Reactions to the EDHEC Study - Faculty and Research

Reactions to the EDHEC Study “Optimal Design of Corporate Market Debt Programmes in the Presence of Interest-Rate and Inflation Risks” - May 20124. ConclusionOur study examined the relevant academictheory and proposed a functional modelto evaluate a corporation’s optimal debtstructure. The breadth and practicalnature of the paper resulted in several keyissues emerging with clarity. To presenta thorough analysis of the abstractconcepts, current practices and futureprogression, we thought it would be bestto supplement our study with practitionerinsight through a formal call for reaction– the results of which confirm many ofthe conclusions of our research.the central tenet of the paper: that formany firms, current debt-managementpractices can be improved through theissuance of inflation-linked debt.Three questions which pertained togeneral concerns were asked to bothgroups of respondents. As depicted in thefollowing graphs, the perspectives wereremarkably similar across both investorsand issuers.Potential issuers exhibited substantialagreement with the positive attributes ofinflation-linked debt, while over half ofrespondents recognised the prospects forthe development of a highly liquid marketas a result of this type of research. Overall,the responses reflect strong agreementwith many of our key propositions, andFigure 13. Contrast of responses of questions asked to both parties22 An EDHEC-Risk Institute Publication