The study, a survey of research on the topic, finds that the financial markets, where stocks, bonds and other securities are traded, serve a critical “informational role” that affects decisions in the “real economy” composed of companies.

Read full article via The Feedback Effect: How the Financial Markets Affect Decisions in the ‘Real Economy’ – Knowledge@Australian School of Business.

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Looming “Fiscal Cliff” Speeds Mergers

Small business of-interest and need-to-know.

Excerpt:  With capital gains and dividend tax rates set to rise in 2013 barring congressional action, dealmakers are rushing to close merger and acquisition transactions by year-end. Acquirers, especially those in industries that are rapidly consolidating, say the impending changes to the tax code — the end of some business tax breaks and higher rates on capital gains and dividends — have lit a fire under business owners.

Owners of closely held businesses who would record a large individual gain from a sale, in particular, are eager to sell. And the threat to the U.S. economic outlook from the “fiscal cliff” is adding to the pressure.

Read full article fiscal cliff capital gains rate sellers Buffalo Wild Wings Airgas Waste Connections.  From CFO.com

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Filed under Small Business, Taxes & Audit

Risk Modelling: Is the Response to the New Complexity Really So Simple? – Knowledge@Australian School of Business

Risk management today.  Why it is different and what is needed to manage today.  Good read.

Excerpt:  Rapidly changing global conditions have been particularly disruptive to the more precise risk management methodologies that enjoyed the high watermark of confidence levels during the period of macro-stability after World War II. At that time, extraordinarily stable conditions provided an environment that lent itself to mathematical applications and the ability to forecast with higher degrees of confidence, notes Andries Terblanche, a professor at the Australian School of Business and chair of financial services at Big Four consulting group, KPMG.

Of course, the world has changed. Significant among the financial and economic changes have been a big increase in the number of floating currencies, a significant growth in the use of derivatives, higher levels of public debt and an increase in global capital flows, aided by new technology.

Read full article via Risk Modelling: Is the Response to the New Complexity Really So Simple? – Knowledge@Australian School of Business.

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Filed under Leadership, Operations & Innovation

12 Most Important Facts Regarding Your Credit Score

What every small business owner needs to know.  Your credit matters and perhaps in ways you were not aware of ….

Excerpt:  Today’s economic climate has every creditor reviewing applicant files with a fine tooth comb. Reviewing and understanding what’s included in your credit file on a yearly basis should become an essential routine. I hope you find these tips I have learned over the years useful.

Read full article via 12 Most Important Facts Regarding Your Credit Score – 12Most.

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Deloitte | Econometric Analysis | Scenario-Based Planning

Download the paper that helps you with important what-if scenarios for your small business.

Excerpt:  Suppose your boss, the Chief Financial Officer or Chief Strategy Officer, asked you how your company’s revenue would be impacted by a changing economic climate in coming years. How would you quantify the potential impact of specific events or variables?

Scenario-based planning is a tool designed to assist the development of strategies for operating in any of several contrasting business and economic environments that could lie ahead.

Download the attachment above to learn how to use statistical techniques of econometric modeling and multiple regression to project financial performance within scenario-based planning.

Download paper here via Deloitte | Econometric analysis | Scenario-based planning | CFO Center | Strategic analytics.

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Economics and the Brain: How People Really Make Decisions in Turbulent Times

An article in one of my favorite topics, “why we are who we are” and “why we do what we do”   🙂   This article reviews findings of how we make decisions  —  the influences, etc.  Leadership and management training.

Excerpt:  “Whereas psychologists tend to view humans as fallible and sometime even self-destructive, economists tend to view people as efficient maximisers of self-interest who make mistakes only when imperfectly informed about the consequences of their actions.”

This view of humans as completely rational – and the market as eminently efficient – is relatively recent. In 1922, in the Journal of Political Economy, Rexford G. Tugwell, said (to paraphrase) that a mind evolved to function best in “the exhilarations and the fatigues of the hunt, the primitive warfare and in the precarious life of nomadism”, had been strangely and quickly transported into a different milieu, without much time to modify the equipment of the old life.

Read full article via Economics and the Brain: How People Really Make Decisions in Turbulent Times | Neuroscience News.

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Filed under Leadership, Operations & Innovation, Management

Open India: Considerations for Retailers – HBR

Small business need-to-know and news-to-watch  —  global business.

Excerpt:  India has rapidly emerged as one of the largest economies in the world, but it is also one of the most complex. Now, led by Prime Minister Manmohan Singh’s insistence that “good economics is good politics,” India has announced a new wave of reforms, seen by many as the most significant step since the ground-breaking “opening of India” in July 1991. The reforms include changes to retail, airlines, broadcast and power sectors.

Read full article via Open India: Considerations for Retailers – Vijay Govindarajan, Javed Matin, and Christian Sarkar – Harvard Business Review.

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Equity, Debt or Assets? A New Lens for Looking at Raising Capital – Knowledge@Australian School of Business

Cash management good read.  Alternatives to weigh that may have long term ramifications.

Excerpt:  “Financing Through Asset Sales” probes the choice to issue equity or sell non-core assets such as a division or a plant. As a means of raising cash, under what conditions are asset sales or equity issues likely to add more value? Edmans, a Wharton finance professor and a faculty research fellow at the National Bureau of Economic Research, and Mann, a Wharton PhD candidate, have an answer.

They propose three forces behind decisions to sell equity or sell non-core assets, which they call the camouflage, correlation and certainty effects.

Read full article via Equity, Debt or Assets? A New Lens for Looking at Raising Capital – Knowledge@Australian School of Business.

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Revenue is Not Coming Back | Change Management Strategy | PwC

Recommended for all small business owners  — takeaways and how-to.

Excerpt:  The current economic environment in the United States and around the world is challenging for banks and business alike. Given the macroeconomic forecast, financial institutions can no longer grow their way out of their problems. Business areas that traditionally provided revenue growth for financial institutions are not growing sufficiently to overcome new capital and regulatory requirements, and activity levels of several major financial sector businesses are flat or declining.

Increased regulation and capital requirements along with limited revenue leverage will require business-model changes boost profitability. Leading institutions are implementing continuous expense management programs to extract value from business-model changes by focusing on efficiency through each key step in the budgeting and reporting systems.

Watch video and download report via Continuous expense management for financial institutions: PwC.

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Filed under Budgeting, Forecasting & Planning, Leadership, Operations & Innovation, Management, Small Business

Investing in Good Governance — The Harvard Law School Forum on Corporate Governance

Small business of-interest and need-to-know.

Excerpt:  The New York Times published today my column Investing in Good Governance. The column discusses a study by Alma Cohen, Charles Wang, and myself about the correlation between governance and returns. The study, Learning and the Disappearing Association between Governance and Returns, forthcoming in the Journal of Financial Economics, is available here.

Earlier research has shown that, during the 1990s, trading strategies based on the Governance Index (Gompers, Ishii, Metrick (2003)) and the Entrenchment Index (Bebchuk, Cohen, and Ferrell (2009)) would have produced abnormally high returns in the 1990s. Our study shows that the correlation between governance and stock returns in the 1990s did not subsequently persist. The study also provides evidence that both the correlation in the 1990s and its subsequent disappearance were due to market participants’ gradually learning to appreciate the difference between firms scoring well and poorly on the governance indices. Finally, the study establishes that, although the governance indexes could no longer generate abnormal returns in the 2000s, their negative association with operating performance and firm value persists. After discussing these findings, the DealBook column concludes with a discussion of whether there are any ways left for investors to make money from governance.

The DealBook column is available here.

Read full article via Investing in Good Governance — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Social Media’s Productivity Payoff – HBR

As the world rushed into social media for business, there were studies being developed to ascertain benefit, business use and best practices.  I don’t think there is any argument still that time drain is valid, but more and more brain or business drain is being proven otherwise.

Excerpt:  How’s this for counter-intuitive? Social technologies — the software and services that make it possible to show off your vacation pictures to all your Facebook friends and follow your favorite team tweet by tweet — are not just giant time sinks that keep your employees from getting their work done. On the contrary, they may become the most powerful tools yet developed to raise the productivity of high-skill knowledge workers — the kind of workers who help drive innovation and growth, and who are going to be in increasingly short supply.

This is one of the surprising takeaways from our recent research on the economic impact of social technologies

Read full article via Social Media’s Productivity Payoff – James Manyika, Michael Chui, and Hugo Sarrazin – Harvard Business Review.

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Filed under Marketing, Branding, Sales, Advertising, eCommerce & Social Media

The Last Days of Pushing on a String – HBR

Small business of-interest and news-to-watch.  The article is an economics lesson —  probability of where this is going.   Good read.

Excerpt:  Einstein is credited with the observation that doing the same thing over and over while expecting different results each time is the definition of madness. Look for Bernanke and Draghi to stop the madness soon.

by Mark Blyth
Mark Blyth is a faculty fellow at Brown University’s Watson Institute for International Studies, professor of international political economy in Brown’s Political Science Department, and director of the University’s undergraduate programs in development studies and international relations.

Read full article via The Last Days of Pushing on a String – Mark Blyth – Harvard Business Review.

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Five mistakes companies make in FX risk management

Good basics for CFO of today …..particularly in a global business…….cash management

Excerpt……..In order to compete in an ever-expanding global market, CFOs need to be aware of changes to monetary policy and foreign exchange rate fluctuations. There have been a lot of developments in this area recently. With countries around the world beginning to recover from the economic turmoil of the last half-decade, it’s more important now than ever before that financial executives mitigate their risks on the international stage.

Read full article……via Five mistakes companies make in FX risk management | Proformative.

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Filed under Cash Management, Leadership, Operations & Innovation

Transformational Entrepreneurship: Where Technology Meets Societal Impact – HBR

This article is a good read…..informational and a bit disturbing all at the same time. 

Excerpt……..The slow decline of industrial manufacturing in developed nations and recent failures of financial capitalism across the globe have sent us searching for a new model of economic growth. I see the two movements of Technology Entrepreneurship and Social Entrepreneurship beginning to converge into a promising solution.

Read full article……via Transformational Entrepreneurship: Where Technology Meets Societal Impact – Max Marmer – Harvard Business Review.

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Tone-Deaf Boards in Sound-Proof Rooms – HBR

Another good read for small business governance and the C-Suite from HBR today.

Excerpt………CEOs and other members of the C-suite deserve fair compensation for running companies, particularly in demanding economic times. Yet, these difficult economic times call for judicious decisions about compensation packages that are more clearly linked to performance and demonstrate that board members and the CEO are not tone-deaf in a soundproof room.

Read full article……via Tone-Deaf Boards in Sound-Proof Rooms – Lucy P. Marcus – Harvard Business Review.

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Filed under Leadership, Operations & Innovation, Small Business