Guest lectures Flashcards
Corporate Governance: Nasdaq Baltic listed companies
What is a Corporate governance?
Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.
Corporate Governance: Nasdaq Baltic listed companies
Name different Corporate governance structures, common elements
(1) Shareholders
(2) Board:
- > oversight
- > strategy
- > supervision
(3) Management:
- >business
- >ethics
- >competitiveness
- > compliance
- >disclosure
(4) Stakeholders:
- > employees
- > banks
- > bondholders
- > regulators
- > suppliers
- > clients
- > business partners
Corporate Governance: Nasdaq Baltic listed companies
What are the main points that the companies should do but do not in Latvia?
(1) Ensuring shareholder rights and participation at shareholder meetings
- > the officially written policy for the division of profits has not been issued, but there are certain trends in the division of profits;
- > The main reason for partial and non-compliance is that information about candidates was not available 14 days prior to the meeting, because the list of candidates had not been set at that moment.
- > The main reason for partial and non-compliance is that the regulations has not prepared on the course of shareholders meeting.
(2) Obligations and responsibilities of the board
- > The main reason for this lies in the fact that regulations for the board are prepared, but not published on the website.
- > Mainly due to its size, the companies have not developed the regulations, and the board is operating according to the Commercial Law.
(3) 50% of the board members are independent
Corporate Governance: Nasdaq Baltic listed companies
What are the main points that the companies should do but do not in Estonia?
(1) Compensation and charge:
- > the companies does not disclose such information, only the total amount;
- >information is significant and highly sensitive in an environment of competition;
- > such information is not published;
- >there is more dependent members than it is recommended to be (the reason for not being independent is that the members have been at the same position for more than three consecutive years due to their skills and experience that were helpful when the company was growing).
Corporate Governance: Nasdaq Baltic listed companies
What are the main points that the companies should do but do not in Lithuania?
(1) Set up of two collegial bodies
(2) Clear separation of management
(3) Supervisory board is preferable in case of only one collegial body
(4) Principles of supervisory board are applicable to only one management board
(5) Chairperson of the management board and CEO are different persons in companies without supervisory board
Corporate Governance: Nasdaq Baltic listed companies
What are independent board members?
An independent board of directors is normally made of members who have no material interests in a company. The purpose of an independent board is to make sure members are not influenced by interests in the company. They are there specifically to help a company run honestly and efficiently.
Why good Corporate governance matters?
Poorly governed companies will be subject to…
• Higher interest rates (up to 2,5 percentage points or more)
• Will have to ensure higher own contribution
• More intensive monitoring and control regime by the banks, such as being required to submit more regular reports, discuss financial plans more frequently, receive consent for certain investments
Mintos: Martins Valters
What is fintech? And what is the future of fintech?
Fintech- computer programs and other technology used to support or enable banking and financial industries.
People’s fundamental needs will not change, but how these needs are met will be profoundly different.
Now differences in:
- Lending (many alternative ways to get loans –> more accessible and user-friendly)
- Transactions/ payments (many alternative ways to make payments)’
- Investments (e.g. app RobinHood offers to invest cost free)
Mintos: Martins Valters
What does Mintos do?
Market lending –> cuts out many unnecessary intermediaries
Mintos- marketplace online connecting buyers and sellers (investors with borrowers –> all types of loans).
Does CAPM exist? : Arturs Petrovs
What is RAB (regulatory asset base)?
Value of net invested capital for regulatory purposes, calculated on the basis of the rules defined by the Electricity, Gas and Water Authority (the Authority) for determining base revenues for the regulated businesses.
Does CAPM exist? : Arturs Petrovs
What is the difference between pure and hybrid CAMP?
Hybrid CAMP also includes:
(1) risk free+current inflation delta +country risk premium
(2) beta + alpha
Does CAPM exist? : Arturs Petrovs
Cost of equity build-up concept
risk free: unavoidable risk (ex. death)
country risk: specific geographical risk (ex. mosquitoes)
market risk premium: general environment
beta: exposure to environment (ex. manager and guard in a bank robbery)
alpha: additional risk (ex. hobby)
Does CAPM exist? : Arturs Petrovs
Risk free rate
Theory:
Government bonds -> no default risk
Zero coupon bonds -> no reinvestment risk
Includes real rate and inflation
Reality: Only long term bonds have no reinvestment risk as you don't have to think about it. Best bonds (AAA): Germany
Does CAPM exist? : Arturs Petrovs
Country risk premium
Theory: Includes factors: economic, transfer, exchange location, sovereign and political -> how to measure?
Reality: 2 bonds of different countries: yours and the benchmark -> bond pairing -> compare the excess returns by calculating the spreads -> get the inflation differential
Does CAPM exist? : Arturs Petrovs
Equity risk premium
Theory: Bond and equity historical data -> get as large as possible dataset
Reality: decide on how to measure the returns (arithmetic or geometric?), consider financial crises or not -> choose the methodology wisely
