Question (1)
Pandemic Hangover: $11 Trillion in Corporate Debt
“Stressed companies piled on debt as interest rates plummeted but could face a reckoning in the next economic downturn. Before the pandemic, U.S. companies were borrowing heavily at low-interest rates. When Covid-19 lockdowns triggered a recession, they didn’t pull back. They borrowed even more and soon paid even less.” (WSJ, 24th June, 2021).
Discuss the potential impact of this high level of debt on these companies.
[50 marks]
Question (2)
UK tech sector seeks more listing reforms to keep IPOs rolling
“Lord Hill said the proposals were designed to ‘encourage investment in UK businesses [and] support the development of innovative growth sectors such as tech and life sciences. He said the UK should use its post-Brexit ability to set its own rules ‘to move faster, more flexibly and in a more targeted way’, in particular for growth sectors such as fintech and green finance. However, the recommendations will cause concern among some institutional investors, which have argued that loosening rules around dual-class shares, for example, will risk lowering corporate governance standards.”
Discuss how dual-class shares could bring benefit or harm to firms and why institutional investors would be concerned about this rule change.
[50 marks]
You must write 750 words for each question
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