Global Financial Crisis

Essential Reading from the Institute Book: Resolving the European Debt Crisis Special Report No. 21 edited by William R. Cline and Guntram Wolff March 2012 RealTime Economic Issues Watch: The Rewards of Brinkmanship in Europe by Jacob Funk Kirkegaard March 6, 2012 RealTime Economic Issues Watch: Brinkmanship in Brussels, Sturm and Drachma for Greece and Europe by Jacob Funk Kirkegaard February 23, 2012 Speech: Italy's Effect on the Global Economy [pdf] by Mario Monti, Prime Minister of Italy Transcript of speech presented at the Peterson Institute February 9, 2012 Policy Brief 12-1: The Coming Resolution of the European Crisis [pdf] by C. Fred Bergsten, Peterson Institute for International Economics and Jacob Funk Kirkegaard, Peterson Institute for International Economics January 2012 Policy Brief 12-4: The European Crisis Deepens [pdf] by Peter Boone, Peterson Institute for International Economics and Simon Johnson, Peterson Institute for International Economics January 2012 Book: Sustaining China's Economic Growth after the Global Financial Crisis by Nicholas R. Lardy January 2012 Congressional Testimony: A New Regime for Regulating Large, Complex Financial Institutions [pdf] by Simon Johnson, Peterson Institute for International Economics Testimony submitted to the Subcommittee on Financial Institutions and Consumer Protection, Senate Committee on Banking, Housing, and Urban Affairs hearing on "A New Regime for Regulating Large, Complex Financial Institutions." December 7, 2011

Policy Brief 11-22: Oil Exporters to the Euro's Rescue? [pdf] by Philip K. Verleger, Peterson Institute for International Economics December 2011 Peterson Perspective: Europe Gets Closer to Recapitalizing Banks [pdf] by Nicolas Veron, Peterson Institute for International Economics Nicolas Vron welcomes the move toward recognition of the weakness of European banks but questions whether leaders are moving quickly enough. October 13, 2011 Policy Brief 11-15: Sustainability of Greek Public Debt [pdf] by William R. Cline, Peterson Institute for International Economics October 2011 Peterson Perspective: The Coming "Financial Repression" [pdf] by Carmen M. Reinhart, Peterson Institute for International Economics Carmen M. Reinhart explains that debt crises lead to "financial repression," which can take different forms, with some alternatives having better outcomes than others. September 28, 2011 Congressional Testimony: The European Debt and Financial Crisis: Origins, Options by Nicolas Veron, Peterson Institute for International Economics Congressional testimony submitted to the US Senate Committee on Banking, Housing, and Urban Affairs: Subcommittee on Security and International Trade and Finance September 22, 2011 Book: A Decade of Debt Policy Analyses in International Economics No. 95 by Carmen M. Reinhart and Kenneth S. Rogoff September 2011 Op-ed: No Excuse for Inaction by Adam S. Posen, Peterson Institute for International Economics Op-ed in Reuters August 31, 2011 Peterson Perspective: What Should the Fed Do? [pdf] by Joseph E. Gagnon, Peterson Institute for International Economics and Michael Mussa, Peterson Institute for International Economics Joseph E. Gagnon and Michael Mussa discuss the latest steps by the Federal Reserve to help the economyand what tools might be used if things get worse. August 11, 2011 Policy Brief 11-13: Europe on the Brink [pdf] by Peter Boone, Peterson Institute for International Economics

and Simon Johnson, Peterson Institute for International Economics July 2011 Op-ed: Stress Tests Are Not Enough to Fix the Banks by Nicolas Veron, Peterson Institute for International Economics Op-ed in the Financial Times July 15, 2011 Book: The Global Outlook for Government Debt over the Next 25 Years: Implications for the Economy and Public Policy Policy Analyses in International Economics No. 94 by Joseph E. Gagnon assisted by Marc Hinterschweiger June 2011 Speech: Regulating Systemically Important Financial Firms [pdf] by Daniel K. Tarullo, Federal Reserve Board Prepared remarks delivered at the Peterson Institute for International Economics, Washington, DC June 3, 2011 Op-ed: The Future of Banking: Is More Regulation Needed? by Peter Boone, London School of Economics and Simon Johnson, Peterson Institute for International Economics Op-ed for the Financial Times April 10, 2011 Working Paper 11-5: Integrating Reform of Financial Regulation with Reform of the International Monetary System [pdf] by Morris Goldstein, Peterson Institute for International Economics February 2011 Working Paper 11-2: Too Big to Fail: The Transatlantic Debate [pdf] by Morris Goldstein, Peterson Institute for International Economics and Nicolas Veron, Peterson Institute for International Economics January 2011 Policy Brief 10-24: The Central Banker's Case for Doing More [pdf] by Adam S. Posen, Peterson Institute for International Economics October 2010 Working Paper 11-15: How Flexible Can Inflation Targeting Be and Still Work? [pdf] by Kenneth N. Kuttner, Williams College and Adam S. Posen, Peterson Institute for International Economics September 2011

Paper: Global Economic Prospects as of September 30, 2010: A Moderating Pace of Global Recovery [pdf] by Michael Mussa, Peterson Institute for International Economics Paper presented at the eighteenth semiannual meeting on Global Economic Prospects September 30, 2010 Policy Brief 10-3: Confronting Asset Bubbles, Too Big to Fail, and Beggar-thy-Neighbor Exchange Rate Policies [pdf] by Morris Goldstein, Peterson Institute for International Economics February 2010 Article: The Dollar and the Deficits: How Washington Can Prevent the Next Crisis by C. Fred Bergsten, Peterson Institute for International Economics Article in Foreign Affairs, Volume 88 No. 6, November/December 2009 November 2009 Congressional Testimony: The Role of the International Monetary Fund and Federal Reserve in the Stabilization of Europe by Edwin M. Truman, Peterson Institute for International Economics Testimony before the US House Committee on Financial Services Subcommittee on International Monetary Policy and Subcommittee on Domestic Monetary Policy and Technology May 20, 2010 Paper: Beware of Greeks Bearing Debts [pdf] by Michael Mussa, Peterson Institute for International Economics May 2010 Congressional Testimony: Needed: A Global Response to the Global Economic and Financial Crisis by C. Fred Bergsten, Peterson Institute for International Economics Testimony before the Subcommittee on Terrorism, Nonproliferation and Trade, Committee on Foreign Affairs, US House of Representatives March 12, 2009 Policy Brief 10-7: The Sustainability of China's Recovery from the Global Recession [pdf] by Nicholas R. Lardy, Peterson Institute for International Economics March 2010 Congressional Testimony: A Proven Framework to End the US Banking Crisis Including Some Temporary Nationalizations [pdf] by Adam S. Posen, Peterson Institute for International Economics Testimony Before the Joint Economic Committee of the US Congress Hearing on "Restoring the Economy: Strategies for Short-term and Long-term Change" February 26, 2009

Speech: Financial Regulation in the Wake of the Crisis by Daniel K. Tarullo, Federal Reserve Board Remarks presented at the Peterson Institute event "Global Financial Regulation Reform in the Wake of the Crisis" June 8, 2009 Speech: Policy Responses to the Global Financial Crisis by Edwin M. Truman, Peterson Institute for International Economics Remarks presented at the Ninth Annual International Seminar, on "Policy Challenges for the Financial Sector Emerging from the Crisis: Building a Stronger International Financial System," Board of Governors of the Federal Reserve System, World Bank, and International Monetary Fund June 3, 2009 Congressional Testimony: Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions by Simon Johnson, Peterson Institute for International Economics Testimony before the Joint Economic Committee of the US Congress hearing, "Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions" April 21, 2009 Speech: Global Economic Prospects: L- or V-shaped Recovery? [pdf] by Simon Johnson, Peterson Institute for International Economics and Michael Mussa, Peterson Institute for International Economics Transcript of the fifteenth semiannual meeting on Global Economic Prospects, Peterson Institute for International Economics, Washington, DC April 7, 2009 Paper: World Recession and Recovery: A V or an L? [pdf] by Michael Mussa, Peterson Institute for International Economics Paper presented at the fifteenth semiannual meeting on Global Economic Prospects, Peterson Institute for International Economics, Washington, DC April 7, 2009 Paper: The Economic Crisis and the Crisis in Economics by Simon Johnson, Peterson Institute for International Economics Revised version of speech prepared for the Presidential Address to the Association for Comparative Economics, San Francisco, January 4, 2009 January 7, 2009 Congressional Testimony: US Foreign Economic Policy in the Global Crisis by Simon Johnson, Peterson Institute for International Economics Testimony before the Subcommittee on Terrorism, Nonproliferation and Trade, Committee on Foreign Affairs, US House of Representatives March 12, 2009

Op-ed: Stopping a Global Meltdown by C. Fred Bergsten, Peterson Institute for International Economics Op-ed in the Washington Post November 12, 2008 Op-ed: Globalizing the Crisis Response by C. Fred Bergsten, Peterson Institute for International Economics and Arvind Subramanian, Peterson Institute for International Economics Op-ed in the Washington Post October 8, 2008 Speech: Addressing the Current Financial Crisis [pdf] by Morris Goldstein, Peterson Institute for International Economics Speech presented at a Peterson Institute event October 7, 2008 Paper: The Subprime and Credit Crisis [pdf] by Morris Goldstein, Peterson Institute for International Economics Paper based on a speech presented at the thirteenth semiannual meeting on Global Economic Prospects, Peterson Institute for International Economics, Washington, DC April 3, 2008 Book: Banking on Basel: The Future of International Financial Regulation by Daniel K. Tarullo September 2008 Op-ed: The Four Horsemen of Subprime Stupidity [pdf] by Adam S. Posen, Peterson Institute for International Economics Op-ed in the International Economy January 2008 Op-ed: Financial Hybrids Do Not Work by Adam S. Posen, Peterson Institute for International Economics Op-ed in the Brsen-Zeitung for the series "Jenseits der Krise" August 7, 2008 Book: Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies by Nouriel Roubini and Brad Setser August 2004 Thesis topics Looking for a thesis topic? Here are a few suggestions. We've also given the chapter(s) in the Vernimmen that partially cover to the topic. Feel free to send us any questions you may have via the Vernimmen.com mailbox, but don't expect us to write your thesis for you!

Let us know if you decide on one of our suggested topics, and we'll tell you if we know if somebody else has chosen the same topic (although we won't reveal any names). We'd also love to receive a copy of your thesis.

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. 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. 3. Is the real interest rate the same in the major western industrialised nations? Once the risk of inflation has been eliminated, the risk-free rate should be the same in all major western industrialised countries, especially since the economies of these countries are becoming increasingly integrated. The issue of government bonds indexed to the rate of inflation now, for the first time, enables us to calculate the expected rate of inflation in countries which issue these types of bonds (UK, Sweden, France), and thus to measure objectively the real interest rate and to check whether interest rates are the same, from one country to the next. See chapter 20 of the Vernimmen. 4. 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 24 of the Vernimmen. 5. The dividend payout policy of European groups Eugene Fama and Kenneth French have drawn attention to a decrease in the size of the average dividend paid out by US groups between 1978 and 1998, and have identified the following causes: - Listing of newly-formed companies which don't pay dividends (high tech, biotech and Internet companies) - Decrease in the size of the dividend paid out by companies that do pay dividends, given the

large number of investment opportunities with very high returns over the period - Increase in the number of stock option plans, which do not encourage management to increase the size of the dividend The aim here is to look at the dividend payout situation in Europe. See chapter 38 of the Vernimmen. 6. 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 26 of the Vernimmen. 7. Status report on research into interest rate structure See chapter 20 of the Vernimmen. 8. Teaching corporate finance at business schools and universities What is the scope of finance teaching, how is it taught, what role do the new technologies play, who teaches finance, to whom, using what tools, etc? This study will involve a survey of finance teachers - sending out questionnaires and conducting interviews. 9. 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 25 of the Vernimmen. 10. How do companies manage country risk? What instruments are used to measure risk and what sort of hedging techniques are used? See chapter 49 of the Vernimmen. 11. 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. 12. 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 49 of the Vernimmen. 13. Why not use the yield curve when 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 20 of the Vernimmen. 14. 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 41 of the Vernimmen. 15. 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. 16. 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. 17. 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 43 of the Vernimmen. 18. 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 46 of the Vernimmen. 19. Should a multi-national whose geographic diversification is perfectly balanced, factor in country risk when assessing investment projects? See chapter 30 of the Vernimmen. 20. Employee-shareholders. 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 Socit Gnrale 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 40 of the Vernimmen. 21. 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 45 of the Vernimmen. 22. 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? 23. 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 49 of the Vernimmen.

24. 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 20 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. 25. 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. 26. 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 32 of the Vernimmen. 27. 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 42 of the Vernimmen. 28. 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. 29. 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 30 of the Vernimmen. 30. 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 31 of the Vernimmen. 31. 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? 32. 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? 33. 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 25 of the Vernimmen. Do hybrid products (convertible bonds, mandatory convertible bonds, etc.) increase the volatility of the shares backing them? See chapter 25 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? 34. 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 45 of the Vernimmen. 35. 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. 36. 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. 37. 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. 38. 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 45 of the Vernimmen. 39. 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. 40. 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. 41. 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? 42. 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? 43. 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 26 of the Vernimmen. 44. 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 40 of the Vernimmen. 45. 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. 46. 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. 47. 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 42 of the Vernimmen.

48. 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 ? 49. 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 s 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 43 of the Vernimmen. 50. 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 26 of the Vernimmen. 51. 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. 52. 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? 53. 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 companys 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. 54. 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. 55. 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? 56. 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 42 of the Vernimmen. 57. 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? 58. 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 24 of the Vernimmen. 59. 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 26 of the Vernimmen. 60. 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. 61. 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. 62. 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. 63. 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 49 of the Vernimmen. 64. 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). 65. 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? 66. 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.

67. 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 43 of the Vernimmen. 68. 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. 69. 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. 70. 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. 71. 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 CAC40 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. 72. 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 22 of the Vernimmen. 73. 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 43 of the Vernimmen. 74. 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? 75. 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 36 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. 76. 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? 77. 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 32 of the Vernimmen. Could the market be inefficient? 78. 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. 79. 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? 80. 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.