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Global Business Outlook

Global Business Outlook. A joint survey effort between Duke University and CFO magazine. John R. Graham D. Richard Mead Jr. Family Professor of Finance Director, Global Business Outlook Survey.

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Global Business Outlook

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  1. Global Business Outlook A joint survey effort between Duke University and CFO magazine John R. Graham D. Richard Mead Jr. Family Professor of Finance Director, Global Business Outlook Survey I hope that you find these slides useful. They are updated through 2009 Q3. I present this deck towards the end of Corporate Finance when I teach the course at Duke, linking course concepts to the current real world outlook. I usually present just parts of this deck. Feel free to cut and paste, with proper attribution. Please let me know if you have questions or comments. -- John Graham Global Business Outlook Duke University Fall 2009

  2. Global Business Outlook • Quarterly Survey • Since July 1996 (54 quarters) • Send to CFO subscribers and ‘Friends of Duke’ • Title of CFO, Treasurer, VP Finance • Global: US, Europe, Asia, China • 1000+ responses • Present results quarterly • Frequent press coverage • MSNBC, WSJ, FT, BW, Wash Post, NPR, podcast, etc. Global Business Outlook Duke University Fall 2009

  3. Content • Ask questions about • Economic Outlook • Similar questions every quarter • Topical issues • Effects of credit crisis, gov’t intervention in financial markets, cost of fuel, etc. Global Business Outlook Duke University Fall 2009

  4. Global Business Outlook Duke University Fall 2009

  5. Global Business Outlook Duke University Fall 2009

  6. Global Business Outlook Duke University Fall 2009

  7. Global Business Outlook Duke University Fall 2009

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  9. Global Business Outlook Duke University Fall 2009

  10. Top CFO Concerns (September 2009) External: • Consumer Demand • Federal Government Agenda/Policies • Credit Markets/Interest Rates • Housing Market Fallout Internal: • Ability to Forecast Results • Working Capital Management • Maintaining Employee Morale / Productivity • Balance Sheet Weakness Global Business Outlook Duke University Fall 2009

  11. Global Business Outlook Duke University Fall 2009

  12. Global Business Outlook Duke University Fall 2009

  13. Global Business Outlook Duke University Fall 2009

  14. Global Business Outlook Duke University Fall 2009

  15. Global Business Outlook Duke University Fall 2009

  16. Global Business Outlook Duke University Fall 2009

  17. Global Business Outlook Duke University Fall 2009

  18. Global Business Outlook Duke University Fall 2009

  19. Expected percentage change in earnings over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  20. Expected percentage change in earnings over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  21. Expected percentage change in domestic employment over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  22. Expected percentage change in domestic employment over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  23. Expected percentage change in outsourced employment over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  24. Expected percentage change in outsourced employment over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  25. Expected percentage change in prices of own firm’s products over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  26. Expected percentage change in prices of own firm’s prices over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  27. Expected percentage change in wages & salaries over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  28. Expected percentage change in wages & salaries over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  29. Expected percentage change in health care costs over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  30. Expected percentage change in health care costs over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  31. Expected percentage change in capital spending over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  32. Expected percentage change in capital spending over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  33. Expected percentage change in capital spending over next 12 months Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  34. CFO Optimism about own country’s economy, on a scale of 0 to 100 For U.S. firms, CFO Optimism about own firm’s financial prospects also shown (in green) Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

  35. Can CFOs Predict the Future? • CFOs predict the future reasonably well • CFO optimism about own firm is highly correlated with future national numbers for • Earnings (68% correlation with next year’s earnings) • Employment (55%) – see chart • Capital Spending (56%) Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

  36. Why care what CFOs say? 2) CFOs say it first • Correlation with future quarter’s value for • CEO optimism (81%, 1 qtr ahead) – see chart • ISM (66%, 1) • Conf Board consumer confidence (86%, 2) • Michigan consumer confidence (71%, 2) • UBS/Gallup Investor confidence (49%, 2) Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

  37. Plan to acquire entire firm or part of firm in next 12 months (top 4 US industries) Global Business Outlook Duke University Fall 2009

  38. Percentage of respondents whose firm has been directly adversely affected by the credit market conditions Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  39. Percentage of respondents whose firm has been directly adversely affected by the credit market conditions Source: Duke University / CFO Magazine Global Business Outlook Global Business Outlook Duke University Fall 2009

  40. Has your company been directly affected by credit crisis? %yes US firms, by credit rating Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

  41. Among companies affected by credit crisis … how has your company been affected? Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

  42. Actions taken in response to credit crisis Firms subject to financial constraints plan to cut R&D, capital spending, etc. more than deeply than plans for unconstrained firms Figure 2/3 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  43. Cash holdings and cash burn rate during crisis Unconstrained firms maintained cash balances during 2008. Financially constrained firms cash on balance sheet fell by 1/5 (from 15.1% of assets to 11.7%) Figure 4 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  44. Where holding liquid assets during crisis? Figure 5 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  45. Figure 6 Figure 4 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  46. Line of credit use during crisis 17% of constrained U.S. firms said that they borrowed now from line of credit in case their bank cut off access in the future … a “run” on bank lines of credit. Figure 7 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  47. To what extent have you drawn down your line of credit (as % of maximum)? Global Business Outlook Duke University Fall 2009

  48. Reasons to limit line of credit use during crisis Figure 8 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  49. Credit constrained from pursuing NPV>0 projects Figure 10/11 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Fall 2009

  50. Do financial constraints limit ability to pursue attractive (NPV>0) investments? % yes Source: www.cfosurvey.org Global Business Outlook Duke University Fall 2009

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