My Internship Experience at SmartStream Technologies (Fintech)

December 27, 2024December 18, 2024 by Lara HADDAD

My Internship Experience at SmartStream Technologies (Fintech)

In this article, Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024) shares her experience as a market analyst at SmartStream Technologies.

Presentation of SmartStream Technologies

SmartStream Technologies (often called SmartStream in short) is a global provider of financial transaction management software and managed services. Their flagship product, Transaction Lifecycle Management (TLM®), helps financial institutions streamline their post-trade processing, improve efficiency, and reduce operational risks. They also offer various services that primarily use AI as a tool to facilitate financial transactions and accounting.

Logo of SmartStream Technologies

Source: the company.

Presentation of my internship at SmartStream Technologies

During my internship as a Market Analyst in Dubai, I gained a deep understanding of SmartStream Technologies’ fintech products. My key contributions included developing a business plan for “SmartStream Air,” an AI-powered product, and implementing sales and marketing strategies to attract potential clients. I also played a pivotal role in preparing the budget for company events, conducting financial analyses to identify cost-saving opportunities and enhance campaign effectiveness. This experience provided valuable insights into the intersection of technology, finance, and marketing within the fintech industry.

Required skills and knowledge

This internship demanded a combination of technical and interpersonal skills. A strong understanding of financial markets and fintech products was crucial. Analytical skills were necessary for market research and business plan development, while financial modeling skills were used for budgeting and forecasting. Communication and presentation skills were essential for conveying ideas and strategies to stakeholders. Furthermore, problem-solving and critical thinking were vital for navigating the complexities of the fintech landscape and developing innovative solutions. Finally, adaptability and a proactive approach were important for thriving in a fast-paced, technology-driven environment.

What I learned

My internship at SmartStream Technologies provided a deep dive into the world of fintech. I gained practical experience in developing a business plan for a new AI-powered product, which involved market analysis, financial projections, and go-to-market strategy development. I also honed my budgeting and cost analysis skills while preparing for a major event. This experience highlighted the importance of data-driven decision-making and the increasing role of technology in the financial services industry.

Three Key Financial Concepts

I present below three key concepts that I used throughout my internship: budgeting and cost analysis, sales forecasting, and return on investment (ROI).

Budgeting and Cost Analysis

Preparing the event budget required careful planning, cost estimation, and analysis to ensure efficient resource allocation. This experience highlighted the importance of financial control and cost management in achieving project objectives.

Sales Forecasting

Developing sales strategies involved forecasting potential revenue based on market analysis and sales projections. This provided valuable insights into the financial planning process and the importance of accurate forecasting.

Return on Investment (ROI)

Analyzing the effectiveness of marketing campaigns required measuring the return on investment to assess the financial impact of marketing spend. This experience emphasized the importance of data-driven decision-making and performance measurement.

Why should I be interested in this post?

This post is highly relevant for ESSEC students interested in fintech, financial product management, or technology-driven finance roles. It demonstrates how financial skills can be combined with an understanding of technology to drive innovation and growth in the financial services sector. The experience of developing a business plan, implementing marketing strategies, and managing a budget provides valuable practical skills applicable to a wide range of finance-related careers. This type of internship can be a stepping stone to exciting opportunities in the rapidly evolving fintech landscape.

Useful Resources

smartstream air

About the author

The article was written in December 2024 by Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024).

My Internship Experience as a Market Analyst at L’Oréal

December 18, 2024 by Lara HADDAD

My Internship Experience as a Market Analyst at L’Oréal

In this article, Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024) shares her experience as a Market Analyst intern with L’Oréal Group. My six-months internship, which was a part of my Global BBA program at ESSEC was a great opportunity to discover a new industry in a big company. The diversification of the missions and the focus on financial analyses of different brands motivated me to start this internship.

Presentation of the Company

L’Oréal, founded in 1909, reigns as the world’s largest cosmetics company. With a diverse portfolio encompassing hair color, skincare, sun protection, make-up, perfume, and hair care, L’Oréal’s success stems from a dual focus: developing innovative products and cultivating strong customer relationships. This approach necessitates a workforce adept at both scientific research and market analysis.

L’Oréal brands

Source: the website.

Presentation of my Internship

As a Market Analyst Intern at L’Oréal’s Global Headquarters in Paris, I delved into the intricacies of the MENA market. My missions included conducting sell-in and sell-out analyses, crafting customer-specific reports, analyzing channel performance and competition (including online and offline channels), and contributing to volume build-up reports and financial simulations, notably GM% modeling. I also worked on establishing the budget of next quarter based on the budget of last year and the performance of the different brands and how the expenses were divided.

These tasks demanded proficiency in data analysis, financial modeling, market research, and a keen understanding of regional market dynamics. I honed these skills while also developing a strong understanding of how financial data informs strategic decision-making within a global corporation.

I was able to develop various analytical, problem solving, financial skills as well as human soft skills thanks to the team work and constant communication I had with my teammates.

Required skills and knowledge

My role at L’Oréal required strong analytical skills to interpret market data, identify trends, and draw meaningful conclusions. Financial modeling and proficiency in Excel were essential for building forecasts and simulations. Presentation skills were vital for communicating findings to the team, while attention to detail ensured accuracy in reports and analyses. Collaboration and communication were key for working effectively within the team and with other departments. Finally, an understanding of the cosmetics industry and market dynamics was beneficial for contextualizing my analysis.

What I learned

I gained a comprehensive understanding of the cosmetics industry, particularly within the MENA market. I honed my analytical skills by working with real market data and learned how to translate complex information into actionable insights. Developing financial models and contributing to strategic decision-making provided practical experience relevant to corporate finance roles. Working within a global corporation like L’Oréal also gave me valuable insights into the complexities of international business and the importance of cross-cultural collaboration.

Three Key Financial Concepts

I present below three key concepts that I used throughout my internship: gross margin, financial modeling, and market analysis.

Gross Margin

Gross Margin Percentage (GM%) is a metric, central to my internship, which reveals the profitability of a product after deducting the cost of goods sold. Analyzing GM% allowed me to assess the financial health of different product lines and contribute to pricing strategies. My team was responsible of three main brands and we would do this monthly analysis on these brands to establish what is going on in the market and what can be fixed.

Financial Modeling

Building financial models based on market data and trends was crucial for forecasting future performance and informing investment decisions. This experience provided valuable insights into how companies use financial projections to guide their strategies.

Market Analysis

Understanding market dynamics, consumer behavior, and competitive landscapes is essential for financial success. My internship provided hands-on experience in analyzing these factors and their impact on financial performance.

Useful Resources

L’Oréal Finance

L’Oréal careers

About the author

The article was written in December 2024 by Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024).

My Experience at Do well do good ESSEC Program

December 18, 2024December 18, 2024 by Lara HADDAD

My Experience at Do well do good ESSEC Program

In this article, Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024) shares her experience as a business analyst in partnership with ESSEC at Do well do good (Formerly ShARE) ESSEC Program. I was able to work with different startups from different industries to better recommend solutions to their problems.

Presentation of the Company

Do well do good is a management consulting NGO partnering with universities worldwide. Its mission is to empower startups with the strategic guidance and resources needed to achieve sustainable growth and profitability. This involves a diverse range of consulting services, including market analysis, financial planning, and strategic development.

Logo of dwdg.

Source: the company.

Presentation of my Internship

My role as a Business Analyst involved supporting three French startups: Lattice Medicine (B2B medical devices), Mendo (AI tool), and Luko (insurance services). My responsibilities ranged from conducting benchmarking and cost optimization analyses for Lattice Medicine to developing market entry strategies for Mendo and improving profitability for Luko through pricing and customer acquisition/retention strategies. This experience required strong analytical skills, financial acumen, and the ability to adapt to the unique challenges of different industries. I learned how financial analysis and strategic planning are intertwined in driving business success, particularly for startups. It was a way for me to combine my passion for finance and strategy to achieve a specific objective. It was particularly interesting to discover new industries and work with experts in the field.

Required skills and knowledge

This experience demanded a blend of hard and soft skills. Hard skills included financial modeling, market analysis, and proficiency in Microsoft Excel for data manipulation and presentation. Equally crucial were soft skills like communication, as I constantly interacted with startup founders and team members. Adaptability was essential to navigate the diverse challenges of different industries, while problem-solving and decision-making skills were key to developing effective solutions for each startup. Finally, time management was crucial to juggle multiple projects simultaneously and meet deadlines.

What I learned

I learned a lot from this experience because it provided me invaluable hands-on experience in applying financial and strategic concepts to real-world business challenges. I gained a deeper understanding of the startup ecosystem, learned how to conduct thorough market research, and developed my financial modeling skills. Working with diverse startups broadened my industry knowledge and honed my ability to adapt quickly to different business models and needs. Perhaps most importantly, I learned the importance of collaboration and communication in a consulting environment.

Three Key Financial Concepts

I present below three key concepts that I used throughout my internship: cost optimization, market penetration, and profitability analysis.

Cost Optimization

Identifying and implementing strategies to reduce costs without compromising quality was a key focus of my work with Lattice Medicine. This involved analyzing expenses, exploring alternative solutions, and developing efficient processes.

Market Penetration

Developing a successful market entry strategy for Mendo required a deep understanding of target markets, competitive landscapes, and financial feasibility. This involved conducting market research, financial projections, and risk assessments.

Profitability Analysis

Improving Luko’s profitability involved analyzing pricing models, customer acquisition costs, and retention rates. This experience highlighted the importance of understanding key financial drivers and their impact on overall business performance.

Why should I be interested in this post?

For ESSEC students interested in finance, this post offers a glimpse into the world of consulting, particularly within the dynamic startup landscape. It demonstrates how core financial skills can be applied to help businesses grow and succeed. The experience of working with multiple startups across different industries is highly valuable for anyone considering a career in financial advisory, venture capital, or entrepreneurship. This type of program can provide a strong foundation for future roles requiring financial analysis, strategic thinking, and problem-solving.

Useful Resources

dwdg Program future leaders

About the author

The article was written in December 2024 by Lara HADDAD (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024).

Chapter 7 Bankruptcies: A Strategic Insight on Liquidations

December 24, 2024December 18, 2024 by Snehasish CHINARA

In this article, Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025) delves into the intricacies of bankruptcy laws, focusing on the pivotal role of Chapter 7 in the United States. This legal framework governs the liquidation process, providing a structured approach for businesses facing severe financial distress. By examining the purpose, procedures, and strategic implications of Chapter 7, this post sheds light on how firms navigate debt management and financial recovery.

Bankruptcy Basics

Bankruptcy is often perceived as a last resort for struggling businesses, a measure taken when all other avenues for debt resolution have been exhausted. However, for businesses of all sizes, understanding bankruptcy is crucial—not only as a potential safeguard but as a strategic consideration in financial planning and risk management. This knowledge becomes increasingly important in today’s volatile global economy, where the financial resilience of a business can determine its survival and growth.

Legal Definition and Purpose of Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” is a legal process under the U.S. Bankruptcy Code that allows individuals and businesses to discharge most of their unsecured debts by liquidating non-exempt assets.

The purpose of Chapter 7 – Liquidation is two fold:

To provide a “fresh start” for debtors who are unable to repay their debts by eliminating the legal obligation for most outstanding liabilities.

To maximize recovery for creditors by selling the debtor’s assets and distributing the proceeds according to a court-approved priority system.

Chapter 7 bankruptcy is widely used when a business is unable to operate profitably or lacks the means to restructure effectively. Chapter 7 typically results in the complete closure of a business, with its assets sold off to repay creditors, as opposed to reorganization under Chapter 11. Below is a detailed breakdown of the Chapter 7 process, implications, and a real-world case study to provide further insight.

Eligibility Criteria: To file under Chapter 7, a business or individual must demonstrate insolvency, where liabilities exceed assets. However, certain entities, such as governmental units and banks, are ineligible and must pursue other legal avenues if insolvent.

This type of bankruptcy is typically used by businesses that are no longer viable or individuals with limited income and substantial debts. Unlike Chapter 11 or Chapter 13 bankruptcies, Chapter 7 does not involve a repayment plan, and businesses filing under Chapter 7 usually cease operations. The process is overseen by a court-appointed trustee, who is responsible for liquidating the debtor’s non-exempt assets, paying creditors, and ensuring compliance with bankruptcy laws.

Figure 1. Number of Chapter 7 Bankruptcy Filings (2013-2022)

Source: computation by the author (data: US Courts Statistics).

Common Causes of Business Bankruptcy

Chapter 7 bankruptcy, or liquidation bankruptcy, is often the final step for businesses unable to overcome financial distress. One major cause is excessive debt, where high liabilities outpace a company’s ability to generate income, as seen with Circuit City. Similarly, declining revenues and changing market demand, like in the case of Toys “R” Us, can leave businesses unable to cover costs.

Poor financial management and high fixed costs, such as rent and payroll, exacerbate financial strain, especially during economic downturns or external shocks like the COVID-19 pandemic. Legal liabilities, such as lawsuits or fines, can also overwhelm a business, forcing liquidation.

Companies failing to adapt to technological disruption, like Blockbuster, or those affected by supply chain issues, risk bankruptcy as they lose competitive footing. Additionally, overexpansion without proper financial controls often depletes resources, leading to insolvency.

Chapter 7 highlights the importance of managing debt, adapting to market changes, and planning for risks to avoid liquidation and ensure business longevity.

Excessive Debt and Overleveraging: Businesses with high levels of debt relative to income often struggle to meet financial obligations, especially if revenue declines. Excessive borrowing, particularly during growth phases, can leave companies vulnerable during economic downturns.

Declining Revenues and Market Demand: A sustained drop in sales or market demand, often due to changing consumer preferences, technological disruption, or increased competition, can cripple a business. With insufficient revenue, businesses cannot cover fixed costs like rent, utilities, and payroll.

Poor Financial Management: Mismanagement of finances, such as inadequate cash flow planning, overinvestment in non-essential assets, or failing to monitor costs, can lead to insolvency. Companies that lack strong financial controls often find themselves unable to weather financial challenges.

Economic Downturns and External Shocks: Recessions, pandemics, or unexpected global events can sharply reduce demand, disrupt supply chains, or increase operational costs. Businesses with thin margins or limited reserves are particularly vulnerable.

Legal Liabilities and Litigation: Lawsuits, regulatory fines, or liability claims can create sudden and overwhelming financial burdens for businesses. Legal judgments can lead to asset seizures, leaving businesses unable to continue operations.

High Fixed Costs and Low Profit Margins: Businesses with high fixed costs (e.g., rent, utilities, long-term leases) and narrow profit margins are especially vulnerable to revenue fluctuations. Even small declines in income can create large deficits, leading to insolvency.

Technological Disruption: Companies that fail to adapt to technological advancements or changing industry practices often lose competitiveness, leading to financial decline. Industries undergoing rapid innovation can quickly make certain business models obsolete.

Lack of Access to Financing: Businesses that cannot secure financing or additional credit to address cash flow issues often resort to Chapter 7. Inability to refinance debt or raise capital can leave businesses unable to meet obligations.

Supply Chain Issues: Disruptions in the supply chain, such as rising costs, delays, or shortages, can increase expenses or reduce product availability, causing financial distress. This is particularly true for businesses reliant on just-in-time inventory systems.

Overexpansion: Rapid expansion without sufficient market analysis or operational capacity often leads to cash flow issues and increased debt. Overestimating demand or investing heavily in new locations can stretch resources thin.

Key Steps in a Chapter 7 Filing

Filing the Petition – The bankruptcy process begins with the debtor filing a Chapter 7 petition in federal bankruptcy court. This petition includes a comprehensive list of all assets, liabilities, income, expenses, and a statement of financial affairs. By filing, the business immediately gains protection from creditors under an automatic stay, preventing further collection actions.

Appointment of a Trustee – After the petition, the court appoints a bankruptcy trustee to oversee the liquidation. The trustee’s role includes managing the debtor’s estate, reviewing asset and liability documentation, and identifying assets eligible for liquidation. The trustee is also responsible for maximizing asset recovery to distribute funds to creditors fairly.

Asset Liquidation and Debt Discharge – The trustee liquidates the non-exempt assets of the business, such as inventory, equipment, and property. Assets are prioritized based on secured and unsecured creditor claims, following a hierarchy established by bankruptcy law. Generally, secured creditors are paid first, followed by priority and unsecured creditors. In most cases, unsecured creditors recover only a fraction of their claims—often below 10%—due to limited available assets. Once assets are distributed, the business’s unsecured debts are discharged, meaning the company is no longer obligated to repay them. This final step formally closes the business, and the entity is typically dissolved.

Implications for Businesses and Creditors

The following are the implications for the businesses and other stakeholders as a result of Chapter 7 bankruptcies –

Pros:

Debt Relief: Business owners are released from most unsecured debts, allowing them to move forward without remaining financial burdens from the insolvent entity.

Simplified Process: Chapter 7 is relatively fast and straightforward compared to Chapter 11, typically concluding within 3-6 months. This timeframe provides a more immediate resolution for both owners and creditors.

Lower Costs: With less need for ongoing legal and operational expenses, Chapter 7 is more cost-effective.

Cons:

Loss of Control: Business owners lose all control of the entity and its assets once the trustee is appointed, limiting their role in decision-making and asset management.

No Future Operations: Chapter 7 results in the closure of the business, removing the opportunity for restructuring or reorganization.

Negative Credit Impact: Owners may face challenges in securing future financing due to the adverse impact on their credit.

Circuit City – A Lesson in Chapter 7 Bankruptcy

Background

Circuit City, founded in 1949, was once a leading electronics retailer in the United States, with over 700 stores and 34,000 employees at its peak. The company was renowned for its innovative approach to retail and customer service, being among the first to adopt superstore formats for consumer electronics. However, by the late 2000s, Circuit City found itself struggling in an increasingly competitive market.

Causes of Financial Collapse

Circuit City’s road to Chapter 7 bankruptcy was marked by several critical missteps and external pressures:

Strategic Mismanagement:

The company attempted to cut costs by eliminating 3,400 of its most experienced sales associates in 2007. This move alienated customers, as less knowledgeable staff were unable to provide the high-quality service that was a hallmark of Circuit City’s brand.

Circuit City also failed to embrace e-commerce aggressively, losing significant market share to competitors like Amazon and Best Buy.

Economic Pressures: The 2008 financial crisis led to a sharp decline in consumer spending, particularly on non-essential items like electronics. Circuit City, already facing financial strain, was hit hard by reduced foot traffic and declining revenues.

Overexpansion and High Fixed Costs: The company had expanded aggressively, opening numerous stores that failed to generate sufficient revenue. This left Circuit City burdened with high lease costs and operational expenses.

Poor Inventory Management: Circuit City struggled with inventory issues, frequently stocking items that were outdated or not in demand. This created significant inefficiencies in cash flow and customer satisfaction.

Filing for Bankruptcy

On November 10, 2008, Circuit City filed for Chapter 11 bankruptcy, intending to restructure its debts and remain operational. However, the reorganization efforts failed for several reasons:

The company was unable to secure adequate financing to support operations during the bankruptcy process.

Suppliers became wary of Circuit City’s ability to pay and began restricting credit terms, creating inventory shortages during the crucial holiday shopping season.

Attempts to find a buyer or merger partner were unsuccessful.

By January 16, 2009, Circuit City announced it would close all its remaining stores and transition to Chapter 7 bankruptcy. The decision marked the end of Circuit City’s 60-year legacy.

The Liquidation Process

Under Chapter 7, a court-appointed trustee oversaw the liquidation of Circuit City’s assets. Key steps included:

Selling Inventory: The company conducted massive clearance sales, liquidating its electronics stock at deep discounts.

Auctioning Real Estate: Store leases and properties were auctioned to recover funds for creditors.

Distributing Proceeds: Proceeds from the liquidation were distributed to creditors based on bankruptcy priority rules:
- Secured Creditors: Received most of the proceeds, as their claims were backed by collateral (e.g., store leases, equipment).
- Unsecured Creditors: Received only a small fraction of their claims, reflecting the risks of unsecured lending.
- Shareholders: As is typical in Chapter 7 cases, shareholders received nothing.

Impact on Stakeholders

Employees: Over 34,000 employees lost their jobs, highlighting the human cost of liquidation bankruptcies. Many workers did not receive severance pay, sparking debates about labour protections in bankruptcy law.

Suppliers: Circuit City’s failure left many suppliers with unpaid invoices, creating ripple effects throughout the electronics supply chain.

Competitors: Circuit City’s exit from the market allowed competitors like Best Buy to capture a larger share of the consumer electronics market, reinforcing the importance of strategic agility in competitive industries.

Lessons Learned

The Circuit City case offers valuable lessons for students and professionals analysing Chapter 7 bankruptcies:

Customer Experience Matters: Cost-cutting measures that compromise customer satisfaction can have long-term consequences, especially in competitive industries.

Adaptation is Crucial: Failure to embrace e-commerce and innovate in response to changing consumer preferences sealed Circuit City’s fate.

Cash Flow is King: Poor inventory management and inability to secure financing during bankruptcy underscored the importance of liquidity for survival.

Chapter 7 as a Last Resort: Circuit City’s transition from Chapter 11 to Chapter 7 illustrates the challenges of restructuring without a strong operational and financial foundation.

Why Should I Be Interested in This Post?

Understanding Chapter 7 bankruptcy is crucial for anyone pursuing a career in finance, business strategy, or law. This post explores the mechanics of liquidation bankruptcy, shedding light on how businesses resolve insolvency and its impact on creditors, employees, and the economy. It provides insights into the strategic decisions driving liquidation under Chapter 7, equipping readers to analyze distressed scenarios and develop a critical perspective on financial risk and recovery strategies.

Moreover, expertise in bankruptcy law opens doors to specialized fields such as turnaround consulting, distressed asset investing, and insolvency law. As global markets increasingly adopt frameworks similar to Chapter 7, this knowledge is highly transferable, offering opportunities to navigate insolvency cases across international markets. Whether you aim to excel in credit analysis, investment banking, or corporate restructuring, this post offers valuable lessons to enhance your strategic and financial acumen.

Useful resources

US Courts Data – Bankruptcy

S&P Global – Bankruptcy Stats

Statista – Bankruptcy data

About the author

The article was written in August 2023 by Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025).

Chapter 7 vs Chapter 11 Bankruptcies: Insights on the Distinction between Liquidations & Reorganizations

December 24, 2024December 18, 2024 by Snehasish CHINARA

In this article, Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025) explores the complexities of Chapter 7 and Chapter 11 bankruptcy laws in the United States, examining how these legal processes impact businesses facing financial distress. With insights into liquidation (Chapter 7) and reorganization (Chapter 11), this post provides a detailed overview of each chapter’s purpose, process, and strategic implications, offering valuable lessons in managing debt and financial recovery.

Bankruptcy Basics

Bankruptcy is a legal framework that helps individuals and businesses unable to meet their financial obligations. When a company files for bankruptcy, it either seeks to reorganize its debts and operations or liquidate its assets to repay creditors, depending on the type of bankruptcy pursued (Chapter 7 or Chapter 11 procedures in US bankruptcy law). Over 30,000 businesses filed for bankruptcy in the US in 2023, demonstrating the critical role this process plays in managing corporate distress. Bankruptcy can offer a pathway to stability, enabling companies to mitigate debt burdens, restructure, and potentially preserve jobs.

1. General Motors (2009) – Corporate Example

Background: General Motors (GM), one of the largest automobile manufacturers, faced a severe financial crisis in 2009. With declining sales, a massive debt load, and high operational costs, GM was unable to meet its financial obligations.

Bankruptcy Filing: GM filed for Chapter 11 bankruptcy to reorganize its debts. Through the bankruptcy framework, GM was able to reduce its liabilities, renegotiate labour contracts, and streamline operations, ultimately emerging as a more financially sustainable company.

Outcome: The bankruptcy framework allowed GM to reorganize its operations and avoid liquidation, protecting jobs and enabling it to continue as a key player in the automotive industry.

2. Lehman Brothers (2008) – Corporate Example

Background: Lehman Brothers, a global financial services firm, was heavily leveraged and exposed to subprime mortgage debt. When the real estate market collapsed, Lehman was unable to meet its debt obligations.

Bankruptcy Filing: Lehman filed for Chapter 11 bankruptcy, marking one of the largest corporate bankruptcies in history. The legal framework allowed Lehman to begin asset liquidation and distribute proceeds to creditors under court supervision.

Outcome: Though Lehman did not emerge as a reorganized company, the bankruptcy framework facilitated an orderly process for winding down the firm and managing creditor claims, preventing a more chaotic collapse.

3. Curtis James Jackson III (50 Cent) – Personal Bankruptcy Example

Background: The rapper and entrepreneur Curtis Jackson (known as 50 Cent) filed for Chapter 11 bankruptcy in 2015 after facing lawsuits and substantial debts he could not pay.

Bankruptcy Filing: Chapter 11 allowed Jackson to reorganize his debts without liquidating his assets entirely. He was able to negotiate repayment terms with creditors while continuing his business ventures.

Outcome: Through the bankruptcy framework, Jackson completed a reorganization plan, ultimately repaying creditors over time and successfully emerging from bankruptcy while preserving his business interests.

Figure 1. Number of Chapter 7 (Liquidation) & Chapter 11 (Reorganisation) 2013 – 2022

Source: US Courts Data (Computation by Author).

Legal Definition and Purpose

The U.S. Bankruptcy Code is a comprehensive set of federal laws enacted to provide a legal framework for bankruptcy filings. It is codified in Title 11 of the United States Code and governs all bankruptcy cases in the country, with different chapters addressing various types of financial distress.

The Code’s objectives include ensuring a fair distribution of the debtor’s assets among creditors, offering a fresh start to debtors, and establishing a structured process for both liquidation and reorganization. The Bankruptcy Code covers everything from the types of bankruptcy filings available to the specific steps and criteria needed for each process. All bankruptcy cases are overseen by federal bankruptcy courts, with judges responsible for ensuring compliance with the Code and adjudicating disputes between debtors and creditors.

Legally, bankruptcy is a federal judicial process governed by the U.S. Bankruptcy Code, which provides the framework to address insolvent companies’ financial liabilities. The primary purposes of bankruptcy law are:

Fair and Equitable Treatment of Creditors: Bankruptcy law ensures that creditors are repaid as fairly as possible based on their claims and priorities.

Relief and Protection for the Debtor: Filing for bankruptcy gives businesses temporary relief from creditor actions, such as lawsuits and collections, allowing them to reorganize or liquidate assets without external pressure.

Rehabilitation or Exit from Market: Depending on the situation, bankruptcy provides businesses with the opportunity to restructure and regain stability or exit the market responsibly.

In practice, bankruptcy serves as both a shield and a tool, giving companies the time and resources to evaluate and act on their financial situation in a structured manner.

Common Causes of Business Bankruptcy

Businesses typically face bankruptcy due to a mix of internal and external factors. Key factors include:

Poor Financial Management: Mismanagement of finances, including high debt levels and inadequate cash flow, is a primary cause. About 50% of small businesses fail within the first five years, often due to financial missteps.

Economic Downturns: Recessions and economic instability can severely impact sales and profit margins, leaving companies unable to meet their financial obligations. The COVID-19 pandemic saw a 20% increase in business bankruptcies in specific sectors, especially retail and hospitality.

High Debt Obligations: When companies rely too heavily on borrowed capital, downturns can leave them unable to service their debt, resulting in financial distress.

Industry Disruptions: Changes in technology and consumer preferences can render a business model obsolete, pushing companies toward bankruptcy. For example, retailers like Sears and J.C. Penney filed for bankruptcy as online shopping trends transformed the retail landscape.

Legal and Regulatory Challenges: Companies in highly regulated industries, such as healthcare and finance, may face significant legal and compliance costs, which can lead to bankruptcy if they are not adequately prepared.

Differences between Chapter 7 & Chapter 11 Bankruptcies

The table below presents the differences between Chapter 7 (liquidation) and Chapter 11 (reorganization) procedures in the US bankruptcy law:

Table 1. Chapter 7 (liquidation) and Chapter 11 (reorganization) procedures in the US bankruptcy law

Source: US Courts

When to opt for Liquidation (Chapter 7) vs. Reorganization (Chapter 11)

Choosing between Chapter 7 liquidation and Chapter 11 reorganization is a pivotal decision for distressed businesses. This choice hinges on various strategic, financial, and operational factors that impact not only the business’s future but also creditors, employees, and shareholders.

Liquidation (Chapter 7)

Ideal Situations for Liquidation:

No Path to Profitability: If a business has no viable path to profitability due to declining industry demand, obsolete products, or irreparable operational inefficiencies, Chapter 7 might be the optimal choice. For example, Circuit City, a major electronics retailer, filed for Chapter 7 in 2009 after failing to adapt to e-commerce trends. With revenue losses of nearly 20% year-over-year and no viable turnaround options, liquidation was chosen to maximize asset value.

Severe Debt Burden: When a business’s debt load is unsustainable and far exceeds its asset value, liquidation might offer the highest recovery rate for creditors. Companies in this position often have debts that are difficult to renegotiate, and without sufficient cash flow to cover interest and principal payments, they are left with no restructuring options.

Asset-Heavy Businesses: Companies with valuable physical assets may benefit more from Chapter 7, where assets like real estate, equipment, and inventory can be sold to partially satisfy creditors. For instance, Toys “R” Us converted to Chapter 7 in 2018, liquidating $1 billion in inventory and assets to repay secured creditors when reorganization proved unfeasible.

Advantages of Chapter 7:

Speed of Resolution: Chapter 7 cases typically conclude within 3 to 6 months, allowing for a quicker closure and reducing prolonged financial strain.

Lower Costs: Compared to Chapter 11, Chapter 7 has lower administrative and legal fees, with an estimated cost between $20,000 and $50,000 for small to medium-sized businesses, whereas Chapter 11 often involves significant legal expenses.

Reorganization (Chapter 11)

Ideal Situations for Reorganisation:

Operational Viability: If a business has strong core operations but is experiencing temporary financial setbacks, Chapter 11 reorganization allows for restructuring while continuing operations. American Airlines, which filed for Chapter 11 in 2011 with over $40 billion in liabilities, was able to reduce labour costs, restructure debt, and emerge stronger through a merger with US Airways.

Need for Asset Preservation: Businesses with valuable intangible assets, such as patents, brands, or customer relationships, can benefit from Chapter 11 to maintain their brand value and market share. Hertz, the global rental car giant, used Chapter 11 in 2020 to retain its market position and shed $5 billion in debt while reorganizing, eventually re-emerging with a stronger balance sheet.

Possibility of Financing and Restructuring: Companies that can attract post-petition financing and renegotiate debts stand a better chance in Chapter 11. Lenders are often more willing to provide financing if the company has a solid plan and ongoing revenue streams. For instance, General Motors secured $30 billion in federal aid during its 2009 Chapter 11 process, allowing it to restructure and continue operations.

Advantages of Chapter 11:

Long-Term Viability: Chapter 11 provides companies with the time and flexibility to reorganise their debts and adjust operations, potentially leading to sustainable profitability.

Creditor Negotiation: Chapter 11 allows debtors to negotiate with creditors for more favourable repayment terms, often resulting in higher recovery rates for unsecured creditors compared to Chapter 7.

Case Study: Toys “R” Us

In 2018, the iconic toy retailer Toys “R” Us filed for Chapter 7 bankruptcy, transitioning from an initial Chapter 11 reorganization filing. The bankruptcy marked one of the most significant retail closures in recent history, affecting 33,000 employees and closing over 700 stores in the U.S. alone.

Background and Context

Company Overview:

Founded: 1948

Industry: Retail (Specialty Toy and Baby Products)

Global Reach: Operated over 1,600 stores worldwide at its peak, including over 700 stores in the U.S.

Legacy: Toys “R” Us was one of the largest toy retailers globally and an iconic brand for several generations.

Financial Background:

Debt Load: Carried approximately $5 billion in debt, primarily from a leveraged buyout (LBO) in 2005 by private equity firms. This debt created a significant financial burden, consuming profits and limiting the company’s ability to reinvest in modernization efforts.

Revenue Pressures: Struggled to compete with e-commerce giants like Amazon and low-cost retailers like Walmart, which offered competitive pricing and convenience.

Initial Bankruptcy Filing (Chapter 11):

Date: September 2017

Objective: The initial Chapter 11 filing was intended to restructure debts and revive the company’s operations. Toys “R” Us aimed to reduce its debt load and improve liquidity to invest in a digital presence and update store experiences.

Challenges: Despite the plan, Toys “R” Us could not generate sufficient revenue to cover operational and restructuring costs due to stiff online competition, seasonal sales dependency, and lack of investor confidence.

Transition to Chapter 7 (Liquidation)

Reasons for Conversion:

Failed Restructuring: By early 2018, the restructuring under Chapter 11 was unsuccessful. The company faced critical cash flow issues and was unable to secure the financing needed to support the reorganization.

Market Challenges: The rise of e-commerce, coupled with consumer preferences shifting away from physical stores, reduced Toys “R” Us’s competitive advantage and viability.

Debt Burden: Servicing a high debt load further strained finances, with Toys “R” Us spending millions annually in interest payments, limiting funds available for reinvestment.

Decision:

Date: March 2018

Outcome: Toys “R” Us officially filed for Chapter 7, leading to the closure and liquidation of its U.S. stores and operations. The transition marked the end of its efforts to survive as a going concern.

The Liquidation Process

Role of the Trustee:

A trustee was appointed to oversee the liquidation of Toys “R” Us’s assets. The trustee’s duties included identifying and valuing assets, conducting sales, and distributing proceeds to creditors based on a priority system.

Assets Liquidated:

Inventory and Merchandise: All remaining toy inventory and other merchandise were liquidated through clearance sales.

Real Estate: Store leases and property rights were sold, with some locations acquired by competitors or other businesses.

Intellectual Property: The “Toys “R” Us” brand, Geoffrey the Giraffe mascot, and other trademarks were sold to generate additional revenue.

Outcome:

Total Proceeds: The liquidation generated approximately $1 billion, but this amount was insufficient to cover the $5 billion debt load fully.
Creditors’ Recovery: Due to the liquidation hierarchy:

Secured Creditors: Received a higher percentage of their claims, as their loans were backed by collateral.

Unsecured Creditors: Recovered less than 5% of their initial investments, reflecting the typical outcome for unsecured claims in Chapter 7 cases.

Impact on Stakeholders

Employees: Approximately 33,000 employees lost their jobs, sparking national debates on the treatment of workers in corporate bankruptcies. Many workers did not receive severance pay, leading to calls for legislative reform in corporate bankruptcy processes.

Suppliers and Partners: Suppliers faced unpaid invoices and significant losses due to the liquidation. The bankruptcy also created ripple effects in the toy industry, impacting toy manufacturers reliant on Toys “R” Us as a major retailer.

Community and Local Economy: The closure of over 700 stores in the U.S. led to economic downturns in local communities, where Toys “R” Us had served as a major employer and contributor to commercial activity.

Key Lessons and Takeaways

1. High Leverage Risks:

The leveraged buyout in 2005 saddled Toys “R” Us with an unsustainable debt load, diverting critical funds toward interest payments instead of innovation and digital transformation.

Insight: Businesses in highly competitive industries should maintain manageable debt levels, particularly when rapid market shifts (like e-commerce growth) threaten traditional business models/

2. Market Adaptation and Innovation:

Toys “R” Us struggled to adapt to changing consumer behaviour, as shoppers increasingly turned to online platforms. The failure to invest in e-commerce further weakened the company’s market position.
Insight: Businesses must continuously invest in technology and customer experience to remain relevant, particularly in the retail sector where consumer preferences shift rapidly.

3. Stakeholder Impact in Chapter 7:

The liquidation resulted in minimal recoveries for unsecured creditors and severe job losses, highlighting the often-painful impact of Chapter 7 on stakeholders.
Insight: Chapter 7 filings may serve as a stark reminder for stakeholders about the importance of financial due diligence and credit protections when engaging with highly leveraged companies.

4. Corporate Governance and Accountability:

The Toys “R” Us case spurred debates on corporate governance, particularly regarding the responsibilities of private equity owners in highly leveraged companies. Questions were raised about whether the company could have been saved with better financial management.
Insight: Effective corporate governance, with a focus on sustainable financing and operational resilience, is essential for long-term business health.

Why Should I Be Interested in This Post?

Understanding bankruptcy is essential for students pursuing careers in finance, consulting, corporate strategy, or law. It provides valuable insights into risk management, financial restructuring, and strategic decision-making, equipping you to navigate complex financial scenarios.

This post enhances your strategic awareness by explaining the frameworks behind liquidation versus reorganization decisions, sharpens your financial acumen to assess distress and recovery strategies, and highlights career opportunities in fields like restructuring and distressed asset investing. With a global perspective, it also offers knowledge transferable across interconnected markets, preparing you for specialized roles in today’s dynamic economy.

Useful resources

US Courts Data – Bankruptcy

S&P Global – Bankruptcy Stats

Statista – Bankruptcy data

About the author

The article was written in August 2023 by Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025).

Real-Time Risk Management in the Trading Arena

February 5, 2025December 16, 2024 by Vardaan CHAWLA

Real-Time Risk Management in the Trading Arena

In this article, Vardaan CHAWLA (ESSEC Business School, Master in Strategy and Management of International Business (SMIB), 2020-2023) shares a case study on real-time risk management in the trading arena.

As an individual investor venturing into the dynamic world of financial markets, it’s crucial to understand and implement effective risk management strategies. The following article, explores the key principles and techniques to safeguard your investments and navigate the potential risks.

Financial markets are very dynamic, interesting, and filled with opportunities and risks. Learning to manage risks in the always-changing world of financial markets is crucial. In the following article I discuss the effective methods to manage, navigate, and avoid risk while dealing in financial markets to help you make informed decisions and safeguard your money.

Understanding Your Risk Tolerance

The first principle of effective risk management is self-awareness. Before diving into financial markets one must assess one’s own risk tolerance meaning the amount of losses you are able to manage comfortably.

Ask yourself critical questions:

How much capital can I realistically afford to lose?
How would a significant loss impact my financial well-being?
Am I prone to emotional decision-making during market fluctuations?

After answering these questions you can start making your trading and risk management strategies and techniques. A very aggressive investor will be open to taking a high amount of risk with more potential results while a conservative investor will be the opposite, low risk with less potential returns. One must invest based on their own loss tolerance.

Core Risk Management Strategies

Once you understand your risk tolerance, equip yourself with these key risk management strategies:

Position Sizing: This describes how much capital is devoted to a specific deal. Starting small is a vital notion, particularly for novices. A typical place to start is with 1% to 2% of your entire portfolio for each deal. With a diversified portfolio, you can progressively raise position size as your experience and risk tolerance permits.
Stop-Loss: Stop orders are vital instruments for safeguarding your investment. To limit potential losses if the market swings against your position, a stop-loss order automatically sells an asset when the price hits a predefined level (lower than the current market price). It’s critical to create stop-loss levels that balance possible asset recovery with risk minimization.
Take Profit: Limit orders work similarly to stop-loss orders in that they automatically lock in profits by selling an asset when the price hits a predefined level (higher than the current market price). This lessens the chance of losing gains if the market turns south. To safeguard your earnings and resist the need to cling to a winning position for too long, use take-profit orders wisely.
Diversification: Avoid putting all of your money in one place. Distribute your investments throughout several industries, sectors, and asset classes. This lessens the effect that a fall in one asset will have on the value of your entire portfolio. Diversification makes your portfolio more stable and less vulnerable to changes in the market.
Risk-Reward Ratio: This measure contrasts the possible gain with the possible loss on a certain transaction. Seek for transactions where the possible profit margin outweighs the potential loss margin. A better risk profile is indicated by a greater ratio. Prior to making a trade, evaluating the risk-reward ratio will help you make well-informed judgments regarding potential gain vs downside.

The figures below illustrate how take-profit and stop-loss can be implemented for a given stock (Meta around August 15,2024). Two orders are sent to the market (at the same time): a sell limit order with a limit price of $290 and a stop order with a trigger price of $280. Note that it is not always possible to place both a limit order an stop order at the same time (it depends on the brokers or trading platforms).

In Figure 1, the stock price stays below the limit price and above the trigger price.

Figure 1. No order execution.

Source: computation by the author.

In Figure 2, the sell limit order is executed as the market price reaches the limit price of the order; the transaction price is $290.

Figure 2. Take profit: execution of the limit order.

Source: computation by the author.

In Figure 3, the sell stop order is executed as the market price reaches the trigger price of the order; the transaction price is $280 (or lower if the market is not very liquid).

Figure 3. Stop loss: execution of the stop order.

Source: computation by the author.

Advanced Risk Management Techniques

As you gain experience, consider incorporating these advanced techniques:

Hedging: This is the process of offsetting possible losses in your underlying holdings by employing derivative instruments, such as option contracts. Before putting hedging methods into practice, careful thought and comprehension are necessary because they can be complicated.
Volatility Targeting: This strategy modifies the overall risk exposure of your portfolio in response to fluctuations in the market. You may lower the sizes of your positions or devote more capital to less volatile assets during times of high volatility. On the other hand, you may decide to take on larger positions or invest in riskier assets during times of low volatility.

Disciplined Execution: The Key to Success

Risk management is not just about having the right tools; it’s about disciplined execution. Here are some essential practices to cultivate:

Trading Plan: One must work meticulously in developing a comprehensive trading plan that clearly defines your entry, exit, risk management strategies, and what you aim to achieve from trading and avoid emotional and impulsive decision-making.
Monitoring and Adjustment: You must also regularly monitor your portfolio and be updated on financial news in order to prepare for potential future losses or opportunities. To maximize your gains utilize Stop loss orders and take profit orders and adjust your trades and position as and when needed.
Emotional Control: When we receive surprise losses or surprise gains we are inclined to make emotional and impulsive decisions that can lead to further future losses. The trader must always make decisions with a calm composed mind to make sound decisions.

By adopting these risk management principles and maintaining disciplined execution, you can navigate the real-time financial markets with greater confidence and minimize the possibility of significant losses. Remember, risk management is an ongoing process that requires constant evaluation and adaptation.

Useful resources

SimTrade course Trade orders

Justin Kuepper (June 12, 2023) Risk Management Techniques for Active Traders

Amir Samimi & Alireza Bozorgian (2022) An Analysis of Risk Management in Financial Markets and Its Effects, Jounrnal of Engineering in Industrial Research, 3(1): 1-7

About the author

The article was written in December 2024 by Vardaan CHAWLA (ESSEC Business School, Master in Strategy and Management of International Business (SMIB), 2020-2023).

Enhancing Financial Market Learning: The ‘Pair & Share’ Pedagogical Approach

July 1, 2025December 15, 2024 by Prof. François LONGIN

Enhancing Financial Market Learning: The ‘Pair & Share’ Pedagogical Approach

In this article, Professor François LONGIN (ESSEC Business School, Finance Department) explains how enhance financial market learning with the ‘Pair & Share’ pedagogical approach.

The SimTrade course

The SimTrade course, offered at ESSEC Business School, is an innovative program designed to provide students with a hands-on understanding of financial markets. At its core, SimTrade combines theoretical knowledge with practical applications, allowing participants to engage in realistic market simulations. Students can experiment with trading strategies, analyze market reactions, and make decisions in a controlled environment, fostering a deeper comprehension of market dynamics and investor behavior.

The course is grounded in the belief that experiential learning is essential for mastering the complexities of finance. By bridging theory and practice, SimTrade empowers students to navigate the fast-paced world of financial markets with confidence and competence.

The ‘Pair & Share’ pedagogical approach

I describe below the “Pair & Share” pedagogical approach that I discovered during the Glocoll program at Harvard Business School. The “Pair & Share” sequence is organized in three steps:

Step 1: Think Individually

I ask participants to consider the question: “What are three key points about financial markets?” for one minute.

Step 2: Pair & Share

I ask participants to exchange their ideas in groups of two. Participant A explains to Participant B what he/she thinks is important about financial markets, and vice versa. I also informed them that in the next step, I will ask the question : What have you learned from your partner?

Step 3: Group Feedback

Insights are shared with the class, summarized into a mind map.

You will find below the mind about financial markets from the students in the course that I teach at ESSEC Business school (Bachelor of Business Administration (BBA), Master in Finance (MiF), and Master in Strategy and Management of International Business (SMIB)).

Please click on the image below to download the mind map of the Pair & Share exercise on financial markets.

Download the mind map of the Pair & Share session

To open the file of the mind map download Xmind that I used during the webinar (there is a free version of the software).

Feel free to improve the mind map with your own ideas.

Methodology of the "Pair & Share" exercise

Please find below a few slides about the "Pair & Share" exercise (methodology and advantages).

Useful resources

SimTrade Demo certificate

SimTrade Courses

SimTrade Simulations

Harvard Business School Global Colloquium on Participant-Centered Learning

About the author

The article was written in December 2024 by Professor François LONGIN (ESSEC Business School, Finance Department).

Why are video games “free”?

December 24, 2024December 14, 2024 by William LONGIN

Why are video games “free”?

In this article, William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026) and Kilien DUPAYRAT (IESEG School of Management, Grande Ecole Program, Entrepreneurship, 2022-2027) discusses “free” video game business models and uses the case studies of League of Legends, Candy Crush, and Axie Infinity as an illustration.

Introduction

There is “no such thing as a free lunch” but somehow the early 21th century has been marked by the emergence of games that don’t need to be purchased to be played.

The video game market matters! It is the biggest entertainment related industry in the world. According to Access Creative College (2022) “the game industry is worth almost double the film and music industry, combined”. In 2022, the global market size of the video game industry was estimated at 217 billion USD and expected to grow at a compound annual growth rate (CAGR) of 13% between 2023 and 2030 according to Grand View Research (2022).

Since its inception in the late 20th century, the video game industry has rapidly evolved from arcade games to immersive experiences across devices. The industry keeps growing and is driven by changing consumer preferences and new technologies. At its disposal is an array of strategies to be profitable. The ways of playing and technologies also evolved with it, from the basic arcade games where you needed to insert a coin to play, to the most advanced business models like blockchain games where the content is made of NFTs. Companies in today’s revenue models master the balance between paying and non-paying players as well as understanding the latest trends.

In this article, we will look at why so many video game companies make their games free and how these new revenue models are the most popular. As a reminder, the revenue model is part of the business model and focuses on how the company makes money by monetizing its products.

Free-to-play (F2P) revenue model

The free-to-play (F2P) revenue model offers free download video games. Their method to generate revenue is through in-game purchases of virtual items for cosmetic, boosting or convenience purposes. The bought items don’t influence the gameplay but can appeal to a desire to design and customize (costumes, colors, etc.) The free-to-play revenue model initially wasn’t popular with investors and companies due to the dominance of traditional premium models, where games were purchased to download. The lack of upfront cost has allowed these sorts of games to reach a larger audience. The F2P model has proven to be highly effective, contributing significantly to the popularization of video games in general. In 2020, Free to play games accounted for “78% of the digital games market revenue” (Davidovici-Nora, 2013).

League of Legends case study

The spread of F2P revenue models came with the rise of online games such as “League of Legends,” free to download but with costly in-game items. The in-game currency is called “Riot Points, RP’s” and can be traded for cosmetic items (skins, wards, emotes) and other non-essential enhancements (event passes, rune pages). Purchases don’t give a gameplay advantage to paying players vs nonpaying players. Therefore, by eliminating barriers to entry to play the game significantly increased its reach. Consider here under the process map of typical experience for a player of “League of Legends” and where transactions take place.

Figure 1 below presents the flow chart “from download to purchase” for the case of League of Legends.

Figure 1. Flow chart from download to purchase: the case of League of Legends.

Source: the authors.

In the flow chart above we can see that once players encounter the in-game store, they are introduced to a wide array of purchasable cosmetics like champion skins and emotes, which have no impact on gameplay but significantly enhance personalization. This creates a cycle of desire: players aspire to own these cosmetics, leading to the purchase of Riot Points (RP) using real money. The emotional satisfaction gained from these purchases’ fuels continued engagement, bringing players back to the game and reinforcing the loop.

Freemium revenue model

The freemium revenue model offers free-to-download video games like F2P games but it doesn’t offer access to the entire game. The differences between both business models are subtle. The gaming experience is incomplete (store purchases include game extensions at a premium). Thus, the name “freemium” is a combination of “free”, the core gaming experience is free and “premium” as the game extensions are purchasable at a premium. In this revenue model there is also possibility to purchase cosmetic items, boosters and convenience improvers.

Candy Crush case study

Candy Crush is an example using the freemium model because it is free to download and begin playing but encourages players to pay for certain enhancements or additional content to improve or expedite their gameplay experience. While the core mechanics—matching candies, progressing through levels, and competing with friends—are accessible at no initial cost, the game limits play sessions through mechanisms like lives (which refill slowly over time) and imposes difficulty spikes on certain levels. Players looking to bypass these limitations, access extra levels more quickly, or gain advantageous power-ups and boosters can purchase them through in-app transactions. These premium offerings are not strictly necessary to play the game, but they greatly enhance or complete the experience, making Candy Crush a clear example of the “freemium” model: the main game is free, yet the most streamlined, convenient, or extended version of play comes at a premium.

Figure 2 below presents the flow chart “from download to purchase” for the case of Candy Crush.

Figure 2. Flow chart from download to purchase: the case of Candy Crush Saga.

Source: the authors.

The flow chart above illustrates how the freemium revenue model typically unfolds for a game like Candy Crush Saga. Initially, players are enticed by the free download and ease of access. After installing, they enter a tutorial or trial phase where resources such as lives are abundant, allowing them to experience the game’s mechanics without frustration. As players progress, the difficulty gradually increases, eventually reaching levels at which winning without purchasing boosts or extra lives becomes challenging. This leads to a point of dissatisfaction or frustration, where the game’s free option feels less enjoyable or even stalled. In response, many players opt to make micro-purchases—buying boosters, additional moves, or unlocking new levels—to overcome obstacles and continue playing seamlessly. This cycle repeats, encouraging ongoing engagement and revenue generation through periodic spending.

Play-to-earn (P2E) revenue model

Revenue Model

The blockchain revenue model is known as the play-to-earn (P2E). These games use blockchain technology to create decentralized gaming ecosystems where players can earn real-world value through in-game activities. Although counterintuitive, this business model brings value to players and to the video game creators at the same time. This model represents a significant shift from traditional gaming paradigms by integrating financial incentives directly into gameplay.

Axie Infinity case study

The game Axie Infinity is a blockchain game and is an example of a P2E game. The game studio charges a rate between transactions in the game economy. “Sky Mavis charges a 4.25% fee to players when they trade Axies on its marketplace.” according to wikipedia.

Figure 3 below presents the flow chart “from download to purchase” for the case of Axie Infinity.

Figure 3. Flow chart from download to purchase: the case of Axie Infinity.

Source: the authors.

The flow chart above illustrates the play-to-earn (P2E) revenue model, using Axie Infinity as an example. The process begins with a free download, allowing players to access the game without an initial purchase. Once immersed in gameplay, players engage in activities—such as battles, breeding, or quests—that reward them with in-game currency. What sets P2E apart is that these virtual assets have real-world value, often tied to cryptocurrencies like Ethereum. Players can trade, sell, or convert their earned in-game currency and items into real money, effectively monetizing their skill, time, and investment in the game. Every transaction, from buying and selling digital creatures (Axies) to acquiring special items, passes through a decentralized marketplace, with a percentage of each trade returning to the game developers. This cycle creates an ecosystem where both players and creators benefit financially, as gameplay activities drive the value of the in-game economy and sustain the platform’s growth.

Conclusion

In conclusion, the “Free-to-Play”, “Freemium”, and “Play-to-Earn” revenue models have revolutionized the way video games generate revenue, each presenting distinct strategies to engage and monetize players while having their games freely downloadable to players. These revenue models are also used in different sectors such as dating applications, social media and music streaming companies.

From a data analysis perspective, both models provide a wealth of information on user preferences and behaviors, allowing for increased personalization and optimization of gaming experiences. However, this also raises ethical questions, particularly concerning the management of gaming addiction and impulsive spending, especially among young or vulnerable players. In terms of performance, statistics often show that the Free-to-Play model can reach a broader user base, while the Freemium model can generate higher revenue per active user due to the need to unlock content, and Play-to-Earn models gain revenue when the gamer user base is active and growing. Each business model has its merits and drawbacks, and the choice of model largely depends on the type of game and the target audience.

Why Should I Be Interested in This Post?

You should be interested in this post because it gives insights on the revenue models companies in the video game industry have adopted. There a section on “blockchain” video games that are very recent and could hold a prevalent space in the years to come. Indeed, by mixing real currency and in-game currency and creating a virtual economy it can become even more addictive and meaningful for players. In the light of the new technologies developed in the augmented reality and virtual reality spaces these types of video games could be the future.

Useful resources

Grand View Research Video Game Market Size, Share & Trends Report Video Game Market Size, Share & Trends Analysis Report By Device (Console, Mobile, Computer), By Type (Online, Offline), By Region (Asia Pacific, North America, Europe), And Segment Forecasts, 2023 – 2030?

Access Creative College How much is the gaming industry worth?

Techquickie (YouTube channel) Blockchain Games Are Here – What You Should Know

Wikipedia Axie Infinity

About the authors

The article was written in December 2024 by William LONGIN (Sorbonne School of Economics, Master in Money Banking Finance Insurance, 2024-2026) and Kilien DUPAYRAT (IESEG School of Management, Grande Ecole Program, Entrepreneurship, 2022-2027).

Top 5 companies in the technology sector

December 25, 2024December 13, 2024 by Nithisha CHALLA

Top 5 companies in the technology sector

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) delves into the top five companies in the technology sector by market capitalization. For each tech company, I provide information into their origins, latest announcements, and notable developments to provide financial professionals and students with actionable insights.

Introduction

The top tech companies are not only industry innovators but also major drivers of global financial markets. Their influence extends from stock market trends to shaping global investment strategies. Their products and services help other companies to improve their productivity. These companies, Apple, Nvidia, Microsoft, Amazon, and Alphabet, dominate global market capitalizations through their relentless focus on advanced technologies like artificial intelligence (AI), cloud computing, and digital services. We examine below the top five tech firms by market capitalization, delving deeper into their financial performance, innovation strategies, and implications for finance professionals.

The picture below shows the world’s 50 valuable companies by market capitalization (Companies Market Cap, August 2024). We can observe that the top 5 companies are related to the technology industry.

World’s top 50 valuable companies by market capitalization

Source: Companies Market Cap.

The market capitalization, commonly called a “market cap”, is the total market value of a publicly traded company’s outstanding shares and is widely used to measure how much a company is worth. In most cases, it can be easily calculated by multiplying the share price with the amount of outstanding shares.

Apple

Apple Inc was founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne in Cupertino, California. Known for its consumer electronics like the iPhone, Mac, and Apple Watch, Apple also thrives in services such as the App Store and Apple Music, contributing to over 20% of its revenue. Apple consistently generates substantial revenue from its ecosystem of devices and services. In fiscal 2024, its services division alone brought in over $70 billion, reflecting a 25.17% change in the market capitalization growth from the previous year.

Logo of Apple Inc.
Logo of Apple Inc tech company
Source: the company.

As of December 2024 Apple has a market cap of $3.748 Trillion USD. This makes Apple the world’s most valuable tech company by market cap according to “companies market cap” company data.

The picture below shows the market capitalization history of Apple from 1996 to 2024.

Market cap history of Apple from 1996 to 2024

Source: Companies Market Cap.

The picture below shows the stock price history of Apple from 1980 to 2024.

Stock price history of Apple from 1980 to 2024

Source: Companies Market Cap.

The company’s stock remains a popular choice for institutional investors due to its consistent performance and market leadership. Apple has steadily increased its dividend and share buybacks, returning over $100 billion to shareholders annually in recent years. Despite declining iPhone sales, Apple’s diversification into wearables and services helped sustain strong financials. It also topped the list of the world’s most valuable global brands in 2023 with a brand value of $880 billion (Business 2 community, 2024).

Initially focused on personal computers, Apple has evolved into a consumer electronics powerhouse. In recent years, its technological innovations, including the Vision Pro mixed-reality headset announced in 2023, underscore its push into augmented and virtual reality spaces. Its expansion into India has been a game-changer, with manufacturing operations set to reduce costs and increase market penetration in one of the fastest-growing smartphone markets.

Nvidia

Founded in 1993, Nvidia Corporation is a leader in Graphics Processing Unit (GPU) development, powering the AI revolution. Its AI hardware is critical for training large language models (LLMs), cementing its role in both consumer gaming and enterprise-level AI solutions. In fiscal 2024, its services division alone brought in over $1.8 trillion, reflecting a 178.92% change in the market capitalization growth from the previous year.

Logo of Nvidia
Logo of Nvidia tech company
Source: the company.

As of December 2024, Nvidia has a market cap of $3.411 Trillion USD. This makes Nvidia the world’s 2nd most valuable tech company by market cap according to “companies market cap” company data. The market capitalization, commonly called market cap, is the total market value of a publicly traded company’s outstanding shares and is widely used to measure how much a company is worth.

The picture below shows the market capitalization history of Nvidia from 1999 to 2024.

Market cap history of Nvidia from 1999 to 2024

Source: Companies Market Cap.

The picture below shows the Stock price history of Nvidia from 1999 to 2024.

Stock price history of Nvidia from 1999 to 2024

Source: Companies Market Cap.

Nvidia dominates the GPU market, controlling over 85% of the discrete GPU space globally. It boasts a gross margin of approximately 65%, one of the highest in the semiconductor industry. According to the Business 2 community, Nvidia’s revenue surged, particularly in its data center segment, which accounted for $15 billion in 2023. Its AI chipsets have become a cornerstone for AI development across industries, leading to increased investor confidence.

Nvidia is integral to AI, as its GPUs are critical for training large language models (LLMs) and generative AI tools. This has led to surging demand for its A100 and H100 chips. Nvidia announced collaborations with Tesla and other automakers for AI-driven autonomous driving technologies.

The company continues to expand its AI reach through strategic investments in startups and partnerships with cloud providers like Amazon Web Services (AWS). Its Omniverse platform is being adopted for digital twins, a technology with applications in industrial design and smart cities.

Microsoft

Established in 1975 by Bill Gates and Paul Allen, Microsoft Corporation has been at the forefront of software development. Its strategic investment in OpenAI and integration of generative AI into its Office suite and Azure cloud services have significantly bolstered its growth. Investors and students can learn from Microsoft’s ability to adapt its business model over decades, sustaining growth in both legacy and emerging markets. In fiscal 2024, its services division alone brought in over $70 billion, reflecting a 19.59% change in the market capitalization growth from the previous year.

Logo of Microsoft Corporation

Source: the company.

As of December 2024 Microsoft has a market cap of $3.342 Trillion USD. This makes Microsoft the world’s 3rd most valuable tech company by market cap according to “companies market cap” company data. The market capitalization, commonly called market cap, is the total market value of a publicly traded company’s outstanding shares and is widely used to measure how much a company is worth.

The picture below shows the market capitalization history of Microsoft from 1996 to 2024.

Market cap history of Microsoft from 1996 to 2024

Source: Companies Market Cap.

The picture below shows the stock price history of Microsoft from 1986 to 2024.

Stock price history of Microsoft from 1986 to 2024

Source: Companies Market Cap.

Microsoft has surpassed a $3 trillion market cap for the first time in January 2024. It has made a significant investment in quantum computing with the development of its Azure Quantum platform.

Microsoft’s Copilot AI has been integrated across its Office Suite, including Word, Excel, and PowerPoint, revolutionizing productivity software. Recent news in June 2024 states that it has strengthened its partnership with OpenAI to bring advanced AI tools to Azure, making enterprise AI more accessible globally.

Amazon

Amazon Inc, founded in 1994 by Jeff Bezos, revolutionized e-commerce before expanding into cloud computing and entertainment. Amazon Web Services (AWS) remains a dominant player in the cloud sector, while its AI capabilities support logistics, retail, and media content. In fiscal 2024, its services division alone brought in over $85 billion, reflecting a 54.2% change in the market capitalization growth from the previous year.

Logo of Amazon
Logo of Amazon tech company
Source: the company.

As of December 2024 Amazon has a market cap of $2.421 Trillion USD. This makes Amazon the world’s 4th most valuable tech company by market cap according to “companies market cap” company data.

The picture below shows the market capitalization history of Amazon from 1997 to 2024.

Market cap history of Amazon from 1997 to 2024

Source: Companies Market Cap.

The picture below shows the Stock price history of Amazon from 1997 to 2024.

Stock price history of Amazon from 1997 to 2024

Source: Companies Market Cap.

Amazon’s Bedrock AI service has enabled enterprises to deploy customized AI models, further enhancing its AWS offerings. According to CRN, AWS held a 31% market share in the third quarter of 2024 and generated $27.5 billion in total sales during this period.

And according to CRN, Microsoft’s Intelligent Cloud business generated $24.1 billion in sales during the third quarter of 2024, up 20 percent year over year. It has also ramped up investments in drone technology, with Prime Air expanding to multiple cities for rapid deliveries. Its expansion into healthcare, with telemedicine services and pharmacy offerings, demonstrates diversification into high-growth industries.

Amazon’s continued investment in AI, including generative AI tools for its AWS customers, has strengthened its competitive edge in cloud services. Its e-commerce business has also seen growth, particularly in emerging markets contributing significantly, with innovations in logistics and Prime memberships driving customer retention.

Alphabet (Google)

Alphabet was founded in 1998 as Google by Larry Page and Sergey Brin in Menlo Park, California (later restructured as Alphabet Inc. in 2015). Google’s dominance in search and online advertising is complemented by its ventures in AI, particularly through its DeepMind subsidiary. It leverages its dominance in digital advertising while investing heavily in AI, autonomous driving (Waymo), and cloud services. Some of the companies under Alphabet are Calico, GV, Capital G, Verily, Waymo, X and Google Fiber. In fiscal 2024, its services division alone brought in over $65 billion, reflecting a 36.57% change in the market capitalization growth from the previous year.

Logo of Alphabet
Logo of Alphabet tech company
Source: the company.

As of December 2024 Alphabet (Google) has a market cap of $2.399 Trillion USD. This makes Alphabet (Google) the world’s 5th most valuable tech company by market cap according to “companies market cap” company data.

The picture below shows the market capitalization history of Alphabet from 2014 to 2024.

Market cap history of Alphabet from 2014 to 2024

Source: Companies Market Cap.

The picture below shows the stock price history of Alphabet from 2004 to 2024.

Stock price history of Alphabet from 2004 to 2024

Source: Companies Market Cap.

Nearly eight years into their journey as an AI-first company, Alphabet launched Gemini AI, a generative AI model to compete with OpenAI’s GPT, integrated into Google Workspace and search functions. Alphabet’s significant developments in Waymo, an autonomous vehicle subsidiary has an expansion of robotaxi services in major U.S. cities.

Recently Alphabet announced an ambitious plan to power all operations with 100% renewable energy by 2030. Its advertising revenues saw a resurgence in 2024 after a decline due to privacy changes in prior years.

Conclusion

The dominance of the top five technology firms Apple, Microsoft, Nvidia, Amazon, and Alphabet, is a testament to their ability to innovate, adapt, and lead in a rapidly evolving market landscape. Their influence extends beyond their respective industries, shaping global economic trends, investment strategies, and technological advancements. Their products and services help other companies to improve their productivity. Their market cap rankings serve as a barometer for the health of the tech sector and the global economy, making them essential for any professional seeking to navigate today’s financial landscape effectively.

Why should I be interested in this post?

For finance professionals, the performance and strategic moves of these tech giants offer valuable lessons in market resilience, innovation-driven growth, and capital allocation. Understanding the trajectories and current strategies of these firms helps in identifying investment opportunities and evaluating risks in the tech sector.

Useful resources

Companies market cap Largest tech companies by market cap

Invest News Network (INN) Technology Stocks: 10 Biggest Companies in 2024

Business 2 Community Top 10 Tech Companies in the World by Market Capitalization in 2024

Computer Reseller News (CRN) Cloud Market Share For $84B Q3 2024: AWS, Microsoft, Google Cloud Lead

Visual Capitalist Ranked: The 50 Most Valuable Companies in the World in 2024

About the author

The article was written in December 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

My Apprenticeship Experience as Customer Finance & Credit Risk Analyst at Airbus

September 4, 2025December 11, 2024 by Snehasish CHINARA

Snehasish CHINARA Customer Finance & Credit Risk Analyst

In this article, Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025) shares his experience as Customer Finance & Credit Risk Analyst at Airbus, which is a leader in the commercial aviation industry as an original equipment manufacturer (OEM).

About Airbus SAS

Airbus SAS, founded in 1970, is a leading European multinational aerospace corporation with a global presence. Specializing in the design, manufacturing, and delivery of aerospace products, services, and solutions, Airbus has established itself as a cornerstone of innovation and excellence in the aviation industry.

From commercial aircraft to defence and space systems, Airbus covers a wide array of sectors, each driven by cutting-edge technology and a commitment to sustainability. Their iconic product line, including the A320 and A350 families, represents the forefront of efficiency, safety, and performance in aviation.

Beyond manufacturing, Airbus is also deeply engaged in digital transformation, pushing boundaries with initiatives in autonomous flying, AI-driven processes, and greener aviation solutions. As an industry leader, Airbus is committed to decarbonizing the aerospace industry, having set ambitious goals to reduce its environmental footprint through innovations such as sustainable aviation fuels and hydrogen-powered aircraft.

With a global workforce of over 130,000 employees and operations in more than 170 locations worldwide, Airbus continues to be at the heart of the aerospace revolution, shaping the future of flight.

Logo of Airbus.

Source: the company.

My Experience as a Customer Finance & Credit Risk Analyst at Airbus

During my time as a Customer Finance & Credit Risk Analyst at Airbus, which was part of my Master in Management degree at ESSEC Business School, I had the opportunity to play a pivotal role in leading financial analyses and supporting high-stakes deal campaigns in the aviation sector. This experience was instrumental in sharpening my analytical and credit risk assessment capabilities, as I worked on transactions exceeding €200M, where each decision carried significant financial implications.

In this role, I focused on developing advanced financial models and internal customer credit rating models, applying methodologies from major credit rating agencies like Moody’s, S&P, and Fitch. These models, built using tools such as Excel, R, and Python, allowed my team to improve the accuracy of risk predictions for over 200 global client companies (mostly airline companies) air. By conducting industry-wide credit risk analyses, I ensured that each deal was supported by a thorough understanding of financial and credit health, helping Airbus mitigate risks and seize opportunities in a highly competitive market.

A key highlight of my work involved analysing the impact of M&A and restructuring activities within the aviation industry. This hands-on experience further honed my ability to deliver comprehensive financial forecasts and credit risk analyses.

One of the most rewarding aspects of my role was the opportunity to present these financial insights directly to senior executives. Communicating complex financial data effectively is crucial when high-value transactions are involved, and this responsibility significantly enhanced my presentation and communication skills. My experience in presenting to top executives helped me not only translate data into actionable strategies but also contributed to the decision-making process at the highest level.

Overall, my role as a Customer Finance & Credit Risk Analyst at Airbus was a formative experience that deepened my expertise in financial modelling, credit risk analysis, and strategic financial communication. It was an invaluable opportunity to contribute to significant aviation industry deals and refine my skills in evaluating financial performance and credit health at a global scale.

My missions

The objective my project was to achieve the following:

Led the migration of Airbus’ internal credit rating model from a manual Excel-based system to an automated and scalable R-based system, improving data processing accuracy and decision-making.

Educated internal teams on industry-specific financial metrics and KPIs to help them understand the financial health of Airbus’ customers.

Conducted comprehensive financial health analyses and credit rating evaluations for over 200 global companies, using tools such as Excel, R, and Python.

Supported marketing and sales campaigns by providing financial insights, risk evaluations, and industry trends to improve Airbus’ position in the aviation sector.

Required Skills and Knowledge

As a Customer Finance & Credit Risk Analyst at Airbus, several key skills and knowledge areas were essential to fulfilling my responsibilities effectively:

Financial Analysis and Modelling: Proficiency in developing financial models and credit rating models was crucial. These models helped me assess the financial health of clients and predict risks. Additionally, I frequently used tools like Excel, R, and Python to develop robust financial models that supported decision-making processes.

Credit Risk Assessment: Applying methodologies from Moody’s, S&P, and Fitch allowed me to conduct comprehensive credit risk assessments. Understanding credit rating criteria and financial ratios helped me evaluate over 200 global companies in the aviation sector, ensuring accurate risk predictions.

Industry Knowledge: Understanding the aerospace industry inside and out was essential. I became familiar with the dynamics between OEMs, lessors, airlines, and financial institutions. This helped me make better-informed decisions when assessing the creditworthiness of our clients and providing insights that contributed to Airbus’ overall financial strategies.

Data Analysis and Reporting: I worked with large datasets to analyse financial performance and assess risk factors. Creating financial reports, dashboards, and presentations helped me convey complex data in a way that was clear and actionable, especially when presenting to senior executives.

Automation and Process Improvement: One of my major projects involved transitioning our internal credit rating system from Excel to a more efficient R-based platform. This required me to develop a scalable solution that not only improved accuracy but also streamlined the data processing workflow, making everything faster and more reliable.

Collaboration and Stakeholder Management: Working closely with various teams within Airbus and external partners taught me the importance of effective communication and teamwork. Presenting my financial insights to senior executives also sharpened my ability to convey complex information in a clear, understandable way, ensuring everyone was aligned with our financial strategies.

This diverse set of skills allowed me to support high-value transactions, improve credit risk assessment processes, and contribute to strategic initiatives at Airbus.

What I learned

Key Learning Outcomes of this project :

Applying Financial Models to Real-World Scenarios: I gained hands-on experience using advanced financial models such as DCF, LBO, and credit rating models. This helped me make informed, evidence-based conclusions to assess credit risk and guide strategic decision-making.

Enhanced Risk Assessment Skills: I learned how to apply credit rating methodologies from major agencies like Moody’s, S&P, and Fitch. This allowed me to develop a deeper understanding of risk factors affecting both the aviation sector and individual companies, enhancing my ability to forecast risks with greater accuracy.

Collaboration and Stakeholder Engagement: Collaborating with cross-functional teams within Airbus, I developed strong communication skills, particularly in presenting complex financial insights to senior executives and aligning my work with broader corporate objectives.

Data-Driven Decision Making: I honed my ability to analyse large datasets, extract meaningful financial insights, and turn them into actionable recommendations. This process strengthened my strategic thinking and ability to contribute to critical business decisions.

Process Automation and Efficiency Improvement: Leading the automation of the internal credit rating system taught me how to streamline workflows and improve efficiency, significantly reducing the time spent on manual processes while enhancing data accuracy.

Concepts related my Apprenticeship

I explain below three business concepts related my apprenticeship: value chain, credit risk analysis, and financial ratios.

Value Chain

The commercial aviation sector comprises multiple interconnected players, each contributing to different stages of the value chain. The value chain begins with aircraft Original Equipment Manufacturers (OEMs) like Airbus and Boeing, which design and manufacture aircraft. These OEMs negotiate deal terms with airlines and lessors for the sale or lease of aircraft. The deals can range from firm orders, where aircraft are purchased outright, to leasing agreements, where airlines lease aircraft for operational flexibility.

In this value chain, airlines are the primary end users, operating the aircraft to transport passengers (commercial airplane) and freight (cargo airplane). Lessors act as intermediaries, purchasing aircraft from OEMs and leasing them to airlines, offering flexibility in fleet management. Additionally, Maintenance, Repair, and Overhaul (MRO) providers play a critical role in ensuring the safety and performance of aircraft throughout their lifecycle. Financial institutions and credit rating agencies are also integral players, assessing the creditworthiness of the companies involved and financing large-scale aircraft transactions.

The deal-signing process with OEMs often involves complex negotiations on pricing, delivery schedules, and terms of financing. Types of deals include sale agreements, wet or dry leases, and purchase options. The financial arrangements and credit risk evaluations play a pivotal role in securing these deals, ensuring that all parties can fulfil their obligations over the aircraft’s operational life.

Credit Risk Analysis

Credit risk analysis is the process of evaluating the likelihood that a borrower or counterparty will default on their financial obligations. In the context of my work at Airbus, credit risk analysis was crucial for understanding the financial health of customers—whether they were airlines, lessors, or MRO service providers. By analysing financial statements, liquidity ratios, and external market factors, we could gauge the risk of default and the overall creditworthiness of these companies.

Credit ratings, provided by the three major credit rating agencies—Moody’s, S&P, and Fitch, are a standardized way to assess a company’s financial health and default risk. These agencies evaluate the financial statements of companies, industry trends, and macroeconomic conditions to assign ratings that range from AAA (lowest risk) to D (in default). Credit ratings are essential for investors and lenders in determining the risk profile of potential investments and for companies like Airbus when structuring deals.

Airbus, like many large corporations, uses internal customer credit rating models alongside external credit ratings to gain deeper insights into the financial stability of its clients. These models allow Airbus to account for industry-specific factors and customer performance metrics that external agencies might overlook. Internal models are particularly valuable in predicting potential risks and making informed decisions about financing, delivery schedules, and long-term contracts, ensuring that Airbus minimizes exposure to credit risk.

Financial Ratios

Financial ratios (key performance indicators (KPIs) for the financial health of a firm) are vital in assessing the financial health of companies in the aviation sector. During my time at Airbus, I focused on analysing these KPIs to evaluate the financial stability and creditworthiness of our customers:

Liquidity Ratios: Indicators like the current ratio and quick ratio show a company’s ability to meet its short-term obligations. A higher ratio suggests stronger liquidity and a lower risk of financial distress.

Debt-to-Equity Ratio: This KPI measures the proportion of debt financing relative to equity. A lower debt-to-equity ratio typically indicates a more financially stable company, with less risk of default in turbulent market conditions.

Profitability Margins: Metrics like net profit margin and EBITDA margin give insights into how efficiently a company is operating. Higher profitability suggests a company can generate sufficient revenue to cover its expenses, even in challenging times.

Gearing Ratio: A company’s gearing ratio measures its financial leverage and how reliant it is on debt to finance its operations. A higher gearing ratio may indicate increased financial risk.

Altman Z-Score: This is a composite score used to predict bankruptcy risk, combining profitability, leverage, liquidity, solvency, and activity ratios. It’s particularly useful for assessing companies under financial stress, a key concern in the aviation sector post-COVID-19.

Cash Flow from Operations: A company’s ability to generate consistent cash flow from its core operations is a strong indicator of financial health. In the aviation sector, where cash flow can be cyclical, maintaining positive cash flow is critical for long-term sustainability.

The following table provides some of the important financial ratios used to estimate the risk of a company. High financial risk is implied by high or low measure according to the ratio.

Table 1. Financial ratios

Financial ratios

Source: The author.

Ratios are most useful when compared between companies in similar sectors and over time. Multiple measurements may be necessary for each given firm to fully comprehend the financial risk.

Why Should I Be Interested in This Post?

If you are passionate about the aviation sector, finance, and risk management, this role as a Customer Finance & Credit Risk Analyst at Airbus offers an exceptional opportunity to develop a deep understanding of the global aviation market while working on high-impact financial transactions. You’ll be at the forefront of evaluating the creditworthiness of major airlines, lessors, and other key players in the industry, gaining valuable insights into how financial health and risk factors influence large-scale deals.

This position also allows you to hone your skills in advanced financial modeling, risk assessment, and credit rating, using real-world data to drive decision-making on transactions worth millions of euros. The chance to work closely with cross-functional teams, present findings to senior executives, and contribute directly to Airbus’ business strategy ensures that you will grow both technically and professionally.

Additionally, the aviation industry is dynamic, with constant innovations in technology, sustainability initiatives, and global market trends. By working in this role, you’ll be part of a sector that plays a pivotal role in global transportation and trade, offering immense potential for career growth and advancement.

Useful resources

Airbus

Allianz Trade Financial Risk

Deloitte Financial Risk

About the author

The article was written in October 2024 by Snehasish CHINARA (ESSEC Business School, Grande Ecole Program – Master in Management, 2022-2025).

CRSP

December 30, 2024December 9, 2024 by Nithisha CHALLA

CRSP

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) examines the history, features, applications, and relevance of CRSP, with a special focus on why it matters to finance professionals and students.

Introduction

CRSP (Center for Research in Security Prices) is a leading financial database renowned for its comprehensive collection of security price data, returns, and market indexes. It is a trusted resource for academics, researchers, and professionals who rely on historical datasets for empirical research and strategic decision-making. With a focus on U.S. markets, CRSP has set the gold standard for securities data, supporting countless studies in finance and economics.

Mastering CRSP not only deepens a student’s understanding of financial markets but also signals to potential employers a commitment to analytical rigor and excellence in finance—a key advantage in a competitive job market.

The History of CRSP

Established in 1960 at the University of Chicago, CRSP was founded to provide accurate and comprehensive data on U.S. stock markets for academic research. Its first dataset covered securities listed on the New York Stock Exchange (NYSE), laying the foundation for rigorous empirical research in finance. Over time, CRSP expanded to include data from other exchanges, such as the American Stock Exchange (AMEX) and NASDAQ, creating an unparalleled repository of historical market information.

Logo of CRSP

Source: the company.

CRSP’s pioneering methodologies in data collection and standardization have significantly contributed to advancements in financial theory and practice. Its datasets have been integral to groundbreaking studies, including those that led to Nobel Prizes in Economics like Eugene Fama.

Key Features

Certain key features of CRSP make it very useful as a database such as its Comprehensive Market Data, High-Quality Data, Unique Identifiers, Event Studies and Analytics, and Customizable Datasets.

As an example, the picture below presents the CRSP website Interface.

CRSP website Interface
CRSP Interface
Source: the company.

Comprehensive Market Data

In the domain of finance, where historical accuracy and data consistency are critical, the Center for Research in Security Prices (CRSP) database has established itself as an invaluable resource. Maintained by the University of Chicago Booth School of Business, CRSP provides high-quality financial and market data, widely recognized for its rigor and reliability.

CRSP provides historical data on stock prices, returns, and dividends dating back to 1926. It includes data on U.S. equity, fixed-income securities, mutual funds, and market indexes.

High-Quality Data

Known for its accuracy and reliability, CRSP meticulously cleans and standardizes data for research-grade quality.

Unique Identifiers

Employs permanent and unique identifiers for securities, ensuring seamless tracking across corporate events such as mergers or name changes.</p

Event Studies and Analytics

CRSP supports event-based analyses, including stock splits, delistings, and corporate actions. It enables users to study the impact of specific events on stock performance.

Customizable Datasets

CRSP allows users to tailor data queries based on timeframes, security types, or specific indices.

Applications in Finance and Business

There are several applications of CRSP in finance and business such as Market Benchmarks, Strategic Planning, academic research, and Corporate Finance.

Academic Research: CRSP is the backbone of empirical finance, aiding studies on asset pricing, portfolio theory, and market efficiency.
Investment Strategies: Asset managers and analysts use CRSP data to backtest trading strategies, analyze market trends, and optimize portfolios.
Market Benchmarks: CRSP provides widely used benchmarks like the CRSP Indexes, which are integral to understanding market dynamics.
Corporate Finance: Researchers and professionals leverage CRSP for analyses on mergers, acquisitions, and the impact of financial policies.

Advantages and Limitations of CRSP

Though there are multiple advantages of using this database there are also certain limitations that we have to consider:

Advantages of CRSP

Historical Depth: CRSP’s long-term datasets enable robust time-series analyses and longitudinal studies.
Reliability: Trusted by academics and practitioners for its meticulous approach to data accuracy.
Comprehensive Coverage: Includes data on a broad range of financial instruments and corporate actions.

Challenges and Limitations

Cost: Access to CRSP is subscription-based and can be expensive for individual users or smaller institutions.
U.S.-Centric Focus: While exhaustive for U.S. markets, it offers limited data on international securities.
Technical Complexity: Requires expertise to navigate and analyze its extensive datasets effectively.

Why CRSP Matters in 2024

In 2024, as financial markets grow increasingly complex, CRSP’s role as a reliable data source is more critical than ever. The database supports cutting-edge research on topics such as algorithmic trading, behavioral finance, and the impact of ESG factors on market performance. With its legacy of contributing to financial innovation, CRSP remains a vital resource for understanding and navigating modern markets.

Conclusion

CRSP stands as a testament to the power of high-quality data in shaping financial research and practice. Its depth, precision, and historical scope make it indispensable for academics, researchers, and industry professionals. As markets evolve, CRSP continues to provide the tools and insights needed to analyze trends, test hypotheses, and drive informed decisions.

Why should I be interested in this post?

For finance students, CRSP is more than a database—it’s an educational gateway to understanding market behavior, testing financial theories, and developing data-driven insights. Familiarity with CRSP equips students with the skills to conduct empirical research and enhances their readiness for roles in asset management, investment banking, and academia.

Useful resources

CRSP CRSP research data products

CRSP CRSP US Stock Databases

Wikipedia Center for Research in Security Prices

About the author

The article was written in December 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

Compustat

December 30, 2024December 9, 2024 by Nithisha CHALLA

Compustat

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) delves into Compustat, its origins and history, features, applications, and its critical role in shaping modern finance.

Introduction

In an era where data drives decision-making, having access to reliable and standardized financial information is essential for academics, analysts, and professionals in finance. Compustat is a comprehensive database that offers detailed financial and economic data on publicly traded companies across the globe. Renowned for its standardized and comparable datasets, it is extensively used for financial modeling, investment research, and academic studies. It is especially valued in environments where precision, consistency, and historical depth of data are paramount.

Investing time in learning how to navigate and apply insights from Compustat is not merely an academic exercise; it’s a practical step toward becoming a data-savvy finance professional ready to tackle real-world challenges.

The History of Compustat

Compustat traces its origins to the 1960s when Standard & Poor’s developed it as a digital repository for corporate financial data. Initially focused on U.S. companies, the database expanded its scope to include international firms, establishing itself as a global standard for financial information. Over decades, Compustat evolved with technological advancements, incorporating tools for analytics and data visualization, thus maintaining its relevance in an increasingly complex financial landscape.

The acquisition of Compustat by S&P Global(Standard and Poor) further solidified its position, ensuring integration with other S&P products like Capital IQ, enhancing both usability and depth.

Key Features of Compustat

Certain key features of Compustat make it very useful as a database such as its extensive financial data, global reach, standardized metrics, customizable data access, and integration capabilities

As an example, the picture below presents the screenshot of the Compustat website.

Compustat website Interface

Source: the company.

Extensive Financial Data

Compustat, a product of S&P Global, is a robust database that provides financial, economic, and market data, making it a cornerstone for those engaged in quantitative research and corporate analysis. Compustat covers thousands of companies’ income, balance sheets, and cash flow statements. It includes detailed information on assets, liabilities, revenues, expenses, and equity.

Global Reach

Compustat provides data on companies from North America, Europe, Asia-Pacific, and emerging markets. It also features coverage of both active and inactive companies for historical analysis.

Standardized Metrics

Compustat ensures consistency and comparability across industries and geographies. It adheres to accounting standards, enabling uniform analysis.</p

Customizable Data Access

Allows users to tailor datasets according to specific time frames, industries, or financial metrics.

Integration Capabilities

Compustat is compatible with statistical software like R, Python, and MATLAB for advanced analytics. It can be integrated with S&P Global’s broader suite of tools, enhancing data utility.

Applications in Finance and Business with Compustat

There are several applications of Compustat in finance and business such as equity research and valuation, credit analysis, academic research, corporate strategy, and benchmarking

Equity Research and Valuation: Investment professionals use Compustat to build financial models, perform company valuations, and assess market performance.
Credit Analysis: Lenders and credit analysts utilize Compustat’s data to evaluate borrowers’ financial health and creditworthiness.
Academic Research: Scholars rely on Compustat for empirical studies on market behavior, corporate performance, and economic trends.
Corporate Strategy and Benchmarking: Businesses use the database for competitive analysis and to benchmark their performance against peers.

Advantages and Limitations of Compustat

Though there are multiple advantages of using this database there are also certain limitations that we have to consider:

Advantages of Compustat

Depth of Data: Historical records spanning decades provide valuable insights for longitudinal studies.
Reliability: Maintained by S&P Global, Compustat is a trusted source of financial information.
Customization: The ability to filter and extract tailored datasets enhances its utility across various applications.

Challenges and Limitations

Cost: The subscription fee is substantial, which may limit access for small organizations or individual users.
Complexity: Navigating the platform and interpreting data may require specialized training.
Limited Non-Financial Metrics: Focuses primarily on financial data, with less emphasis on qualitative aspects like ESG (Environmental, Social, Governance) metrics.

Why Compustat Matters in 2024

In the rapidly evolving financial landscape of 2024, Compustat remains a vital resource. With the growing complexity of global markets, the need for standardized and reliable data has never been greater. As businesses increasingly adopt AI-driven analytics, Compustat’s clean, structured datasets are a foundation for machine learning models and predictive analytics. Furthermore, its historical archives enable researchers to analyze economic trends and market cycles with unparalleled depth.

Conclusion

Compustat stands as a benchmark in financial databases. Its extensive features, historical depth, and global reach make it indispensable for professionals and academics. Compustat empowers users to make informed decisions in a data-driven economy by bridging the gap between raw data and actionable insights.

Why should I be interested in this post?

For finance students, understanding and utilizing Compustat can be a game-changer. Mastery of this database enhances research capabilities and provides a competitive edge in the job market. Familiarity with Compustat signals to employers a proficiency in handling large-scale financial data and performing advanced analytics skills highly sought after in finance, investment banking, and consulting.

Useful resources

S&P Global Compustat Financials

Fidelity Investments Introduction to Standard & Poor’s Compustat

European University Institute (EUI) Compustat – Standard and Poor’s

Wikipedia Compustat

About the author

The article was written in December 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

Statista

December 30, 2024December 9, 2024 by Nithisha CHALLA

Statista

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) explores Statista, its origin, features, applications, and its value as a go-to resource for data and insights.

Introduction

Statista is a leading provider of market and consumer data, presenting information in an intuitive, visually appealing format. Known for its user-friendly interface and comprehensive coverage, Statista aggregates data from over 22,500 trusted sources, making it a one-stop shop for global statistics, market trends, and industry reports.

Moreover, familiarity with Statista demonstrates to employers a capacity for leveraging data to inform decisions—a skill highly sought after in finance, consulting, and analytics roles. By mastering Statista, students not only enhance their academic experience but also gain a competitive edge in their professional journey.

The History of Statista

Founded in 2007 in Hamburg, Germany, Statista was created to simplify access to data and transform complex information into actionable insights. The platform initially focused on German-speaking markets but quickly expanded to serve a global audience. Over the years, Statista has grown into one of the largest statistics portals worldwide, providing data in fields ranging from technology and finance to healthcare and consumer behavior.

Logo of Statista

Source: the company.

Statista’s innovative approach to presenting data visually has set it apart. By combining academic rigor with business-friendly accessibility, the platform has become indispensable for decision-makers across industries.

Key Features of Statista

Certain key features of Statista make it very useful as a database such as its Extensive Data Coverage, Interactive Visualizations, Comprehensive Reports, Global Consumer Survey, and Ease of Access

As an example, the picture below presents the Statista website Interface.

Statista website interface

Source: the company.

Extensive Financial Data

Statista, a renowned online statistics and market research platform offers a treasure trove of data for professionals, researchers, and students alike. Statista offers over 1.5 million statistics across 170 industries and 150+ countries. It includes data on demographics, consumer behavior, market trends, and economic indicators.

Interactive Visualizations

Statista provides charts, infographics, and dashboards to make data interpretation easier. Its users can customize visualizations to suit their needs.

Comprehensive Reports

In Statista, industry reports, market forecasts, and trend analyses are available. There are also special reports that focus on emerging topics like digitalization, sustainability, and AI.

Global Consumer Survey

Statista has a unique feature that offers insights into consumer attitudes and preferences across regions and industries.

Ease of Accessibility to data

Statista supports export in multiple formats, including PDF, Excel, and PowerPoint, for seamless integration into presentations and reports. And it features a powerful search engine and intuitive navigation tools.

Applications in Finance and Business with Statista

There are several applications of Statista in finance and business such as Market Research, Strategic Planning, academic research, and Public Policy, and Advocacy

As an example, the picture below presents the news about the monthly variation of the harmonized consumer price index (HICP) in France from January 2021 to April 2024.

Statista news on harmonized consumer price index(HICP)
Statista Interface
Source: the company.

Market Research: Businesses use Statista to understand market dynamics, consumer preferences, and industry trends.
Strategic Planning: Statista’s insights help organizations make informed decisions about investments, product launches, and expansions.
Academic Research: Students and researchers rely on Statista for data-driven studies in fields like economics, business, and social sciences.
Public Policy and Advocacy: Policymakers use Statista to analyze economic indicators and societal trends, aiding in policy formulation and advocacy efforts.

Advantages and Limitations of Statista

Though there are multiple advantages of using this database there are also certain limitations that we have to consider:

Advantages of Statista

Broad Scope: Covers a wide range of topics, industries, and geographies.
User-Friendly: Simplifies complex data with visual tools and intuitive navigation.
Trusted Sources: Aggregates data from reputable organizations, ensuring reliability.

Challenges and Limitations

Subscription Costs: Comprehensive access requires a paid subscription, which might be prohibitive for some users.
Limited Raw Data: Focuses more on aggregated and processed data rather than raw datasets.
Depth vs. Breadth: While broad, some topics may lack the depth found in specialized databases.

Why Statista Matters in 2024

In 2024, as data becomes the backbone of strategic decision-making, Statista’s role is more vital than ever. Its ability to present real-time insights and long-term trends in a visually engaging manner caters to the increasing demand for actionable intelligence. With industries navigating challenges like digital transformation and global economic shifts, Statista serves as a reliable ally in staying informed and competitive.

Conclusion

Statista has revolutionized how data is accessed and utilized. Its blend of breadth, reliability, and user-friendly design makes it a versatile tool for anyone needing data-driven insights. Whether you’re exploring new markets, conducting academic research, or shaping public policy, Statista equips you with the knowledge needed to succeed in a complex world.

Why should I be interested in this post?

For finance students, Statista offers a wealth of resources to support academic projects, case studies, and career preparation. The platform provides access to financial metrics, market trends, and consumer insights that are invaluable for coursework and internships.

Useful resources

Statista Empowering people with data

Statista Global stories vividly visualized

Wikipedia Statista

European University Institute (EUI) Statista

About the author

The article was written in December 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

Trump Trade

December 7, 2024 by Marine SELLI

Trump Trade

In this article, Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024) examines the phenomenon of “Trump Trades” and their enduring impact on financial markets.

What Is the Trump Trade?

Have you ever wondered how politics shapes financial markets?

The “Trump Trade” highlights this intersection as it captures how market movements are influenced by the policies of Donald Trump. This phenomenon was first observed after his surprise 2016 election victory, and then resurfaced in 2024 with Trump’s re-election.

The Trump Trade is the financial strategies and market movements based on expectations of Trump’s economic policies enactments. It is about how markets understand and view them. Investors react to these policies such as anticipated tax cuts, deregulation, trade measures, and infrastructure projects which leads to significant market shifts.

In 2016 when Trump’s election came out of the blue and the market rallied, all major U.S. indices, including the S&P 500, Dow Jones Industrial Average and Russell 2000, hit record highs. Then, fast forward to 2024 and the story repeated itself. In the month of the election, November 2024, the Dow Jones shot to an all-time high of 44,910.65 and the S&P 500 broke 6,000 points for the first time.

In this phenomenon, it is observed how investor behavior follows the perception of Trump’s policy as pro-business.

What is it about Trump’s presidency that drives these significant market reactions?

Trump has a real estate magnate background therefore he positions himself as a supporter of loose monetary policy: as a developer, he used to rely mainly on cheap credit to finance his projects, benefit from asset appreciation and leverage investments.

His economic philosophy was shaped by his background and that is still reflected in his policies and statements. If implemented, Trump’s policies would prioritize growth, borrowing, and investment, the core of the Trump Trade phenomenon. In fact, Trump’s policies are largely articulated in terms of tax cuts, deregulation, tariffs and infrastructure spending, which are for investors, opportunities of growth.

Two Elections: 2016 vs. 2024

When comparing the Trump Trade in 2016 and 2024. What remained the same and what changed? Trump’s surprise win in 2016 sent shockwaves through the financial world. He was able to get investors to change their portfolios based on his policies. Small cap stocks led the way, outperforming large caps by nearly 8 percent, as they are more reliant on domestic growth, and equity markets surged. The yield on the 10-year Treasury also shot up by almost 100 basis points. It was a steepening yield curve, reflecting optimism over growth but concern about higher borrowing costs and inflation.

Trump’s reelection by 2024 was less surprising, but markets still reacted heavily. Shortly after his victory, the Dow Jones climbed 200 points and small cap stocks again outperformed as investors favored companies less exposed to global trade risks. Additionally, the bond market behaved in line with 2016 trends by long term yields rising faster than short term yields, a sign of inflation expectations.

Financial Market Movements during Trump Re-election

Source: Bloomberg, Les Echos

Trump viewed as an inflationist?

Why do markets think Trump equals inflation? The answer to his policies and economic philosophy. Of course, Trump’s way of doing fiscal expansion through unfunded tax cuts and big spending naturally triggers inflation expectations. Higher disposable income from lower taxes creates demand and raises prices. At the same time, businesses that import goods are burdened by higher costs, which are often passed on to consumers due to protectionist measures that Trump wants to accentuate.

These dynamics are reflected in bond markets. Inflation eats away at the purchasing power of fixed payments, so investors require higher yields on long term bonds. The dynamic steepens the yield curve, whereby long-term rates rise faster than short term rates. In 2016 and then again in 2024, this pattern characterized the Trump Trade and proved that markets still see Trump as an inflationist.

In addition, as I mentioned earlier, Trump’s economic strategy is influenced by his background in real estate. He has always been someone that has leveraged debt to grow and has always pushed for lower interest rates and expansive fiscal policies.

The Forces Driving the Trump Trade

Trump’s policies and economic agenda have included his tax reforms. The 2017 Tax Cuts and Jobs Act cut the corporate tax rate from 35% down to 21%, which had a massive impact on corporate earnings and stock valuations. The same optimism is building in technology and consumer sectors that would be the biggest beneficiaries of these measures for 2024, when there is a possibility of further tax incentives.

Another key driver is deregulation, as during Trump’s first term rollbacks on things like environmental protections, financial regulations and healthcare compliance lowered costs for businesses and raised profitability in sectors like energy and banking. While these expectations have reappeared yet again in 2024, the increased focus on ESG investing has made things more difficult, with some investors eschewing industries deemed environmentally unfriendly.

Furthermore, a boost to infrastructure spending also fuels optimism, as Trump’s pledge of massive energy infrastructure investments such as in energy pipelines for example, has raised market hopes for the industrial sectors. In the weeks following Trump’s 2016 victory, the energy sector outperformed the broader market by over 10%, and similar gains were seen in 2024 as infrastructure-related stocks went up on hopes of renewed public investment.

In conclusion, the Trump Trade exemplifies how market perceptions, often driven by political rhetoric rather than enacted policies, can shape financial dynamics. While Trump’s agenda captures market optimism, much of it may rest on speculative assumptions and short-term gains, masking the underlying risks and long-term challenges. The sustainability of this optimism is contingent on consistent execution, realistic fiscal discipline, and the ability to address structural issues beyond mere rhetoric. Without these, the Trump Trade could unravel as a fleeting market illusion.

Why should I be interested in this post?

Understanding the Trump Trade demonstrates how political decisions, and macroeconomic policies can move financial markets. The analysis links the theoretical principles you study such as market behavior, and corporate strategy to their real-world application. The Trump Trade is a practical example of how politics, economics, and finance play off each other, no matter whether your aspiration is to work in investment banking, asset management, or corporate strategy. It goes beyond academic learning as a basis to think critically about future political and economic shifts that might influence global markets.

Useful resources

JPMorgan Private Bank Is the Trump Trade a Good Deal?

Goldman Sachs on Trump’s Economic Policies

LSE Economic Impacts of the Trump Tariff Proposals on Europe

Financial Times Trump’s Tariff Policies Analysis

Financial Times Market Reactions to Trump’s Economic Decisions

Financial Times Global Trade in the Trump Era

Deutsche Bank Flow: Trump Trade – Back to the Future

Synapses (YouTube channel) Business Insights

About the author

The article was written in December 2024 by Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024).

Political Risk: An Example in France in 2024

September 4, 2025December 7, 2024 by Marine SELLI

Political Risk: An Example in France in 2024

In this article, Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024) explores the intricate relationship between political risk and financial markets, focusing on France’s landscape in 2024.

The context

Financial market stability is critically dependent on political risk, which determines how investors behave, borrowing costs and how strong a nation’s currency is. Consequently, market fears of political instability under Michel Barnier’s government have been heightened in France. Indeed, the instability has manifested itself in rising bond spreads, pressure on the euro and rising costs of debt issuance. Therefore, France’s financial landscape is being impacted by political uncertainty.

Spread Since the Dissolution of the National Assembly.
Spread Between French and German Bonds Political risk in France
Source: Bloomberg, Les Echos

The Cost of French Debt Rises

One of the most widely followed indicators of France’s economic health is its government bonds (obligations assimilables du Trésor or OATs): the yield reflects market confidence in France’s creditworthiness and economic conditions, with rising yields often signaling increased risk perceived by investors. Additionally, the spread between OAT yields and German Bunds serves as a benchmark for comparing investor sentiment toward France versus Europe’s strongest economy. In the past few months, the French bond market has spiked to political uncertainty. As a result, the spread between French and German 10-year bond (which represents a key risk gauge) spiked to 89 basis points in late November 2024. It is the highest since eurozone crisis days in 2012, and up from the 55 basis points in May 2024 before parliamentary dissolution.

Spread Between French and Greek Bonds.

Source: Bloomberg, Les Echos.

The spread reflects the additional yield investors demand to hold French debt over German bonds, which are the eurozone’s safest. Therefore, it represents a quantifiable expression of the risk that markets see associated with France’s political and fiscal situation. This comes as France’s 10-year bond yield has risen sharply from 2.9% at the start of 2024 to 3.2% in November 2024. However, German yields have remained steady at 2.1%, reflecting a difference in confidence among investors in the two economies.

Therefore, the implications for France’s borrowing costs are profound. In 2025, the government will issue €300 billion in bonds, a record amount, as debt refinancing needs and budgetary deficits are pushing up borrowing. A 30 basis point rise in yields could add £900m a year to the interest bill, further stretching a budget that is already under severe strain. Hence, the urgent need to restore market confidence is underlined by the cumulative cost of higher borrowing rates.

The Cost of French Debt Rises

France’s political challenges have also put pressure on the euro, often considered a barometer of European unity. The euro is currently trading at $1.05 and risks further depreciation to parity with the US dollar if the Barnier government collapses. Historically, currency markets have been sensitive to French political developments, and we can point to recent examples.

For instance, speculation of a severe euro devaluation swirled around a ‘Frexit’ in 2017 after fears of such an outcome during the presidential campaign of Marine Le Pen. Analysts had forecast up to 5% fall in the euro, but Emmanuel Macron’s eventual victory eased those fears, pushing the euro 10% higher in four months. However, in 2024, the situation is less clear. The euro’s path remains fragile as investor sentiment is weighed down by political uncertainty and fiscal deficits near 6% of GDP. Further decline would aggravate inflationary pressures by increasing the cost of imports, especially energy, and would provide only modest export benefits in a weak global economy.

Meanwhile, the widening of the French-German spread in recent weeks has been a clear signal that skepticism about France’s political and fiscal outlook has been growing.

France, a semi core of the eurozone, now has borrowing costs approaching those of southern European countries such as Spain and Portugal, which have been viewed as riskier. For example, Spanish 10-year bond yields have fallen below those of France due to the improved fiscal discipline in and economic performance by Spain. In the meantime, France’s credit default swaps are trading at 0.4%, implying a default probability of 2.6%. This is still below Greece’s 5%, but it reflects a loss of confidence in French fiscal management.

Additionally, liquidity concerns are also at play. France’s ability to get enough private investors to put money into its debt is becoming more reliant on these private investors as the European Central Bank reduces its purchases of bonds. The shift in market dynamics only underscores the need for political stability.

France Fiscal Outlook

France’s fiscal outlook is a daunting challenge for financial markets. This comes as the government embarks on its record €300 billion debt issuance program for 2025, at a time when interest costs are rising and the budget remains in deficit. As a result, the sheer volume of outstanding debt, coupled with higher yields, will push debt servicing expenses to €55 billion in 2025, from €50 billion in 2024.

Moreover, France’s debt-to-GDP ratio is already 111% in 2024, one of the highest in the eurozone. That ratio has been a source of concern about the sustainability of France’s fiscal policies, given that it comes amid a slow economic growth. That’s why analysts warn that without meaningful reforms to deal with structural deficits, the debt trajectory could become unsustainable, which will then trigger further downgrades from credit rating agencies and higher borrowing costs.

Outstanding French Debt Overview.

Source: Agence du Trésor.

In conclusion, France is at a crossroads, and its financial markets are reflecting deep seated worries about political instability and fiscal sustainability. Widening bond spreads, growing debt servicing costs and pressure on the euro underscore the need for action. Furthermore, this case serves as a textbook example of how political risk can deeply impact financial markets. The interplay between France’s domestic political turmoil, bond spreads, currency volatility, and investor sentiment demonstrates how closely markets monitor political developments.

Why should I be interested in this post?

This post provides an analysis of how political risk impacts financial markets, focusing on the French bond market, currency fluctuations, and fiscal sustainability. It gives you an outlook on the real-world consequences of political instability, offering a detailed understanding of how investor sentiment shifts in response to political uncertainties.

Useful resources

European Central Bank (ECB)

Agence France Trésor (AFT)

Bloomberg

Les Echos (Financial Market Section)

Standard & Poor’s (S&P) Global Ratings

About the author

The article was written in December 2024 by Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024).

My Internship Experience at Safety Carb

December 24, 2024December 7, 2024 by Marine SELLI

My Internship Experience at Safety Carb

In this article, Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024) shares her professional experience as a Strategic Financial Planner at Safety Carb Additifs.

About Safety Carb

My father founded Safety Carb Additifs as an entrepreneurial venture in 2015 to produce French industrial additives. It is a company focused on environmentally friendly additives while reducing their negative ecological impact. Over the years, Safety Carb has developed itself and reaffirmed its positioning earning eco-certifications that also allow its customers to benefit from eco-primes.

Logo of the company.
Logo of Safety Carb
Source: Safety Carb.

My internship at Safety Carb

Joining Safety Carb Additifs as a Strategic Financial Planner gave me the opportunity to contribute to an entrepreneurial venture which is a stimulating and ever evolving environment. My role encompassed many day-to-day recurring tasks such as inventory management, issuing invoices, it was mainly centered around developing a comprehensive business plan, which served as a foundation for the company’s strategic initiatives and future growth. Yet being in a small corporate setting, in rare moments I also had to bring support in other areas such as operational tasks.

In the end, this internship allowed me to delve into the company’s financial operations and understand the unique challenges faced by entrepreneurial ventures.

My missions

One of the main parts of my internship was the creation of a detailed business plan with the CFO ( Chief Financial Officer ). I had to do in-depth market research of this process in which I had to assess growth opportunities and identify the company’s competitive advantage. We looked to determine the possible market expansions and the need to incorporate the sustainability metrics into the plan. Safety Carb emphasized the use of its eco-friendly products to break new market segments in this business plan.

It also featured financial projections of the company’s growth potential and indicated the company’s ability to achieve profitability while conforming to his sustainability objectives, and used scenarios useful for external financing like investors.

I was also responsible for helping to synthesize accounting data and to create tools to monitor inventory so that the company’s operations could be kept efficiently and on track with its financial achievement.

Required skills and knowledge

Reflecting on it, my internship at Safety Carb Additifs required a combination of technical and analytical skills. Developing the business plan required me to acquire a comprehensive understanding of financial modeling and market analysis. Moreover, I needed a strategic mindset to balance the company’s entrepreneurial objectives with its operational constraints. For instance, while drafting the Business Plan, I had to consider the company’s limited financial and human resources, ensuring that proposed initiatives were feasible within budget and staffing constraints. Additionally, the production capacity of the company’s facilities imposed limits on how quickly new projects or expansions could be implemented.

What I learned during my internship at Safety Carb

This experience enhanced my understanding of how financing can support entrepreneurial ventures and fast-track its success. I also learned to develop business plan creation skills, from market analysis to financial projections, and gained an overview into how sustainability can drive growth in competitive industries in today’s environment. On a more personal note, working closely within an entrepreneurial team also gave me a deeper appreciation for the challenges and opportunities that come with running a family business.

Financial concepts related my internship

Business Plan Development

One of the key financial concepts I applied during my internship was business plan creation. This involved integrating various components into a cohesive Excel that reflected the company’s strategic direction.

Cost-Benefit Analysis

I also relied on cost-benefit analysis to evaluate the potential return on investment for market expansion initiatives and the need for a validation of other eco-certifications. By assessing the trade-offs between costs and expected benefits, I was able to provide actionable recommendations backed-up by several hypotheses.

Cash Flow Management

Cash flow management was another important concept. For any entrepreneurial venture, it’s necessary to understand how to project and monitor cash flows and ensure that the company’s operations were financially sustainable.

Why should I be interested in this post?

If you’re interested in an entrepreneurial venture, finance and sustainability, I think this post provides a great ground to demonstrate how finance can serve as a catalyst for both business growth and positive environmental impact.

Useful resources

Safety Carb

About the author

The article was written in December 2024 by Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024).

My Internship Experience as a Brand Strategy Assistant at Accor

December 24, 2024December 7, 2024 by Marine SELLI

My Internship Experience as a Brand Strategy Assistant at Accor

In this article, Marine SELLI (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024) shares her professional experience as a Brand Strategy Assistant at Accor, focusing on brand strategic analysis for a global portfolio of midscale brands.

About Accor

As a global hospitality industry leader, Accor has over 5,300 hotels throughout 110 countries. Accor has a wide variety of brands from luxury to economy, catering to different segments of customers – leisure travelers to business professionals. The company is known for its focus on innovation and sustainability and is always looking for ways to maintain a competitive advantage in a changing market. Today, the focus is on “augmented hospitality”. The brand strategy team in Accor’s global operations is responsible for creating and executing actions to promote value, brand equity, market presence and operational efficiency. In close partnership with regional relays and individual hotels, the team is able to adapt strategies in order to work with the specific dynamics of each market. Accor recently has been in the process of a strategic transformation, moving away from being a hotel owner and towards franchising and contracted management. Accor increases operational flexibility and minimizes financial risk by selling its brand name rather than owning the hotels directly and brand strategy is a key element of its global success. This strategy allows the company to concentrate on specific and focused competencies such as brand management, customer experience, but also innovation while transferring the financial and operational responsibilities of property ownership to third parties. By adopting a franchising and contracted management model, Accor also mitigates the risks associated with real estate ownership such as market fluctuations, high CAPEX ( capital expenditures ), and asset depreciation. This asset-light approach also provides greater agility, as it enables Accor to expand more rapidly and adapt to changing market conditions.

Logo of Accor.

Source: Accor.

As of December 5, 2024, Accor’s stock price has reached €46.08, reflecting a 45% year-to-date growth from its 52-week low of €32.47 on August 5th. This significant recovery underlines the investor’s confidence in the company’s strategic shift towards this asset-light model and its operational resilience. Moreover, Accor’s reentry into the CAC40 in March 2024 highlighted its resurgence as a key player in the French economy. The stock is now showing strong momentum, peaking at a 52-week high of €46.12, with daily trading volumes of 492,713 and a market capitalization of €11.23 billion.

Accor’s Historical Stock Data.

Source: Euronext.

My internship

During six months, I worked as a Brand Strategy Assistant for Accor, supporting global initiatives for three brands: Belonging to Mercure, Grand Mercure and Handwritten Collection. In my role, I had to simultaneously apply analytical know-how and communication skills to ensure strategic priorities were consistent across regions and individual properties. Because of my position, I was able to interact with a diverse range of stakeholders, including hotel managers responsible for implementing strategies on-site, regional leaders overseeing multiple properties, and corporate executives shaping the brand’s strategic vision. My role was to identify and help to develop the most impacting actions to drive results at the hotel level, and communicate these to the regional teams and the hotel managers.

My missions

When I was interning, a large part of what I did was take I did was take comprehensive data sets detailing every hotel Accor owns, including each property’s specific features and performance metrics such as occupancy rates, average daily rates (ADR), revenue per available room (RevPAR), and marketing campaign performance. Then I would synthesize it into a clear, actionable report. To accomplish that, I had to create Powerpoints that would portray brand strategies and performance insights to the regional teams and hotels all around the world as well as to the stakeholders at all levels with key performance metrics being highlighted. A second important part of my work was determining the ROI of different actions.This was computed by analyzing the incremental revenue generated from specific initiatives relative to their associated costs, such as marketing spend, operational investments, or promotional discounts. Through an analysis of global hotel-level data, I was able to identify which initiatives were having the greatest impact and provide recommendations on how to best utilize resources for maximum impact.

Required skills and knowledge

In this role I needed high-level synthesis skills to make sense of large amounts of data and report into documents. There was a need for proficiency in Excel to curate the data, and PowerPoint to convey effectively the information. I also needed analytical skills as I worked with financial metrics such as ROI and KPIs to analyze the success of initiatives. In addition, the role required deep collaboration and strong communication skills. I regularly engaged with a wide range of stakeholders, including regional teams, hotels, and agencies. I also developed expertise in working across different markets, understanding their unique characteristics, and aligning recommendations with each region’s specific goals and challenges.

What I learned

I learned a lot through my internship about how global strategies are applied to the local market in a fast developing and competitive industry. I acquired advanced skills in data analysis and synthesis and learned how to communicate complex information clearly to diverse audiences. In addition, I learned about the process of using financial metrics like ROI and KPIs to evaluate and prioritize strategic actions. On top of that, I believe this experience helped me develop my ability to think critically about how brand strategies can drive tangible results across different markets.

Finally, managing a hotel portfolio of this size (+1000 hotels) and complexity highlighted the difficulty of ensuring that every hotel aligns with Accor’s vision and delivers on its brand promises even though it is now its main business model. I had gained firsthand experience in learning how to navigate this challenge, contributing to initiatives designed to reinforce operational implementation and efficiency which is a key driver in hospitality business.

Financial concepts related my internship

I explain below three financial concepts related to your internship: Return on Investment (ROI), Key Performance Indicators ( KPIs) and Budget Management

Return on Investment (ROI)

ROI was one of the key financial concepts I applied. I analyzed the ROI of many different initiatives to identify which action led to the highest ROI and so resources were directed towards actions which led to the best results for driving hotel performance.

Key Performance Indicators (KPIs)

Another concept was KPIs. The hotel industry has its own specific metrics such as occupancy rates, average daily rate, and revenue per available room. These are essential for evaluating the success of each project and determining where improvements could be made.

Budget Management

Finally, my manager and I worked extensively on both budget management and budget allocation, which were critical aspects of my role. For budget allocation, we collaborated to distribute a strict and defined budget across different brands and within various global initiatives, such as brand campaigns, regional activations, and strategic projects aimed at strengthening Accor’s global market presence. I contributed by carefully evaluating the expected ROI of each initiative, analyzing key performance metrics like brand visibility, customer engagement, and revenue contributions. Together, we ensured that resources were allocated strategically to maximize the impact on a global scale. In terms of budget management, we worked closely to monitor spending across these global initiatives, ensuring compliance with the allocated budget. I actively tracked expenditures, flagged any deviations, and supported the development of adjustments to keep financial goals on track.

Why should I be interested in this post?

If you’re interested in exploring a mix of finance, strategy and marketing within a global organization, my experience at Accor demonstrates how financial metrics are used to drive impactful decisions in several business’ segments. It also highlights the importance of ensuring that global strategies translate into local success, offering valuable insights for those aspiring to work in corporate strategy, hospitality, or brand management.

Useful resources

Accor

About the author

The article was written in December 2024 by Marine SELLI (ESSEC Business School, (ESSEC Business School, Global Bachelor in Business Administration (GBBA), 2020-2024).

Factiva

December 30, 2024December 6, 2024 by Nithisha CHALLA

Factiva

In this article, Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024) delves into the essentials of Factiva, its features, and its applications, showcasing why it remains indispensable for professionals and academics alike working in business and finance.

Introduction

In the fast-paced world of business and finance, access to accurate, reliable, and up-to-date information is paramount. Factiva, a subscription-based database owned by Dow Jones & Company, is a cornerstone for researchers, financial analysts, and business professionals seeking high-quality data for decision-making.

The History of Factiva

Factiva was launched in 1999 as a joint venture between Dow Jones & Company and Reuters, two industry titans in financial news and information services. The aim was to create a unified platform catering to the growing need for consolidated global news and business data access. By integrating Dow Jones’s deep archives and Reuters’ real-time data capabilities, Factiva emerged as a pioneering solution for professionals in any sector, especially finance.

Logo of Factiva.

Source: the company.

Factiva is a premier business intelligence platform offering access to a vast array of global content, including news, company information, market data, and industry insights. It integrates thousands of sources from over 200 countries in more than 30 languages. These sources include major newspapers, trade journals, industry publications, and multimedia content.

In 2006, Dow Jones acquired full ownership of Factiva, streamlining its integration with other Dow Jones products, including The Wall Street Journal. Over the years, Factiva has evolved into a sophisticated tool incorporating artificial intelligence (AI) and machine learning for advanced data analytics, thus staying ahead in a competitive information services market.

Key Features

Certain key features of Factiva make it very useful as a database such as its Extensive Content Coverage, Search and Filter Options, Data Analytics and Visualization, Company Profiles, and Industry Reports.

As an example, the picture below presents the news about Apple in the Factiva Interface.

Factiva Interface

Source: the company.

Extensive Content Coverage

Factiva includes over 33,000 sources, such as The Wall Street Journal, The Financial Times, The New York Times, and Reuters. It features specialized publications in sectors like energy, healthcare, and technology. Archival content dates back decades, enabling trend analysis and historical research.

Search and Filter Options

Advanced search tools allow users to refine searches using keywords, topics, dates, or specific publications. Filters can narrow results by geography, industry, or company size.

Real-Time News

Factiva provides real-time updates on financial markets, economic changes, and global events. Alerts and notifications keep users informed of developments affecting their areas of interest.

Data Analytics and Visualization

Users can extract, analyze, and visualize data to identify patterns and insights. Tools include charts, graphs, and export options for seamless integration with other software.

Company Profiles and Industry Reports

Comprehensive profiles offer financials, competitors, and SWOT (Strengths Weakness Opportunity and Threats) analyses for thousands of companies. Industry reports provide market trends, regulatory updates, and forecasts.

Applications in Finance and Business

There are several applications of Factiva in finance and business such as Investment Research, Risk Management, Academic Research, and Public Relations and Marketing.

Investment Research: Financial analysts rely on Factiva for market trends, earnings reports, and competitor analysis to guide investment decisions.
Risk Management: Businesses use Factiva to monitor geopolitical events, economic risks, and compliance-related developments.
Academic Research: Factiva’s extensive archives are invaluable for finance students and researchers studying historical market behavior or conducting case studies.
Public Relations and Marketing: PR professionals use Factiva to monitor media coverage, track competitors, and evaluate public sentiment.

Advantages and Limitations of Factiva

Though there are multiple advantages of using this database there are also certain limitations which we have to consider.

Advantages of Factiva

Global Reach: Access to international publications ensures a well-rounded perspective.
Customizable Dashboards: Users can tailor the interface to prioritize relevant content.
Reliable Sources: Factiva aggregates data from reputable and verified sources.
Ease of Integration: APIs (Application Programming Interface) allow integration with other platforms for streamlined workflows.

Challenges and Limitations

Cost: Factiva’s subscription model can be expensive for individuals or small businesses. The pricing is on the request basis of the data.
Complexity: The platform’s depth may require training for optimal use.
Access Restrictions: Some content may have geographical or licensing restrictions.

Why Factiva Matters in 2024

With the explosion of information and the increasing risk of misinformation, Factiva’s role as a curated, reliable database is more critical than ever. Its ability to distill vast quantities of data into actionable insights makes it a vital tool for navigating the complexities of modern business and finance. Moreover, the integration of advanced technologies such as AI in Factiva enhances predictive analytics, enabling users to anticipate market movements and mitigate risks proactively.

Conclusion

Factiva exemplifies the power of information in driving informed decision-making. Its rich history, innovative features, and significant economic implications underscore its enduring relevance in a data-driven economy. Whether you’re a student aiming to excel in finance or a professional seeking a competitive edge, Factiva equips you with the tools to succeed in a knowledge-driven world.

Why should I be interested in this post?

By embracing Factiva, users, and students mainly gain not just data but the clarity and confidence to act on it effectively, ensuring better outcomes for businesses, academia, and industries at large.

Useful resources

Dow Jones Factiva – Global News Monitoring, Business Intelligence Platform

Dow Jones What is Factiva?

European University Institute (EUI) Factiva news and company database

Wikipedia Factiva

About the author

The article was written in December 2024 by Nithisha CHALLA (ESSEC Business School, Grande Ecole Program – Master in Management (MiM), 2021-2024).

Treasury Bonds: The Backbone of U.S. Government Financing

September 4, 2025December 3, 2024 by Camille KELLER

Treasury Bonds: The Backbone of U.S. Government Financing

In this article, Camille KELLER (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024) explains the purpose, significance, and global role of U.S. Treasury bonds.

Introduction

Treasury bonds (T-bonds) are long-term debt securities issued by the U.S. Department of the Treasury, fundamental to funding government operations and shaping economic policies. Backed by the “full faith and credit” of the U.S. government, they are regarded globally as benchmarks of stability and reliability.

These bonds play a dual role: domestically, they underpin the financial system and provide risk-free investment options, while globally, they influence capital flows and pricing in international markets. With their long maturities and predictable returns (if hold until maturity), Treasury bonds are a secure haven for investors in times of uncertainty.

This article explores the structure of Treasury bonds, their critical role in monetary policy, and their global significance in maintaining financial stability.

What Are Treasury Bonds and How Do They Work?

Treasury bonds are issued by the U.S. government to finance national projects and repay debt. They have maturities of 10 to 30 years and offer fixed semiannual interest payments, returning the principal amount at maturity.

Figure 1 below gives the evolution of the interest rate of Treasury bonds (30 years of maturity) over the period March 1977 – December 2024 (data from Federal Reserve Bank of St. Louis). You can download the Excel file for the historical data used to build the figure.

Figure 1. Evolution of the US Treasury bonds interest rate.

Source: Federal Reserve Bank of St. Louis.

These bonds are sold through public auctions, where competitive bidders specify desired yields, and non-competitive bidders accept the auction’s determined rate. This transparent process ensures fair pricing and liquidity, making T-bonds accessible to a wide range of investors.

Treasury bonds are considered among the safest investments globally, given the U.S. government’s ability to generate revenue through taxation and currency issuance. This security makes them a key component of institutional portfolios, particularly for pension funds and central banks looking for low-risk, reliable returns.

In financial markets, T-bonds serve as a benchmark for long-term interest rates. Their yields influence borrowing costs for mortgages, corporate bonds, and loans, directly affecting economic activity. During financial uncertainty, their reputation as safe-haven assets attracts significant demand, reaffirming their stability and importance in global markets.

The Role of Treasury Bonds in Monetary Policy

Treasury bonds are integral to U.S. monetary policy, serving as tools for the Federal Reserve to manage money supply and interest rates. Through open market operations, the Federal Reserve buys or sells Treasury bonds to inject or withdraw liquidity from the financial system. These actions influence borrowing costs and economic activity.

When the Federal Reserve purchases T-bonds, it lowers interest rates, encouraging borrowing and investment. Conversely, selling bonds tightens liquidity and increases rates, curbing inflation and slowing economic growth.

T-bonds are also key indicators of inflation expectations. Fixed coupon payments lose value in inflationary periods, prompting investors to demand higher yields as compensation. Their role as a measure of market sentiment makes them critical in assessing economic conditions.

The yield curve—a graph of yields on Treasury securities of varying maturities—offers further insight. An inverted yield curve, where short-term yields exceed long-term yields, is often a precursor to economic recessions, signaling investor concerns about future growth.

Through these mechanisms, Treasury bonds enable the Federal Reserve to balance economic growth, inflation, and employment, making them indispensable to monetary policy.

Treasury Bonds as a Global Benchmark

Treasury bonds extend their influence far beyond U.S. borders, forming the bedrock of the global financial system. Their stability, liquidity, and dollar-denominated nature make them indispensable to central banks, institutional investors, and sovereign wealth funds worldwide.

Central banks, particularly those in countries like China and Japan, hold large reserves of T-bonds to stabilize exchange rates, manage currency reserves, and hedge against market volatility. Their status as a low-risk investment ensures enduring demand, reinforcing the U.S. dollar’s dominance in global finance.

T-bonds also serve as a benchmark for pricing other financial instruments. Their yields represent the risk-free rate used in valuation models for equities, corporate bonds, and derivatives, shaping investment decisions across markets.

In times of crisis, Treasury bonds attract capital as investors seek security, lowering yields and providing stability to global markets. However, this reliance also introduces vulnerabilities; events like U.S. debt ceiling debates or credit rating downgrades can disrupt global confidence in Treasury securities.

Despite these challenges, the unwavering demand for Treasury bonds highlights their critical role in ensuring liquidity and stability in the international financial system.

Why Should I Be Interested in This Post?

This post is a valuable resource for students and professionals interested in understanding the mechanics of Treasury bonds and their broader implications. It highlights the intersection of government finance, monetary policy, and global markets, offering insights into how these instruments shape economies worldwide.

Useful Resources

U.S. Department of the Treasury

Federal Reserve Economic Data (FRED)

Federal Reserve

About the Author

The article was written in December 2024 by Camille KELLER (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024).

OAT: France’s Answer to Sovereign Bonds

September 4, 2025December 3, 2024 by Camille KELLER

OAT: France’s Answer to Sovereign Bonds

In this article, Camille KELLER (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024) explains the role, structure, and significance of French government bonds known as Obligations Assimilables du Trésor (OATs).

Introduction

Obligations Assimilables du Trésor (OATs) are the backbone of France’s government debt strategy, providing a reliable means to finance public expenditures. These long-term debt securities are issued by the French Treasury and are central to the stability of France’s financial system.

OATs not only ensure the funding of state operations but also serve as a benchmark for the European financial markets. Their appeal lies in their fixed and predictable returns (if hold until maturity), making them a popular choice for institutional investors seeking stability in a historically low-risk asset.

This article dives into the structure and purpose of OATs, their relevance in monetary policy, and their role in the broader European and global financial system.

What Are OATs and How Do They Work?

OATs are long-term debt securities issued by the French Treasury to meet the government’s borrowing needs. The maturities of OATs ranges from 2 to 50 years. Investors receive fixed annual interest payments and the principal amount at maturity.

Figure 1 below gives the evolution of the OAT interest rate (10 year of maturity) over the period January 1986 – December 2024 (date from investing / Banque de France). You can download the Excel file for the historical data used to build the figure.

Evolution of the OAT interest rate.

Source: investing / Banque de France.

OATs are issued through public auctions managed by Agence France Trésor (AFT), the French government agency responsible for debt issuance and management. These auctions allow competitive and non-competitive bidding, ensuring a transparent and efficient process.

The reliability of OATs is grounded in the French government’s creditworthiness, supported by a robust and diversified economy. This low-risk profile attracts a wide range of investors, including pension funds, insurance companies, and foreign governments, making OATs a staple of institutional portfolios.

In financial markets, OATs play a vital role as benchmarks for euro-denominated securities. They influence pricing for corporate bonds, mortgages, and other fixed-income instruments within the Eurozone. Their stability and liquidity make them a key asset class in European financial systems.

The Role of OATs in Monetary Policy

OATs are an integral part of monetary policy in the Eurozone, serving as tools for the European Central Bank (ECB) and other institutions to influence financial conditions. As sovereign bonds, they are used in the ECB’s open market operations, including quantitative easing programs aimed at stabilizing the economy.

Through these programs, the ECB purchases OATs and other Eurozone bonds to inject liquidity into the financial system. This lowers interest rates, supports borrowing, and stimulates economic growth during periods of economic stagnation or crisis.

The yield on OATs is also a key indicator of France’s economic health and investor sentiment. Rising yields suggest increased borrowing costs for the government and heightened risk perceptions, while lower yields signal strong investor confidence and stability.

Additionally, OATs contribute to the overall functioning of the Eurozone’s financial architecture by providing a risk-free benchmark for pricing other securities. Their role in monetary policy extends beyond France, influencing financial markets across the European Union.

OATs as a Global Benchmark

OATs hold significance beyond France, serving as a critical component of global financial systems. Their euro-denominated nature positions them as an attractive option for central banks and institutional investors seeking diversification in foreign reserves.

Global investors often compare OATs with other sovereign bonds, such as U.S. Treasury bonds and German Bunds, to evaluate risk and return profiles. This competition reinforces OATs’ status as a key player in international capital markets.

In times of financial uncertainty, OATs provide a safe haven for investors looking to preserve capital. Their high liquidity and the French government’s strong credit ratings ensure consistent demand, particularly during economic turbulence.

However, OATs’ global importance also comes with challenges. Economic or political instability in France can impact investor confidence, affecting the broader European financial system. Despite these risks, their resilience and reliability continue to cement their role in global markets.

Why Should I Be Interested in This Post?

This post is a valuable resource for students and professionals interested in understanding OATs as a key financial instrument. It highlights their significance in government financing, monetary policy, and global markets, making them essential knowledge for those exploring careers in finance or economics.

Useful Resources

Agence France Trésor (AFT)

European Central Bank

Organisation for Economic Co-operation and Development (OECD)

About the Author

The article was written in December 2024 by Camille KELLER (ESSEC Business School, Bachelor in Business Administration (BBA), 2020-2024).

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