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COMMENTS PRINT
HARDBOUND
The book impresses upon us the lesson that even the strongest among us can be vulnerable from a different perspective.
Aditya Malik
HARDBOUND
Outlook Business

Big Boss

Does a firm’s management affect its borrowing costs? If research by Yihui Pan, Tracy Yue Wang and Michael S Weisbach is to be believed, the effects are quite substantiated. It has been noted that the greater the uncertainty surrounding the top executives at a firm, the higher the interest rates get. This pattern persists even when there is a change in the management, when the successor is not an heir to the business or when the lender and top management of the firm have no prior relationship. However, although management risk increases the likelihood of default and therefore the promised interest rates on debt, it should not affect expected returns on debt (or equity) or firms’ capital budgeting decisions if investors are well-diversified. This paper proves that managerial policy is an important a factor in lending, as predictability reduces the cost of borrowing.

Title: Does Uncertainty about Management Affect Firms’ Costs of Borrowing?

Source: National Bureau of Economic Research


Disrupt The Disruptor

In a market where start-ups crop up on a daily basis, researcher Elizabeth Robles found that disruptive strategies can help companies get to the top. Established companies that have succeeded in the past have done so by developing radically different business models and using the same logic their disruptor used on them. She takes the example of Gustazos, a social media company that disrupted the group buying daily deals market in Puerto Rico through newer, simpler divisions and technology. The most important rule to succeed, she says, is to break the rules of the game in each market.

Title: How to identify disruptive new businesses

Source: Social Science Research Network

COMMENTS PRINT
HARDBOUND
The book impresses upon us the lesson that even the strongest among us can be vulnerable from a different perspective.
Aditya Malik
HARDBOUND
Outlook Business
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