Why do firms hold so much cash?

Why do U.S. firms hold so much more cash than they used to? by Bates, Kahle, and Stulz.Short version: firms are holding more cash now than they used to. This runs counter to theory that would suggest that as transaction costs decrease and hedging opportunities increase, cash holdings would decrease. Interestingly the increased cash holding does not appear related to agency cost

SocGen Had Been Warned About Kerviel

Yeah this is getting interesting!!!SocGen Had Been Warned About Kerviel: "Prosecutor Jean-Claude Marin, who announced the filing of attempted-fraud charges against Kerviel, told reporters the derivatives exchange Eurex had alerted SocGen last November about questionable trades by Kerviel. Separately, several of the bank's internal control units also had flagged some of his trades in recent months

More from Davos

I admit everything on this list may not be seen as traditional finance, but if you do not find at least 80% of the sessions beyond interesting, you might want to get your heart checked! ;)It is is the video of almost every session!!! wow!!!!!For instance, here is the private equity session mentioned a few days ago.

What’s $34 Billion on Wall Street? - New York Times

Tails I win, heads I don't lose? That seems to be the main point of the NY Times piece that looks at what has happened to some of the CEOs whose firms have most millions, err billions. A look in:What’s $34 Billion on Wall Street? - New York TimesUNDER the stewardship of Dow Kim and Thomas G. Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34

Study Says Private Equity Isn’t Big Job Killer - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Study Says Private Equity Isn’t Big Job Killer - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times: "In perhaps the most extensive study conducted on the issue, the World Economic Forum plans to announce on Friday the results of yearlong examination of 5,000 private equity transactions from 1980 through 2005.The answer? Well, the study found that private equity does

Kerviel joins ranks of master rogue traders

Kerviel joins ranks of master rogue traders: "In being identified as the lone wolf behind French investment bank Société Générale's staggering $7.1-billion loss Thursday, Jérôme Kerviel joined the ranks of a rare and elite handful of rogue traders whose audacious transactions have single-handedly brought some of the world's financial powerhouses to their knees.This notorious company includes Nick

Tom Brady and Efficient Capital Markets - - CFO.com

LOL...Rodney and I were interviewed for this one. Check it out. Tom Brady and Efficient Capital Markets - - CFO.com: "A potential injury to the seemingly unstoppable New England quarterback had odds makers reworking the Super Bowl point spread, knocking two points off of the original calculation and making the Patriots a 12-point favorite over the New York Giants.The Brady boot incident is an

More on this one to follow!

Societe Generale uncovers massive fraud: ""French bank Societe Generale said Thursday it has uncovered a 4.9 billion euro ($7.14 billion) fraud -- one of history's biggest -- by a single futures trader whose scheme of fictitious transactions was discovered as stock markets began to stumble in recent days.CEO Daniel Bouton said the trader's motivations were 'irrational,' netting the trader no

Importance of compounding from Jonathan Clements

I have never met Jonathan Clements, but he is definitetly one of my favorite business writers. When I was at Penn State and using a class packet, I bet over 50% of the packet was written by him. Here is tells of teh importance of compounding. From Yahoo (and WSJ):"People think in terms of simple interest, not compound interest. For instance, if our investments clock 8% a year for 10 years, we

Fed Cuts Rate 0.75% and Stocks Swing - New York Times

SURPRISE!! I confess I thought I was still asleep when I heard this news on the radio this morning. And then I thought the announcer had misspoken. But no, it was 75 basis points. Wow.Fed Cuts Rate 0.75% and Stocks Swing - New York Times: "The Fed’s policy-making group, known as the Federal Open Market Committee, lowered its target for the federal funds rate, which regulates overnight loans

SI.com - Tennis - Ivanovic to play Venus, again, in Slam - Monday January 21, 2008 2:14AM

Possibly my new favorite woman's tennis player:SI.com - Tennis - Ivanovic to play Venus, again, in Slam - Monday January 21, 2008 2:14AM: "She studies finance via university correspondence courses., reads Greek mythology and is just eccentric enough to sidestep lines on the tennis court and eat every night at the same restaurant in some cities."

Learn the ABCs of ETFs - ETF - Strategy - IVV

A pretty useful (and easy to read) article on ETFs, definitely worth reading for introductory students!Learn the ABCs of ETFs - ETF - Strategy - IVV: "Exchange-traded funds, or ETFs, are index funds that trade like stocks on major stock exchanges. They were introduced to U.S. markets in 1994 and now have a market value of $150 billion. Although that's still a relatively small number compared with

NPR : Resolving to Retire with a Nest Egg

NPR : Resolving to Retire with a Nest Egg: "The money you save in your 20s and 30s will give you a tremendous return compared with what you scramble to save when retirement is just around the corner. Steve Mariotti, the founder and president of the National Foundation for Teaching Entrepreneurship, sees the mathematical forces at work as key — not just for retirement but for teaching people to

You Should Worry About Ambac - Forbes.com

Global warming, bird flu, and terrorism not enough for you? Here is something else to worry about! Bond insurers may be facing downgrades. How big of worry? It is easy enough to see a downgrade, but a default is significantly less likely (albeit possible). And if it were to happen, the mere size of their positions (true they are measured in notional principles) is staggering. A look in from

Shareholders vs. Bondholders

I start most of my classes off discussing the Nexus of Contracts and how the different stakeholder groups have different incentives which lead to fights and conflicts. This may be the most celar-cut example I have seen in a while.Which Buyout Firms Were Quickest to Cash Out? - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times: "Most shareholders like dividends —

Study: $90 wine tastes better than the same wine at $10 | Underexposed - CNET News.com

Well, score another one for behavioral finance. Classic economics would suggest that the price should not influence taste. But in a wierd twist (possibly a signaling story?) researchers now say that people sense (literally) that the tasts is better for more expensive wines eve when the wine is identical.Study: $90 wine tastes better than the same wine at $10 | Underexposed - CNET News.com: "...

Citis Dividend Bears Have Their Day - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

I would imagine anyone who cares probably has heard the news today that Citi cut its dividend. In line with previous research findings, Citi did fall on the news of the cut (currently down about 7.5%). However, what is more interested (and telling) is looking back to last fall when this cut was predicted by some (example Meredith Whitney, the CIBC analyst who reportedly received death threats

Magellan Fund, Closed in ’97, Will Reopen - New York Times

Magellan Fund, Closed in ’97, Will Reopen - New York Times: "For the first time in a decade, new investors will be able to put money into a mutual fund that helped fuel Fidelity Investments’ rapid growth in the 1980s and 1990s, but has recently lost many retirement-age investors as they withdraw cash.Fidelity said on Monday that it would reopen its $44.8 billion Magellan Fund to new investors"

Trading in Deal Stocks Triggers Look at Banks - WSJ.com

Trading in Deal Stocks Triggers Look at Banks - WSJ.com: "In the paper, 'The Dark Role of Investment Banks in the Market for Corporate Control,' three European finance professors examined more than 1,600 U.S. merger deals between 1984 and 2003, along with quarterly 13F filings of institutional stock ownership. They found that during the last quarter before a merger announcement, large investment

Prediction markets are not perfect

Primary results prove prediction markets flawed -- chicagotribune.com: "Political pollsters weren't the only ones red-faced after the New Hampshire Democratic primary Tuesday.Online prediction markets, which enable individuals to bet on the outcome of dozens of events, also had become exceedingly enthusiastic about Sen. Barack Obama after he beat Sen. Hillary Clinton in the Iowa Democratic

I am back!

I'm back from Mississippi and can start blogging again. (See BonaResponds.org for info on the trip).If you have emailed me in the past two weeks and I did not get back to you, that is why. Give me a few days and then if I have not emailed you, just ask again :)It promises to be a busy semester as I am teaching an overload (5 classes) and we are still trying to hire someone. I think I also have