International Finance and Responsible Financial Management

For this week’s blog, I watched a documentary called ‘The Midas Formula.’ No, this isn’t a documentary about the story of King Midas and his ability to turn everything he touches to gold. The Midas Formula is a finance documentary revolving around the stock market. After all, this is a finance blog and so it should come as no surprise that the documentary will have a financial theme. In this blog, I will give some background about what The Midas Formula is about and explain what I learned and understood from watching this documentary. Then, I will look at different theories from my module International Finance and Responsible Financial Management which were brought up or are applicable in the context of the documentary. So, you are all probably wondering what The Midas Formula is and how it is related to finance. The Midas Formula is more commonly known as the Black Scholes Formula (The Midas Formula, 1999). The Black Scholes formula was designed to eliminate risk from trading on...

There are many different theories in the academic world of finance surrounding both the importance of dividends and how shareholders and the general market can react to changes in a company’s dividend policy. There are also different types of dividend policy which will be discussed in this blog. The different theories and policies will be applied to a company I have looked at called Norilsk. I will look at their current dividend policy and their future dividend policy whilst also applying relevant theories and ideas I have been learning on the module International Finance and Responsible Financial Management. Norilsk Nickel (or Nornickel) is the world’s largest producer of palladium and is also one of the largest suppliers of nickel (Financial Times, 2019). Palladium is useful in the modern world as it is used in vehicles such as cars, specifically in the catalytic converter which is used to reduce harmful emissions (Financial Times, 2019). Norilsk's share price has increas...

For the topic of this week’s blog, I will focus on a film I have watched and relate the themes, ideas and events to relevant theories I have studied so far. The film I watched was The Wolf of Wall Street which was released in 2013 starring Leonardo DiCaprio and was directed by Martin Scorsese (Scorsese, 2013). The film is based on the life of famous stockbroker Jordan Belfort who acquired the name ‘The Wolf of Wall Street’, depicting his rise to fame and wealth and his eventual downfall (Scorsese, 2013). A lot of the financial theories, ideas and concepts shown in the film centre around the stock market (Scorsese, 2013). If we ignore the copious amounts of sex, drugs, alcohol and just general debauchery, there are some financial theories, ideas and concepts which directly relate to the International Finance and Responsible Financial Management module I have been studying over the last 8 weeks. Early in the film, when the main character, Jordan Belfort, gets a job working on wall ...

Pizza Express, a casual dining chain, are facing growing problems with their capital structure causing real concern for the company’s future (The Financial Times, 2019a). Capital Structure is simply, ‘the mix of securities and financing sources used by corporations to finance real investment’ (Myers, 2001).The main research conducted into capital structure focuses on the debate of debt vs equity and tries to establish the optimal ratio between the two types of finance (if one even exists) (Myers, 2001). This week’s blog will look at the case of Pizza Express as their current capital structure is causing concerns for bondholders (The Financial Times, 2019a). Also, this week’s blog will look at possible reasons why Pizza Express have chosen the capital structure they currently have and compare this to relevant theories of capital structure whilst also looking at possible solutions to improve their current financial situation. Pizza Express have undergone some difficult times in rec...

The weighted average cost of capital (WACC) is the weighted average cost of a firm’s capital structure (Mian & Vélez-Pareja, 2008). This is a company’s cost of equity and the cost of debt added together. According to Mian and Vélez-Pareja (2008), there are complications with the calculations for WACC however these are mainly due to misinterpretation and misuse by companies. Reducing WACC is something companies aim to accomplish and EDF Energy are no different. EDF Energy are currently undergoing construction of a new nuclear power station called Hinkley Point C which is projected to cost roughly £22 billion (The Financial Times, 2019b). This is a significant amount of money and so financing will be an issue for EDF Energy. On top of that, Hinkley Point C, as well as other projects in France and Finland, have been plagued with problems, causing long delays and extra unexpected costs (The Financial Times, 2019b). The problems with these projects have seen their share price in F...

Late on Wednesday 23 rd October 1929, share prices on the New York Stock Exchange began to plummet. Investors were shocked. Panic ensued as 2.5 million shares were sold within one hour (Bartholomew, 2009). This was the start of what would later be know as The Great Crash. The BBC  documentary, which aired in 2009 and was directed by Joanna Bartholomew, investigates the years leading up to The Great Crash from 1919 up until a few years after The Great Crash in 1929 (Bartholomew, 2009). The documentary tells personal stories, looks at the facts and explains what happened. In this week’s blog, I am going discuss some of the ideas, theories and facts from this documentary whilst also comparing these ideas to some academic articles and looking at the wider impact of The Great Crash. When the New York Stock Exchange crashed, it is estimated that $25 billion worth of personal wealth disappeared due to the fall of the stock market prices (Bartholomew, 2009). Confidence in the econom...