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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. Global Business Outlook. Quarterly Survey Since July 1996 (55 quarters)

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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 Global Business Outlook Duke University Winter 2009

  2. Global Business Outlook • Quarterly Survey • Since July 1996 (55 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 Winter 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 Winter 2009

  4. Global Business Outlook Duke University Winter 2009

  5. Global Business Outlook Duke University Winter 2009

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  7. Global Business Outlook Duke University Winter 2009

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  10. Global Business Outlook Duke University Winter 2009

  11. Top CFO Concerns (December 2009) External: • Consumer Demand • Federal Government Agenda/Policies • Price Pressure • Credit Markets/Interest Rates Internal: • Margin Maintenance • Ability to Forecast Results • Maintaining Morale / Productivity • Working Capital Management Global Business Outlook Duke University Winter 2009

  12. Global Business Outlook Duke University Winter 2009

  13. Global Business Outlook Duke University Winter 2009

  14. Global Business Outlook Duke University Winter 2009

  15. Global Business Outlook Duke University Winter 2009

  16. Global Business Outlook Duke University Winter 2009

  17. Global Business Outlook Duke University Winter 2009

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

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

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

  21. 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 Winter 2009

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

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

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

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

  26. 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 Winter 2009

  27. 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 (43% correlation with next year’s earnings) • Employment (81%) – see chart • GDP (78%) Source: www.cfosurvey.org Global Business Outlook Duke University Winter 2009

  28. Why care what CFOs say? 2) CFOs say it first • Correlation with future quarter’s value for • CEO optimism (84%, 1 qtr ahead) – see chart • ISM (75%, 1) • Conf Board consumer confidence (86%, 2) • Michigan consumer confidence (81%, 1) • UBS/Gallup Investor confidence (49%, 2) Source: www.cfosurvey.org Global Business Outlook Duke University Winter 2009

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

  30. 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 Winter 2009

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

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

  33. 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 Winter 2009

  34. 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 Winter 2009

  35. 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 Winter 2009

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

  37. 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 Winter 2009

  38. How fund investment if credit constrained? Figure 12 from Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Winter 2009

  39. To raise funds during the credit crisis …have you sold assets? % who answered yes • Source: Campello, Graham, Harvey, “The Real Effects of the Credit Crisis” Global Business Outlook Duke University Winter 2009

  40. As of December 2009, when do you anticipate domestic employment at your firm to return to year-end 2007 levels? Cumulative Percent Global Business Outlook Duke University Winter 2009

  41. As of December 2009, when do you anticipate domestic employment at your firm to return to year-end 2007 levels? Cumulative Percent Global Business Outlook Duke University Winter 2009

  42. As of December 2009, when do you anticipate domestic employment at your firm to return to year-end 2007 levels? Cumulative Percent Global Business Outlook Duke University Winter 2009

  43. As of September 2009, compared to current sales revenue, how much will your company’s revenue need to increase for you to increase domestic employment to year-end 2007 levels? Global Business Outlook Duke University Winter 2009

  44. Reason(s) your company would not benefit from the adoption of a national healthcare system Global Business Outlook Duke University Winter 2009

  45. Credit Line Terms – Q2 2008 vs. Q2 2009 U.S.A. Months Basis points Basis points 30.1 27.6 26.4 196.8 Source: www.cfosurvey.org June 2009 survey. See Campello, Giambona, Graham, and Harvey, 2009 12.7 127.5 Europe Asia 12.5 30.5 193.5 115.5 22.6 26.9 20.8 27.7 8.9 87.9 25.3 124.5 Global Business Outlook Duke University Winter 2009

  46. Interest Rate Markup – Q2 2008 vs. Q2 2009 (US data) Constrained Credit vs. Unconstrained Credit Firms 355.9 141.3 105.1 Units = basis points Source: www.cfosurvey.org June 2009 survey. See Campello, Giambona, Graham, and Harvey 191.4 Non-Investment Grade vs. Investment Grade Firms Negative Cash Flow vs. Positive Cash Flow Firms 189.3 184.1 213.1 155.0 191.0 119.2 128.4 117.9 Global Business Outlook Duke University Winter 2009

  47. Maturity of new lines – Q2 2008 vs. Q2 2009 (US data) Constrained Credit vs. Unconstrained Credit Firms 30.7 29.1 28.3 22.5 Units = months Source: www.cfosurvey.org June 2009 survey. See Campello, Giambona, Graham, and Harvey Non-Investment Grade vs. Investment Grade Firms Negative Cash Flow vs. Positive Cash Flow Firms 37.7 36.6 31.2 28.8 29.1 23.0 25.9 20.5 Global Business Outlook Duke University Winter 2009

  48. How would you rate your employees’ morale level? Fair + Poor, 2009Q4 Source: www.cfosurvey.org Global Business Outlook Duke University Winter 2009

  49. Relative to 2008, does your company plan to adjust its target compensation mix for 2010? Net percentage change, 2009Q4 Source: www.cfosurvey.org Global Business Outlook Duke University Winter 2009

  50. Relative to 2008, does your company plan to adjust its target compensation mix for 2010? Net percentage change, 2009Q4 Source: www.cfosurvey.org Global Business Outlook Duke University Winter 2009

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