- FINANCIAL ANALYSIS
- FINANCIAL MARKET
- FINANCIAL MANAGEMENT
- FINANCIAL LAW
- CAPEX CHOICE
- SHAREHOLDER STRUCTURE
- LBO AND PRIVATE EQUITY
- BANK AND INSURANCE
- CORPORATE STRUCTURE
- GREEN AND SUSTAINABLE FINANCE
1. Figures relied on by financial analysts when analysing the accounts of companies that publish their results in accordance with two or more different accounting standards.
When a company publishes its results in line with different accounting standards (US GAAP, IAS, GAAP, national accounting standards, etc.), there may be discrepancies in the figures for net earnings, shareholders' equity, EBIT, or even net debt. Which figures should analysts rely on and why? What are the factors that determine this choice (stock market on which company is listed, nationality of analyst or bank he/she works for, etc.)
2. What is the difference between EBIT and operating income
The emphasis analysts place on operations has driven companies to stretch the definition of EBIT and to develop the concept of operating income, which is often quite different from EBIT. The purpose of this study is to determine how popular operating income is today, and to identify the factors that distinguish it from EBIT. See chapter 9 of the Vernimmen.
3. How does a company survive its EBITDA being divided by 5 in one year? The example of Arcelor Mittal in 2009.
In 2008, Arcelor Mittal, the leading European steelmaker, recorded EBITDA of $24.5bn and only $4.8bn in 2009. In 2014, EBITDA was only $7bn, i.e. less than a third of the figure for 2008.
How does a company survive in a cyclical with high fixed costs?
The aim of this exercise is to analyse the measures taken by Arcelor Mittal from a financial and operational point of view before and during the 2009 crisis that enabled it to survive its EBITDA being divided by 5 and its share price by 6.
4. Why do corporate finance researchers continue to use return on assets (ROAs) instead of Return On Capital Employed (ROCE) to measure corporate profitability, while investors and analysts have been using ROCE for decades ?
5. Deferred tax assets and liabilities
Start by providing an overview of accounting treatments under IAS and US GAAP, then look at how these standards should be applied and how they are applied by companies/analysts/investors carrying out a financial analysis for the purposes of a valuation or solvency study. See chapter 7 of the Vernimmen.
6. Switch to IAS-IFRS - the challenge presented by goodwill
As the months go by, European listed companies are discovering the upheavals involved in implementing IAS/IFRS from the FY 2005. The controversy surrounding IAS 39 (recognising and measuring financial instruments) has been a case of missing the wood for the trees - although there is no doubt that this standard is likely to have a major impact on companies in the financial sector, other IAS/IFRS standards are likely to impact just as much on the balance sheets of large industrial or retail groups.
For example there is IAS 22 (business combinations) and IAS 36 (impairment of assets) which will completely overhaul the way goodwill is treated - depreciation is replaced with the impairment test, which means a strict definition of a model for valuing assets acquired, which will make it possible to monitor the assets over several years. Both standards issue a series of recommendations, for the most part indicative, certain aspects of which may be somewhat baffling to valuation experts, but which most importantly are likely to usher in significant changes in the relationship between a company and its auditors.
The aim of this study is to analyse the scope of the methodology recommended by these two standards in terms of valuation, and to measure, on the basis of a field study, the implications of the imminent introduction thereof for the various actors involved (finance and accounts department within companies, auditors, market authorities, financial analysts, etc.) and their relationships with each other. See chapter 6 of the Vernimmen.
7. Other comprehensive income
Created as a result of the IASB's desire to revalue certain items on the balance sheet, without actually creating a result to be entered on the income statement, OCIs are a sort of accounting UFO.
The aim of this thesis, other than to make a census of OCIs and to undertand their accounting logic, is to reflect on whether the financial analyst can, in the end, extract relevant information from them, or whether they are a formless jumble of ideas, with no hope of redemption. See chapter 7 of the Vernimmen.
8. The experience of IFRS 16 by the finance departments
Major reform of the IFRS standards which implies treating operating leases as financial leases, how did the finance departments of listed companies experience this reform, in terms of workload, the resulting changes in their lease/holding policy and communication to the market. Research work through interviews with financial directors to whom access will be given. For 2 or 3 students.
9. Environmental P&L
What is that? The gadget of a spoiled company (Kering, parent company of Gucci and Yves Saint Laurent) or the future of accounting in a world where the energy transition has become an emergency? Access to Kering's financial director will be provided. Reflection work for a student.
10. The end of the world
Likelihood and implications of a clearing-house default.
11. Techniques for placing bonds on the euro-zone market
The techniques used for placing bonds have changed a great deal over the past five years, and are now similar to techniques used for placing shares - book building, road shows, etc. The purpose of this thesis is to provide an overview of the current situation, and explain the reasons behind recent changes. See chapter 25 of the Vernimmen.
13. The development of electronic communication networks (ECNs) in the USA
For a long time, the NYSE and the Nasdaq have dominated the US stock markets. This dominance is now being challenged by new electronic communication networks (ECNs) such as Archepelago, POSIT or Instinet. The first aim of this thesis would be to describe these systems. You should draw up a list of the types of services that they offer and describe how exchanges on these systems are organised. The thesis could also look at the factors behind the success of ECNs, compared with the more traditional stock exchanges, especially the Nasdaq.
14. Credit enhancement for securitization transactions
In a situation where securitization is developing rapidly across Europe, more and more players are taking an active interest in credit enhancement. Credit enhancement companies provide financial guarantees to issuers, which means that they are given a higher rating by the rating agencies and are thus able to take advantage of lower financing costs.
The purpose of this study is to clarify situations in which credit enhancement is used (different types of securitzation, use of credit derivatives) and identify the French or international sectors of this market. What is the role played by rating agencies? What practical steps are involved in setting up a credit enhancing solution?
15. Real options bubbles
An analysis of how the theory of real options was popularised at the time of the Internet bubble in 2000, in order to justify valuation levels that it was no longer possible to produce using standard valuation methods.
After having been used to justify the unjustifiable, do real options still have any credibility? See chapter 30 of the Vernimmen.
16. Portfolio management topics
How can macro economic variables be used to explain fluctuations in the market premium over time?
How can macro economic variables be used to explain fluctuations in the liquidity premium over time?
Can one outperform the market by investing long-term in small and medium stocks, which is where market efficiency is the most reduced?
Is the risk-free rate used to determine the rate of return required by investors over the short-, medium- or long-term?
What is the optimum size of a diversified portfolio in terms of number of products and amount invested?
Is their a high or low rotation of assets on portfolios which outperform the market over a given period.
Do the managers of portfolios which outperform the market over a given period and who change companies, generally to set up on their own, continue to outperform the market?
In other words, do talented individuals within an institution continue to prosper outside this institution?
17. Finance in Africa topics
How can the savings of an African country be channelled into the equity capital of local companies?
What are the requirements of African companies in terms of hedging against foreign exchange losses?
The African financial economy - a single regional market or a juxtaposition of local markets?
What are the requirements of African companies in terms of hedging against fluctuations in interest rates?
Should African companies make a rapid shift to IAS, or should they stick with their existing accounting standards?
Analysis of the financial structure of African companies - debt/equity, liquidity, solvency
How do you set up a zero balance account in Africa?
Impact of a change in the euro/CFA franc parity on the cash management of an African group?
What investment instruments are available to the African company treasurer?
18. Hybrid products topics
Is it possible to place hybrid products (convertible bonds, mandatory convertible bonds, etc.) other than with hedge funds which are not interested in the product itself but are attracted only by the possibility of arbitrage as their issue price is low (in other words, they are undervalued).
See chapter 24 of the Vernimmen.
Do hybrid products (convertible bonds, mandatory convertible bonds, etc.) increase the volatility of the shares backing them?
See chapter 24 of the Vernimmen.
Accounting for hybrid securities under the new IAS standards - not the same as current practice under European standards and US GAAP.
The cost of capital of hybrid securities - what does the issue of hybrid securities cost the company? cost of equity, cost of debt or other cost?
What is the impact of the issue of hybrid securities on the share price?
Is there a special class of investors to whom hybrid securities are sold? : Hedge funds, retail investors, specialised funds etc.?
Techniques for placing hybrid securities - Technique for placing shares? Technique for placing debt? Or specific technique?
19. Stock overhang
Some listed stocks have been affected by overhang, which means a risk of negative impact on valuation as a result of the existence of one or several shareholders, structurally seeking to sell their shares on the market. The purpose of this thesis is to study the phenomena by drawing up a typology of the different situations and attempting to identify the common characteristics and measure the impact on the valuation of the share.
20. Are micro-caps destined to vegetate or will they have to delist?
A number of experts have drawn attention to the fact that micro-caps, those companies that do not offer sufficient liquidity to institutional investors and are not really followed by financial analysts, are destined to vegetate or to delist. The purpose of this thesis is to analyse this statement in the aim of coming up with recommendations on a financial strategy, either for listed micro-caps or for companies that may be tempted by the idea of an IPO.
21. Inflation-linked bonds a summary of experiences in Brazil, the USA and the UK.
In September 1998, the French Treasury issued its first fungible government bond that was indexed to inflation, known as the OATi. This new financial instrument is likely to become the benchmark long-term risk-free asset. The aim of the thesis is to collate information on experiences in other countries where similar instruments already exist, and to draw up a list of advantages and drawbacks for investors and for issuers.
22. Asset allocation and real estate investments
How large a share should real estate assets have in the allocation of assets? What instruments are available for investing in real estate and for managing real estate risk?
23. Regulation and economic model for sell-side analysts
This topic covers the consequences of a regulation that the FSA has announced it intends to introduce, that will prevent sell-side analysts from making their research available free of charge. What sort of viable business model for sell-side analysts could result from such regulation?
24. ADRs - success or failure, and why?
Many European companies that went for a cross-listing in New York (ADR = American Depositary Receipts) have found that their exchange volumes in New York are very low, and no longer even cover the fixed costs of listing. Which companies were ADRs a success for and which a failure? Why? See chapter 25 of the Vernimmen.
25. The increase in idiosyncratic risk.
There is evidence for the U.S. that idiosyncratic risk has increased in the stock market. Is this true in Europe as well? Review of the literature on stock market volatility, and application to European data.
26. The stock split puzzle
With a stock split a company entitles its share holders with N>1 new shares for each old share. In other words a stock split increases the number of shares outstanding without increasing the company's capital and without affecting the ownership structure. As the market value of a company is independent from the number of shares outstanding, a stock splits should not affect the distribution of stocks returns. However, several empirical studies find that stock return volatility increases after a stock splits. Is it possible to explain this puzzle ?
27. Comparative analysis of access to liquidity in European and US firms.
The aim of this research is to study to what degree US and European firms have different cash access strategies and what the causes and consequences thereof are.The commercial paper market in the USA, the equivalent to the treasury bills market in Europe, is much more developed, both in volume and in depth, than in Europe where the role of banks is more important in the short-term financing of firms than it is in the USA.
An analysis of the behaviour of firms on both sides of the Atlantic since 2007 will provide much food for thought.
28. Who still uses the Black & Scholes formula?
The Black & Scholes formula assumes that prices of underlying assets follow a normal law.
However, both theory (challenge of normal law by power laws highlighted by Benoit Mandelbrot) and practice (2007 and 2008 saw daily variations in the share price that normal law assumed would only happen once every million years; the existience of the volatility smile) show that the Black & Scholes formula has serious credibility problems.
The aim of this thesis is to determine who still uses it, who has modified its margin as a sort of makeshift repair, and who is doing something completely different, using power laws, for example.
This research work is based on a review of the litterature covering option valuation models and on interviews with banking and hedge fund professionals. See chapter 23 of the Vernimmen.
29. How high should the discount be set for a capital increase with preferential subscription rights?
Although capital increases with preferential subscription rights are among the most common operations on the market, very few financial actors fully understand the financial implications thereof. The amount of the discount is usually the subject of lively debate when the terms and conditions of the operation are set. Regardless of the objective criteria underlying the setting of the discount, what are the false criteria that persist in practice? This thesis also includes interviews with recent issuers and with the ECM teams of investment banks. See chapter 25 of the Vernimmen.
30. How do the crisis and the post crisis fit behavioural finance?
It seems that the crisis has a lot to do with behavioural biases and so called herd behaviour. A review of behavioural finance topics would be followed by a critical assessment of how it applies to the crisis and the post crisis.
31. What is systemic risk in the end and how to measure it?
Regulators want to control systemic risk, whether there is no measure of systemic risk. Now, they look carefully at macro-prudential regulations as opposed to regulations applying to each specific firm for addressing this uncontrolled issue. Re-defining systemic risk how it should be measured, and monitored today are major challenging priorities.
32. Hedge funds during the financial crisis
Most hedge funds performed poorly during the crisis and lost customers. The student will document these facts. Then, s/he will look for funds that did better than the rest of the hedge fund industry and try to identify the determinants (investment strategies, lockup periods, etc.) of performance before, and during, the crisis.
33. Herding and rationality
To what extent is herding behaviour compatible with agent's rationality? What implications on price dynamics and crashes? What institutional features of financial markets facilitate the appearance and persistence of herding? See chapter 15 of the Vernimmen.
34. CAC-40 as an Portfolio of International Stocks
Many in the popular press in France were outraged at the growth of CAC-40 stock market index when the French economy was doing poorly. One explanation for this phenomenon is that CAC-40 stocks are large corporations with significant international presence. This thesis will try to discern empirically the portion of the CAC-40 Index returns that are linked with the stock market indexes of the countries in which CAC-40 companies have significant investments and get a sense of the portion of the CAC-40 that can be linked with the French economy.
35. Does a Hong Kong listing lead to higher prices than a listing in Europe?
Rusal, the Russian group has elected to list its shares on the Hong Kong Stock Exchange, as has L'Occitane en Provence. Other groups are following this trend. Is this because their activities are mainly in South East Asia, or is it because they want to get the best P/E ratio or the highest EBIT multiple like those of the HKSE and independently of their own growth prospects? In other words, are investors naive and do they attribute HK P/E ratios to any group that lists on the HKSE, regardless of whether its activity is growing at the same pace as that of companies in the region?
36. Overview of investment fund structures
There is a very wide variety of different structures for investment funds. There are those that are valued from day to day from which investors can exit by giving 24 hours notice, such as unit trusts, those that require 8 days notice, such as mutual funds, those where the notice periods are longer, ranging from a few months to a few quarters, and those that cannot be cashed in at all for 5 to 7 years, or even longer. Liquidity is naturally a factor to be considered when ranking and choosing a structure. But is it the only one? What are the restrictions? What other factors play a role in chosing one investment fund structure over another?
37. High Frequency Trading: share price manipulation or liquidity improvement?
It is estimated that high frequency trades account for 40 to 50% of orders placed on the stock market. Some trades are made, only to be cancelled a fraction of a second later.
What is the purpose of such trades?
Improving liquidity on markets and narrowing the gap between the offer price and the asking price, or do they create price gaps that are disconnected from all economic reality which they subsequently take advantage of, either through gaining access to the order book before everyone else, or by enjoying private advantages (installation of algorithms as close as possible to the stock exchanges' IT processing centres?
38. Sovereign Default
There has been a lot of public discussion lately around the topic of sovereign default, which is often described as the absolute worse scenario. This topic aims at clarifying the issue: how often do we observe sovereign default, what are the consequences for the defaulting countries (macroeconomics, future access to the markets, spreads...), do countries default too much or too little?
A possible starting point to the research is: The Elusive Costs of Sovereign Defaults, Eduardo Levy Yeyati, Ugo Panizza, Journal of Development Economics 94 (2011) 95105
39. Latest Developments in the Derivatives World: Volatility Derivatives, Weather Derivatives, Real-Estate Derivatives, Derivatives on Dividends, Biodiversity Derivatives, etc.
This project would consist in focusing on one of the latest families of derivatives securities and discuss its main benefits in terms of risk-sharing among economic agents, as well as the pricing techniques used in practice.
40. How to properly compute betas?
A pillar of the CAPM, the beta coefficient is not easily calculated, or rather since the founding fathers of portfolio theory carefully avoided specifying how to calculate it, practitioners have developed a sizeable number of calculation methods: daily, weekly or monthly share prices; over one, two, three, five years, with or without a minimum R2 filter, etc.
The aim of this thesis is to draw up a list of practices and to analyse and criticise them in order to obtain operational recommendations.
For more, see chapters 18 and 19 of the Vernimmen.
41. Write a literature review on the performance of SRI funds compared to non SRI funds and the market. From a financial point of view, does the investment in an SRI fund an efficient way to help the planet and your financial performance?
42. Does the share price rise immediately after the payment of a dividend?
For many people, shareholders get rich by receiving dividends which are viewed as similar to wages for workers. The reality is quite different, since the share price mechanically falls by the amount of the dividend, so there is no enrichment, which is quite logical. But is there a rapid recovery of the share price after the dividend payment to the level it was at before the dividend payment? Logically not. The purpose of this research is to demonstrate this by a statistical study of the behavior of post-dividend payment share price movements. For 2 or 3 students.
43. The role and function of cornerstone and anchor investors who are asked to become shareholder of an unlisted company just at the time of, or before, its listing on the stock exchange. This is developing a lot and poses problems of price and liquidity, since fewer shares are sold as a result, and of governance.
44. Bond and equity correlation of returns:
How the change of inflation regime has dramatically changed this correlation sign and dynamic, theoretical / academic assessment of the correlation (Shiller 1993 on co-movement of assets) and case study
45. Managing pension funds: lessons from the UK LDI crisis
The UK pension market was recently in the eye of the storm as LDI-related margin calls led to a massive sell-off of Gilts and prompted the intervention of the Bank of England to support the currency and reestablish order to the domestic bond market.
The purpose of the thesis will be to take one step back, determine the appropriateness and performance of LDI investment strategies and assess their future potential.
The thesis will cover:
- The theoretical foundations of LDI for pension institutions and insurance companies
- The mechanics of LDI and implied leverage related to the use of derivative strategies
- A comparative analysis of LDI in the key pension markets (US, UK, Australia, NL, etc.)
- Lessons learned for investors, incl. liquidity management
- The future of LDI and assimilated investment strategies
The thesis will rely on:
- A review of the theoretical literature on liability-hedging and LDI
- A review of recent publications on the topic in the offing of the UK crisis
- Interviews with market practitioners (investment consultants, finance professors,
pension funds and asset managers)
46. Should asset managers be regulated?
There are more and more calls for regulators to more closely monitor the activities of the asset management industry:
- Since the GFC, the so-called shadow banking sector has grown significantly in the US and Europe, and this escapes the traditional oversight of central banks;
- Passive managers have become huge and therefore control an ever-increasing share of market capitalization with procyclicality consequences;
- Asset managers are spearheading the private market democratization wave with potential implications for retail investors;
Should asset managers qualify as systemically important financial institution?
The thesis will assess the pros and cons of a tighter regulation of asset management companies.
- What is the purpose of financial regulation? What were the changes introduced in the wake of the GFC?
- How to take stock of the shadow banking sector?
- What are the other drivers calling for more regulation in the asset management industry?
- What activities should be more regulated? And why?
- What would be the implications for the industry?
This thesis will rely on:
- A review of literature covering financial regulations and the shadow banking sector
- An analysis of the position papers of various official institutions, lobby groups, NGOs
and companies related to this important questions
- Discussions with industry and regulatory body representatives
The team will have to form their own opinion on this topic.
47. Limited Attention and Information Frictions
According to the Efficient Market Hypothesis (EMH), stocks prices should reflect new information instantaneously. Yet, the literature has uncovered instances of both underreaction and overreaction to news. The post-earnings announcement driftâthe tendency for stock prices to drift in the direction of the earnings newsâis arguably the best-known departure from the EMH and has often been explained as a result of limited attention by market participants. The student will summarize the literature in this field and conduct a related empirical analysis. For instance, the student could test whether investors respond to earnings announcements even though the announced earnings were already anticipated by the market. Another idea would be to test whether investors perhaps overreact to one-time profit effects (extra-ordinary income) by not realizing that this profit level is probably not sustainable. [Interesting data on revealed attention choices by people can be gleaned from: https://www.google.com/trends/]
48. Disposition effect
The disposition effect describes investorsâ tendency to sell winning positions too early while holding-on to losing positions for too long (this is irrational and leads to portfolio losses because of return momentum; see below). While the literature has proposed several explanations for this type of behaviour, there is no consensus as to which one is most likely to drive the effect. The student will conduct an empirical test using retail or institutional transaction data to shed light on this question.
49. Debt contract terms.
What determines the simultaneous use of different contract features (yield, covenants, seniority, maturity, collateral,
.). Theory and evidence. See chapter 39 of the Vernimmen.
50. The risk of inflation for the company
Although there are more and more products designed to hedge against inflation, it could be interesting to analyse the impact of an unexpected change in the rate of inflation on a company.
These thesis could be based on a number of clinical studies of companies operating in different sectors. It could also be extended to countries where inflation is more volatile. See chapter 51 of the Vernimmen.
51. Self-insurance by large groups by captive insurance companies
Most large corporations in the industrial and services sectors have an insurance or reinsurance company, called a captive company, as a subsidiary. There are currently over 5,000 captive insurance companies operating worldwide, generally located in tax havens. Captive companies play a key role in managing the risk of large corporations. They make it possible to pool the companyï¿½s internal risks, they facilitate the transfer of information needed to implement a risk prevention strategy, they help amortise insurance price cycles, they provide access to the reinsurance market, they can be used to access tax breaks, etc. The suggested research would involve analysing the different motivations that result in a corporation setting up a captive insurance company and the different types of insurance companies. See chapter 51 of the Vernimmen.
52. How much cash should be kept on the asset side of the balance sheet?
Financial theory, the practice of financial analysis and that of valuation have often held that cash on the balance sheet is a negligeable item from an analysis point of view, especially since it is deducted from the amount of gross bank borrowings and financial debt, to arrive at net bank borrowings and financial debt, which is what the analysis focuses on.
The liquidity crisis of 2008 and the research carried out by Laurent Fresard have led us to the view that this approach is a bit perfunctory. See chapter 33 of the Vernimmen.
The aim of this thesis is to analyse the situation at the main listed companies, looking at their cash retention policies. What preoccupations are behind the amount of cash kept on the balance sheet? Cash as a precautionary measure, cash for transactions, strategic cash for financing a future major transaction, cash blocked in subsidiaries, often abroad, for tax or regulatory reasons, virtual cash as a result of payment periods, etc.
53. How to invest cash when interest rates are zero
In a zero interest rate environment or negative, how treasurers of euro area companies invested their cash and what developments are noteworthy in this area between 2015 and 2021?
54. Zombie companies
They would be kept alive artificially thanks to the side effects of quantitative easing programmes launched before or after the outbreak of the pandemic which, resulting in very low interest rates and readily available financing, would allow them to survive where in a normal environment they would have had to disappear.
The purpose of this research is to verify their existence and characteristics through statistical studies and interviews.
55. How do companies manage country risk?
What instruments are used to measure risk and what sort of hedging techniques are used? See chapter 51 of the Vernimmen.
56. How industrial groups use value at risk (VAR)
VAR was initially developed as a tool by banks, and is increasingly being used by industrial groups such as Tele Denmark. The purpose of this study is to look at how this tool is used in European companies. The study could also be extended to cover cash flow at risk. See chapter 51 of the Vernimmen.
57. Credit Default Swaps: Would the system work better with clearinghouses?
The credit default swaps are simple instruments of which market grew exponentially until the crisis happened. They are traded over the counter, i.e. on a bilateral bias between a firm and another client firm. Because of traceability issues among others (who guarantees whom?) clearinghouses are promoted for trading those instruments. A review of all aspects of this pending important issue would be welcome. See chapter 51 of the Vernimmen.
58. Takeover regulation in Europe
What are the main shared features and the major differences between regulations governing takeovers in the different countries of Europe? On what point is convergence most urgently needed? Will the new draft European directive on takeovers cover all the issues that need to be dealt with? See chapter 45 of the Vernimmen.
59. Merger arbitrage
With hedge funds now firmly on the scene, risk arbitrage when a takeover is announced is an important activity, and can influence the outcome of tender offers. Review this segment of the industry.
60. On the role of means of payment in takeovers and intercorporate asset sales.
In an asset sale and takeovers parties have a choice among different sources to finance the transaction. The acquirer/buyer can pay the target/ seller ï¿½s shareholders with cash, debt, equity etc. What determine the choice of the mean of payment in these deals? Why market react differently at the announcement of equity-based and cash-based transactions? Why market reaction to the mean of payment differ in asset sale and takeovers? See chapter 45 of the Vernimmen.
61. Link between size of control premium and level of debt
Given that the size of the control premium should mainly reflect the level of synergies and given that these are generated by capital employed, we might expect that the larger the share of capital employed financed by debt (which does not benefit from the control premium), and accordingly the smaller the share of equity in the financing of capital employed, the higher the control premium as a percentage is likely to be.
The purpose of this study is to check whether this intuition is borne out by the premiums actually paid for deals involving a control premium.
62. Comparison of M&A fees in the USA and in Europe
Mark Abrahamson, Tim Jenkinson and Howard Jones have shown that in the USA, fees earned by investment banks on IPOs were 3% higher than in Europe. This would appear to be due to less competition in the USA compared with Europe.
Could this also be true for M&A deals?
63. Merger-related divestitures
This topic studies financial links between mergers and divestitures. Mergers frequently go together with asset disposals, prior or after a merger bid. Cash-financed mergers often change the capital structure of companies and create a need to raise cash via asset disposals. Is it possible to determine the importance of financial motives in the link between mergers and divestitures? See chapter 45 of the Vernimmen.
64. Is the recent spate of hostile takeover bids a sign of a stock market rebound?
BHP Billiton on Potash Corp, ACS on Hochtief, Nexans on Draka, etc. are some of the hostile, or at least unsollicited, takeover bids launched in 2010. Is the reappearance of such bids a sign, as has often been the case in the past, of a stock market rebound? See chapter 45 of the Vernimmen.
65. Under which conditions should the accretion of post-acquisition EPS of a company be compared to the accretion of EPS if the same funds were used for a share buyback? Is this practice widespread or confined to a few groups?
See chapter 26 and [CHAPTER 27] of the Vernimmen
66. Bankruptcy regulation in Europe
What are the main shared features and the major differences between the ways bankruptcies are handled in the different countries of Europe? On what point is convergence most urgently needed? See chapter 48 of the Vernimmen.
67. Should a multi-national whose geographic diversification is perfectly balanced, factor in country risk when assessing investment projects?
See chapter 29 of the Vernimmen.
68. Factoring risk in to investment decision-making
This thesis could take a quick look at the standard tools used when choosing an investment (NPV, IRR, payback), on the basis of chapter 30 of the Vernimmen, focussing on real options. Value could be added through a survey of companies that invest (especially venture capital firms) to find out what techniques they use in practice to predict risk.
The employee-shareholders subject is very topical. For companies, giving their employees a share in the capital helps to reduce conflicts of interest between shareholders and employees, is a form of profit sharing which is advantageous from a tax point of view, and sometimes also a way of protecting the company from hostile takeovers (see the role played by Societe Generale employees in response to the unsolicited takeover bid by BNP). The aim of this research is to compare the practices of large French and US companies with regard to employee-shareholding schemes (legal, tax and financial set up, percentage of capital held by employees, acquisition price, discount, company top ups, company loans, use of leverage, minimum performance guarantee, representation of employee-shareholders on board of directors, etc.).See chapter 41 of the Vernimmen.
70. Stakeholder capitalism in Germany
This topic looks at the trend of German companies to opt out from the obligation of codetermination by changing the corporate form from AG to SE. Is this change followed by a change in the supervisory board? And what are the effects?
71. What are the exit strategies for LBO funds?
IPO, trade sale, sale to another LBO fund, new LBO, etc. What changes have we seen over time? See chapter 47 of the Vernimmen.
72. In which sectors is it impossible to carry out an LBO?
Ten years ago, the accepted theory was that the ideal LBO company should have predictable cash flows and should have reached maturity without laying out too much on capital expenditure. Nevertheless, today we see LBOs being carried out on cable companies in Germany (still in deficit with high capex), on an insurance company, and on a Japanese bank. What then are the sectors or the situations where it would still be totally impossible to carry out an LBO. See chapter 47 of the Vernimmen.
73. The LBO market - issue of entry and balance
Are there too many LBO funds on the market? Too much money? What are the differentiation strategies? Competition strategies? Impact on interest rates? Development of alternative investments? Performance? How will the current pressure on the market be resolved? Does the duration of the investment fund always tie in with the needs of the company? See chapter 47 of the Vernimmen.
74. Private Equity and Asset Flippling
Private Equity funds occasionally exit an investment after less than a year, which hardly leaves enough time for introducing standard LBO management recipes, nor to measure the effects thereof. Why, and what are the results?
75. LBOs: build-ups and internationalization of portfolio firms
Build-ups, the expansion of portfolio firms via related acquisitions in an attempt to improve the market position, is a classical PE strategy. Recently, these strategies have focused in particular on acquisitions in markets with high growth potential. The thesis will try to investigate when these strategies lead to internationalization of companies hitherto concentrated on their domestic market.
76. Is listed private equity the future for SMEs listed on the stock market? The low liquidity and hence the low levels of valuation of listed SMEs, except for specific sectors such as biotech or medtech, coupled with increasing accounting and legal constraints may lead SMEs to sell to midcap PE funds, some of which are listed (Wendel, Eurazeo, 3i, Argos, etc.). Is this a fad ? A long term trend ? The future ?
77. How do publicly traded private equity funds fight again the holding discount that most of them support? What explains the different levels of haircuts that we observe? What are the techniques used and their effectiveness to reduce or eradicate them? What evolution over time?
78. Was the success and growing importance of private equity since the 1980s due to the steady decline in interest rates over that period?
79. The value of options whose exercise price is fixed by an independent expert
In many M&A transactions, the parties grant each other call and put options, the exercise price of which is fixed by an independent expert, in line with market prices, when the option is exercised. How can the financial value of these options be calculated, given that the standard formulas value all of them at 0? See chapter 23 of the Vernimmen.
80. The cost of capital of tracking stocks,...
...of preferred shares, and more generally of equity equivalents. Sometimes sold as a cure-all (especially on bullish markets), they often turn out to be a lot more expensive than ordinary equity - take the case of Legrand which had to promise to pay a dividend 60% higher than that paid to its ordinary shareholders so that it could place its preferred shares without voting rights. How can these extra costs be measured and what sort of counterpart should be expected. See chapter 24 of the Vernimmen.
81. Why not use the yield curveï¿½
ï¿½when calculating discounted free cash flows, to integrate a different required rate of return every year, in the same way as the yield curve is used for valuing bonds? Can it be proved that the 10-year rate, often price, is a good approximation of the geometrical average of yield curve rates? See chapter 19 of the Vernimmen.
82. European betas vs national betas
The arrival of the euro has meant that more and more analysts are calculating beta by regression against European indexes in the euro zone (Euro Stoxx) and no longer against national stock exchanges. Has this changed the betas of shares? Why? See chapter 18 of the Vernimmen.
83. Methods used for valuing banks
Banks are very special breed of animal and standard valuation methods (DCF, EBIT multiples) are ill suited to their valuation.
Methods have thus been developed based on the same logic as for industrial companies (discounting of earnings after factoring in a tier one target ratio, regressions, etc.).
The thesis could also analyse these methods (especially through the methodologies described in the notes to tender offers), then suggest ways that these might be developed.
84. Methods used for valuing companies in emerging markets
We encounter very specific problems when valuing companies in emerging markets - discount rates, dealing with runaway inflation, factoring specific risks into the business plan.
The thesis could draw up a list of all of the specific issues and provide suggestions as to how they might be resolved. See chapter 31 of the Vernimmen.
85. The cost of capital of a company which is on the verge of bankruptcy
Is the cost of capital for a company in financial distress, on the verge of bankruptcy, different from that of a company in the same sector that is doing well?
Not from a theoretical point of view, even though there is no consensus on the theory on this point. But in practice, the answer is yes, as can be seen from the interest rates that creditors charge such companies, which can rise to between 15 and 20%, but which do of course factor in the very real risk that the debt may have to be written off.
What should companies experiencing difficulties do when confronted with an investment choice? Should they take the rate resulting from the weighted average cost of capital (which doesn't factor in any specific risk) and the cost of debt which does factor in the specific risk? Or some other rate?
In other words, what is the cost of capital for a company experiencing difficulties equal to? See chapter 29 of the Vernimmen.
86. Value of subcription rights
When there is a capital increase with subscription rights, the subscription rights are detached from the shares and listed on their own line during the course of the capital increase. In theory, there is a simple formula that links their price to the value of the share.
The aim of this thesis is to check whether this relationship has been properly verified and to identify any obstacles that could get in the way of smooth execution - transaction costs, depth of the loans market/borrowing of securities, etc.
For more, see chapter 25 of the Vernimmen.
87. What is the risk free rate?
In practice, it is most often the 10-year government bond rate, which is highly liquid and has a long term to maturity, like the discount flows it is competing against. To all intents and purposes, is it not a very short-term (one day) Treasury Bill?
What are the consequences of switching from one to the other on the value of assets? This study covers a review of the literature, reflections and empirical tests on valuations. See chapter 19 of the Vernimmen.
88. How to analyse carmakers with loan subsidiaries.
Most analysts seem to consider captive finance houses of carmakers (such as PSA or VW) as credit establishments, for which the notion of entreprise value (EV)does not really mean anything. When calculating the EV for the consolidated group, they only include the "industrial" debt, and leave out the debt of the captive finance house.
Nevertheless, it could also be considered as vendor financing, with all of the risks (NPLs, refinancing, etc.) that this implies. In the event of problems, the industrial part will probably be forced to bail out its captive, which should discourage us from "overlooking" the latter's debt.
The aim of this thesis is to reflect on the best way of analysing the financial statements and valuing groups that are structured in this way.
89. Valuation of Apple
How do you explain that an overwhelming majority of analysts give a "buy" recommendation for Apple, the second largest market cap in the USA ($333bn), with a target share price of $500 vs the current trading price of $340, and that, notwithstanding excellent growth prospects (EBIT, EBITDA and free cash flows practically doubling between 2011 and 2015), the share is valued on the basis of a 2011 EBIT multiple of simply 8 times?
What can the market see that the analysts can't? See chapter 31 of the Vernimmen.
Could the market be inefficient?
90. Relationships between the equity risk premium and the risk free rate
Empirical observation shows that when interest rates are low and the equity market risk premium is high, like in 2003, and when interest rates start to rise, the required rate of return on equity does not rise at the same pace because most of the time the equity risk premium falls parallel to the rise in interest rates. In fact, the required rate of return on equity capital is much less volatile than the equity market risk premium and the risk-free interest rate.
The aim of this study is to reflect on relationships between these two parameters on the basis of econometric studies.
91. What level of discount is justified on the sales of start-up shares on the secondary market compared to the price recorded during a capital increase on the primary market taking place at about the same time? Basis of this discount and evolution over time with the examples of unlisted unicorns: Uber, AirBnB, Blablacar, etc. Does this discount evolve over the time and maturity of the start-up?
92. Are shares in European banks valued by the P/E ratio or the PBR?
Everyone knows that Deutsche Bank is valued for 20% of its book equity, but who knows its P/E ratio? Research based on statistical analyses and interviews with financial analysts.
93. Is the rate of growth to perpetuity the risk-free rate?
A classic problem in the calculation of a DCF is whether the growth rate to perpetuity should correspond to the risk-free rate. This is the thesis of some valuation teachers, but is far from corresponding to the practice of valuations.
94. Corporate governance topics
The role and the function of the independent director in a listed company.
Should one person be allowed to hold the positions of CEO and Chairman of the same company?
What are the advantages and drawbacks of changing auditors every five years?
Who should pay auditors and define the scope of their work?
See chapter 43 of the Vernimmen.
95. The impact of corporate governance on company valuation.
Review the literature that describes the impact of different corporate governance features (e.g., ownership structure, take-over protection, etc.) on company performance. Possibly, identify two extremes of corporate governance among European companies and study their stock market valuation. See chapter 43 of the Vernimmen.
96. Is there a correlation between corporate governance at a company and its economic and financial performance?
20 years after major developments in corporate governance (numerous reports on the subject in many countries like the Cadbury or Vienot reports), do academic studies lead to any conclusions on the subject? See chapter 43 of the Vernimmen.
97. Is there a correlation between management remuneration and the economic and financial performance of the company?
In other words, do academic studies show that a potential increased remuneration is motivating and leads to better economic and financial performances?
98. Corporate Governance: employee-owned companies in Europe
The idea of this thesis is to look at companies in Europe in which employee-ownership is dominant or in which employees form an important group of shareholders. And to look on its role on performance, labor relations and corporate governance.
99. Should the adoption of a code of corporate governance by listed companies be made obligatory ?
In France, listed companies are under no obligation to implement a code of corporate governance. This is simply a recommendation. What is obligatory is the disclosure of whether a code is implemented or not (the Afep-Medef or Middlenext code) and when this is not the case, an explanation as to why must be provided. Unsurprisingly, most listed companies which do not implement a code of governance are among the smallest companies and explanations given are often rather cursory.
The aim of this study is to look at the interest of making obligatory for a listed company to adopt a code of corporate governance.
100. Minimum number of shares that a board director must own and their impact on the performance of the company
In somes countires (France is an example), board directors are requested by law to own a minimum number of shares in the company defined in its articles of association. How this figure is defined given the characteritics of the firm? Is there a relationship between the minimum number of shares and the financial and economic performances of the company ?
101. Essential criteria for granting bank loans
Banks have loan committees which review the applications for loans made by corporate clients. The criteria on which their decisions are based are summarised in standardised files, which often contain a lot of information.
This thesis would be based on interviews with several bank managers from a number of different banks, in the aim of determining which criteria they considered to be the most relevant for deciding whether to grant a loan or not.
102. Regulations for the insurance industry: How should Solvency 2 evolve for restricting primary risks of financial and/or non financial insurance companies?
The regulation of insurance companies, notably financial guarantee products (AIG Financial Products for example), which compete directly with banks, is Solvency 2. Since it follows similar path as banks regulations, it should also change as Basel 2 became Basel 3 for banks. For anyone interested in the insurance industry (in a broad view), an appraisement of financial insurance regulations is highly relevant. Research can focus on financial guarantees only or on any major business lines of insurance (Financial, life insurance, Property and Liability).
103. Syndicated loan finance
Firms have many possibilities how to use the financing raised through syndicated loans. Do firms use the proceeds to make acquisitions, other investments, or is it for working capital purposes? How does the stock market react to syndicated loan issues? Does it depend on what the firm uses the proceeds for? Overall, this project sheds light on how firms use the proceeds from syndicated loans. See chapter 21 of the Vernimmen.
104. Can Basel III Prevent the Next Great Recession
We are still going through the Great Recession, the most significant financial crisis since the Great Depression of 1930s. The adoption of Basel I and II bank capital regulation was supposed to prevent such scenarios. This thesis sets out to examine whether the higher bank capital requirements proposed under Basel III Accord can prevent future banking crises any better than Basel I and II did. The author will conduct a survey of the existing academic literature together with the current press articles supplemented by the BIS documents to examine the costs and benefits of the higher capital requirements under Basel III.
105. Stressed Out: Differences Between Bank Stress Tests Conducted in the US and the EU
This thesis will examine the differences and the similarities of the bank stress tests conducted on the two sides of the Atlantic. The authors will examine, with a critical eye, whether the stress tests helped improve confidence in the US and EU banking systems.
106. Future of the European banking industry
What (s) future (s) for the European banking industry that can not generate returns on its equity in relation to its cost of capital, which in some countries can hardly be more concentrated than today ( France, UK, Benelux) and for which inflation of regulatory constraints is not over yet?
107. Dual-listing of European companies
A number of European companies choose to be listed on more than one stock exchange (both inside and outside Europe). This study could be based on a statistical analysis of the phenomena of dual-listing of European countries, with a country-by-country breakdown. The factors behind dual-listing could also be looked at (minimising the cost of capital, search for liquidity, etc.). See chapter 42 of the Vernimmen.
108. The new conglomerates
Why did some groups spend the last 15 years diversifying, a period during which conglomerates had a bad reputation? What are the conditions in which these new conglomerates succeeded? See chapter 42 of the Vernimmen.
109. How are groups generally organised these days?
Is there is a parent company, that is a pure holding company, that is listed, that only holds shares in the subsidiaries, without any operational activity other than the running of the group? Or is it a mixed model where the parent company has a dual activity of holding company and an industrial and/or commercial activity of its own, most often in the country of origin and corresponsing historically to the initial activity developed by the group?
The aim of this thesis is to consider the issue by looking at the tax and legal aspects and by carrying out a survey of the way in which large listed groups are now organised. See chapter 42 of the Vernimmen.
Who becomes CFO? What is their typical career path? How are they selected? How are they paid?
111. Micro finance topics
a) Micro finance - philanthropy or normal market requirements - in other words, should returns be an issue in micro finance, or should investors be happy if they get their money back and consider the exercise a success if it helps develop human potential?
b) Is finance successful micro finance? : Micro finance is the starting point, the economy takes off and then finance arrives.
112. Principle-based versus rule-based regulations: respective roles?
Principle-based regulations are based on general principles rather than specific rules (Basel 2 for banks). Rules are predictable but too much constraining whether principle implementation is less predictable, but avoids all players doing the same thing at the same time (herd behaviour dictated by too many rules?). The development of regulations is a complex process in Europe (documented) and principle based regulations seem to have faded away. Is that true? Pros and cons?
113. Accounting for carbon externalities
While a scientific and business consensus is by-and-large established around climate change, investors still struggle to appropriately measure the risk and therefore integrate this dimension in a compelling way in their investment processes.
The recent scandals around ESG-investing, the lack of common playing field in ESG ratings, the incompleteness of EU-supported regulations raise the question of how best to integrate ESG considerations in the investment process. A pragmatic yet ambitious scenario is to put a price on externalities and account for this risk in the financial statements of a company.
The project will aim at developing innovative recommendations on the measurement and reporting framework of CO2 emission-induced externalities in financial statements.
It will be necessary to review progress made at the levels of the IASB and other official bodies, understand the various ways to measure and price carbon risk and come up with innovative ideas to renovate accounting framework and give investors a useful integration tool.
The thesis will cover:
- The literature on the measurement of externalities
- The state-of-the-art of the work developed by accounting standard boards
- Potential innovative experimentations
- The conditions for this approach to work and the roadmap to be followed The research will rely on:
- Theoretical literature about the management and pricing of externalities
- Case studies of carbon credit markets implemented around the world (incl. Kyoto
protocol, EU initiatives)
- A review of information relating to the work carried out by standard boards
- Interviews with market practitioners / experts to understand the state of play and
conditions for success
114. Do highly polluting firms have higher or lower expected returns?
Using a database on CO2 emissions, the thesis will examine whether, controlling for other known risk-factors, carbon emissions and changes in carbon emissions predict future stock returns.
115. Climate Finance.
Global warming poses an existential threat to our economic well- being, health, and even survival as a species. After surveying the literature, the student will focus on one aspect of how global warming is affecting finance. For example, how do investors respond to the increasing negative publicity on âdirtyâ firms? Do stock returns reflect climate risks in a timely and adequate manner? How well do companies and investors respond to changing prices of carbon emission certificates? How much do investors and/or customers react to ESG scandals? Are green bonds priced differently compared to normal bonds?