The financial markets have often been criticized as places where only profits count, where the dictates of short-term earnings override long-term interests. This article focuses on equity markets in order to weigh several factors and see whether these markets are inherently incompatible with the long run. After considering how the theories of agency and efficient markets have ...
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To review the academic literature in finance on long-term investors, the role of shareholders, in particular institutional investors, is highlighted. Three points are broached: What is a long-term investor? What are the theoretically possible relations between an investor’s investment horizon and corporate decisions? And what do we learn from empirical studies about the real ...
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The debate about the “short-termism” induced by the financial markets has gone viral. The usefulness of these markets has come under question along with the goal of maximizing shareholder value. After recalling how these markets are beneficial to business investments, attention is focused on how they give rise to problems of governance, in particular short-termism. ...
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In light of the urgency surrounding issues relating to the climate, pollution, biodiversity and all forms of inequality, finance must also contribute to changing the world. While some players are prepared to go “green” and inject humanism into their rhetoric, products and services, the financial ecosystem needs to make a genuine commitment and provide tangible proof of its implication. ...
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As a result of their unprecedented commercial success, large US-based technology firms have, over the past two decades, built up huge cash reserves, which are comparable to those of the world's largest bond funds. In this article, we will show that this situation is the result of ultra-conservative management of their capital, which contrasts with their image of cutting-edge innovators. ...
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From a uniquely financial standpoint, businesses aim to create value and therefore make investments whose generated rate of return is higher than the rate of return required by contributors of financial resources, factoring in the risks taken. This means that listed companies are bound by this profitability goal demanded by shareholders. ...
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The environmental transition needs major investments to make production carbon-free. For more than a decade, the green bond market has been growing to meet the needs of investors and issuers in the effort to fight global warming. This paper addresses the following questions: Do these green bonds differ from conventional bonds? Why do firms issue them? ...
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To assess the impact of research in finance over the past sixty years, how to measure the effect of theories on practices, on the financial industry’s growth and, too, on the social norms and institutional arrangements that organize the realm of finance? This article’s principal contribution is to insist on the role of theory in the social construction of finance and on the necessity for financial theory ...
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Several changes during the past few years have left marks on the financial markets: fragmentation, digitization, algorithmic high-frequency trading. Concomitant with a considerable increase in the volume of market data, these phenomena have pushed regulatory authorities to overhaul and modernize their systems for detecting violations. ...
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While asset managers’ behavior has not been among the root causes of the financial crisis, their industry’s size and structure have generated financial stability concerns among policymakers. Global regulatory bodies nowadays agree that asset management activities are “systemically important.” On the other hand, the growth in retail activities has prompted ...
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This paper compares the crises of the 1930s and 2008 on two points: firstly, policymakers’ reactions at the height of these two banking and financial crises (reactions that differed substantially, notably thanks to the experience gained from the Great Depression in both the US and Europe); secondly, the financial regulations implemented in the wake of each crisis. ...
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In contrast with bank lending, financial markets theoretically allow for the disintermediated allocation of savings for investment. Post-financial crisis policies such as the Capital Markets Union (CMU), the reform of securitisation, expansionary monetary policies, etc., have bolstered the reliance on market-based financing, particularly for debt financing. ...
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The Capital Markets Union (CMU), together with the Banking Union, is a major programme of financial Europe. Its objective is to boost investment, growth, and employment through increased efficiency and deepened integration of European financial markets. This article will first review the CMU’s objectives, ways, and means, and will then touch upon the ...
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In September 2016, the Luxembourg Stock Exchange (LuxSE) launched a unique platform entirely dedicated to green bonds. It is called the Luxembourg Green Exchange (LGX). Such was the success of LGX that, following a strong market push, in May 2017, the platform expanded to also include bonds that finance social and sustainable projects. It has the potential to rewrite ...
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Since 2009, the issue of climate change has fuelled a global economic competition focused on the green energy markets. So-called “green” bonds, issued to finance projects with a positive effect on the climate and on the broader environment, have become emblematic of this new green energy market, which is impacting all energy-dependent economic sectors, led...
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The disclosure of a fraud orchestrated by Henri Rochette, one of the most powerful financiers in Paris, started a scandal. Rochette, once arrested, immediately reversed accusations and claimed that his enemies had hatched a plot. After investigations established that his arrest was arbitrary, the financial scandal became political and legal. The part of accounting ...
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