Investment

Off

External

Off

51�Թ�� Business School’s event showcased female leaders driving sustainable investing, ESG innovation and long-term value creation.

Main image: 51�Թ�� Business School | Fergus Burnett

3 minute read

Alumni blog: Why Angel Invest?

Francesca Hoare — Tue, 04 Mar 2025 09:31:29 +0000

Alumni blog: Why Angel Invest?

Francesca Hoare Tue, 04/03/2025 - 09:31

4 March 2026 Alumni

Besnik Mustafa (Weekend MBA 2025)

After beginning his career at Finance Think, Besnik Mustafa went on to advise Members of Parliament in North Macedonia. He later joined Salience Consulting, gaining experience across multiple international markets.

27 February 2026 Alumni

Alumni Careers: Understanding imposter syndrome and career growth

Imposter syndrome is something our careers consultants encounter frequently when supporting professionals through moments of growth, transition, and increased responsibility.

13 February 2026 Alumni

Alumni Careers: Helping Alumni Stay Visible and Valuable in the Age of Remote Work and AI

As the world of work continues to shift through the rise of remote working and rapid advances in AI, our careers consultants are increasingly supporting professionals who want to stay visible, valued, and strategically positioned.

28 July 2020

Alumni

Written by Matthew Stafford (Executive MBA 2010), Co-founder of 9others, a network of over 4,000 entrepreneurs in 45 global cities. He is also the co-founded of the DMG Syndicate, which helps grow startups via syndicate investment, as well as writing his own blog.

Why Angel Invest? There's nothing else quite like it

Over the last few years I’ve built up a small investment portfolio and my aim is to have investments in 100 startups. In this post I’ll give some background about why I think being an Angel Investor in startups is a good idea, and a fascinating and exciting space to be in. And to help you make better decisions when it comes to investment.

What do we mean by the term ‘investing’?

Investing is a broad term and will be used more and more. I predict that, in a similar way to the last decade ending with everyone calling themselves an ‘entrepreneur’, the 2020s is going to end with everyone calling themselves an ‘investor’.

Venture Capital (VC) is a catch-all but a good catch-all for Angel Investing. It’s capital for the (ad)venture. The type of companies that the investment goes into are startups; newly formed businesses that are started with the aim of achieving massive success and impact. Think Facebook when Mark Zuckerberg was still at Harvard, Uber when it was one of Travis Kalanick’s side projects, or Airbnb when they were selling breakfast cereal.

As with many adventures though, Angel Investing is risky. Very risky. For every Uber there are thousands of startups that fail to get anywhere close. But the thing that people often forget when thinking about how risky investing in startups is, is that the maximum amount of money investors can typically lose is 1x whatever invest. And with the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme tax breaks for UK Angel Investors it’s often less than that.

With risk comes reward and the upside for Angel Investing can be huge. For example one angel investor who put $25k into Uber in their 2010 seed round turned out to be worth over $124m at IPO (May 2019).

Why become an Angel Investor? And why now?

I first started learning properly about VC at 51�Թ�� Business School when studying for my MBA. I studied Software Engineering at Durham University during the early years of Facebook, Gmail and Twitter. I programmed enough code to know how websites like those worked and the incredible impact they could have. After Durham I moved to London and worked as an Analyst and Architect for some software companies. I worked at three different companies inside two years. I moved around a lot because I was hungry to work hard but wanted to have impact and get the rewards for that hard work. After a while I realised that it wasn’t going to happen.

So after joining the third software company in 2008 I started exploring the idea of gaining an MBA to give my career a boost. I was accepted at 51�Թ�� Business School and that changed everything. Studying Software Engineering at Durham meant a classroom of 32 other male undergraduates. No women. And no one really talked to each other that much, except online. Business school was thankfully more diverse. I met people from all sorts of different industries and stages in their careers and learnt a huge variety of subject matter. Durham was pretty much a maths degree with a bit of programming whereas 51�Թ�� was almost two years of strategy, accounting, marketing, economics, statistics, organisational behaviour, corporate finance, entrepreneurship, private equity and Venture Capital. VC was by far my favourite — the chance of having a small stake in a bunch of young, fast growing, virtually limitless potential companies was certainly appealing.

With risk comes reward and the upside for Angel Investing can be huge.

After graduating in 2010 I got a job with a small investment and advisory firm in London. I was taken on to work on London’s ‘Gateway2Investment’ programme, a GLA and EU backed programme to help London’s (mostly tech) startups become more investment-ready. In the next 18 months the team helped 52 companies raise over £23m in equity investment. This was right at the start of the latest wave of entrepreneurship. Now it’s common to be an entrepreneur, but back then it was a bit weird — why, just after the credit crunch, would anyone want to start a startup?

What I saw during 2010 and 2011 led to me co-founding 9others. What started over one meal for me and ‘9 others’ in December 2011 has grown into a global network of over 4,000 attendees in 47 cities around the world. At each meal entrepreneurs share a challenge and help each other out and it’s through these trusted relationships that drives everything I do. It’s because of 9others that I’ve met the founders of Uber, CityMapper, what3words, OneFineStay, Stripe and many more. No matter what happens (even a global pandemic) I will always be able to host a meal with 9others.

Throughout 2012 and 2013, I caught the bug for investment. In 2013 I left my job and struck out on my own, consulting with startups and some big companies that wanted to learn from them.

In 2016 I co-founded Dot Matrix Group (DMG). DMG is a syndicate of Angel Investors (68 at the time of writing) with a growing portfolio of startup investments. The investment opportunities typically come from the 9others network as that’s where I can get to know people, help out and learn how they operate and conduct themselves. We work hard to add value with the network and expertise of ourselves and DMG syndicate members.

So far so good?

Getting to this point has taken 10 years. A lot of it has been pretty gruelling but I’ve absolutely loved it too.

What I want to do now is help more people explore the possibility of becoming an Angel Investor by understanding the decision making process you need to go through.

There’s lots to consider: There’s deal flow (getting visibility of enough opportunities), there’s access (being able to invest in the hot deals) and being patient and having good judgement (balancing gut feel vs hard analysis).

So why do it? For me it’s the opportunity to contribute to and learn from some of the smartest people in the world. And with that there’s the chance to get a return unlike any other.

You can connect with Matthew via LinkedIn or on Twitter, or read more in his blog.

Programme

5 minute read

What really helps SMEs through downturns?

Cláudia Custódio — Wed, 15 Jan 2025 12:14:02 +0000

What really helps SMEs through downturns?

Cláudia Custódio Wed, 15/01/2025 - 12:14

More blogs

13 April 2026 Knowledge

Expert Q&A: Henry Dimbleby on the hidden ways ultra-processed foods harm our health and why the government must act now

20 March 2026 Knowledge

'Boomerasking': How to break the annoying habit hurting your workplace relationships

12 March 2026 Knowledge

Who decided what ambition looks like?

29 January 2026

Article at a glance:

Cláudia Custódio’s study examined an ongoing Portuguese plan to help healthy small businesses during the 2008 economic crisis and the decade that followed. Key findings include:

Targeted credit guarantees can be a powerful tool to preserve jobs, sustain investment and strengthen productivity. This is successful only when deployed selectively and at moments of genuine financial stress. There were no discernible benefits during times of growth.
Well-designed schemes support viable firms, rather than propping up unproductive ones.
Banks and business leaders play a critical role in ensuring support reaches firms that can use it productively

Small businesses are the backbone of most national economies, accounting for 90 per cent of businesses worldwide (World Bank) and 99 per cent of UK businesses. And there are many government initiatives to help them - but some schemes risk propping up inefficient and failing ventures.

Our research examined an ongoing Portuguese plan to help healthy small businesses during the economic crisis of 2008 and into the decade that followed. By using state of the art research methods, the results showed without doubt the positive impacts – and when support was no longer effective.

Amid a worldwide credit squeeze in the wake of the downturn, the Portuguese government offered these firms access to cheaper, largely guaranteed bank loans – thereby removing most of the risk for banks. Their eligibility was decided based on annual reviews and criteria such as sound finances and performance.

The study looked at a decade’s worth of data which ran beyond the recession and the subsequent sovereign debt crisis in the Eurozone and on into years of economic expansion. And the results are clear. In times of economic crises, small businesses which benefitted from cheaper guaranteed credit tended to invest more, recruit more staff and were more likely to become exporters. During this time the scheme boosted growth and appeared to improve productivity.

But importantly, cheaper guaranteed credit only had an impact during economic downtimes – there were no discernible benefits during times of growth.

What can policy makers take from these findings?

Targeted finance works with a few caveats: schemes to ease access to cheaper finance are highly effective if disbursed with discretion. While small businesses account for nearly two thirds of jobs in the UK’s private sector, it’s unproven that blanket support – such as the loans and furlough schemes extended in the UK during the Covid 19 pandemic – will produce the same results. These schemes must be precisely designed, targeted and reviewed.

Blanket support is not proven to deliver the same benefits over different business cycles: findings suggest targeted loan guarantees are ineffective during good times – it’s only during recessions that these small businesses benefit from a credit boost.

Eligibility criteria differ for different economies: these targeted firms are probably among those who benefit from smoothly functioning capital markets during good times and don’t need government support – possibly an indication that the threshold for eligible firms in Portugal was set too high during the expansion period. Given the UK’s concerns over lacklustre productivity, it’s promising that we see mild benefits from this targeted support – eligible companies became more productive, although these effects took time to emerge.

Narrowed gaps between levels of productivity across industries: – according to economic models, these findings reflected that capital is better allocated among businesses, possibly allowing companies to improve their productivity.

Employment effects are mixed: while there was a net uptick in job numbers, we also deduced that companies investing seemed also to lose some roles. Could it be that companies buying new equipment might be hiring new staff to operate it? Departing employees remained unemployed – an impact that policy makers will certainly care about.

What can banks and small businesses do?

This was a tightly targeted programme which removed much, but not all, of the risk for banks themselves. We discovered that many small businesses didn’t know about the support on offer and that take up was low in the early stages. Could banks act as important go-betweens to communicate available schemes to relevant small businesses?

Small business leaders reported that the bureaucracy involved in applying for a loan was too arduous – but our research shows that it’s worth the effort. Companies who benefitted were those judged to be in good financial health, without too much debt or too many unpaid bills – it pays to keep your house in order.

Targeted credit guarantees can be a powerful tool to preserve jobs, sustain investment and strengthen productivity. The Business School’s research suggests this is successful only when deployed selectively and at moments of genuine financial stress.

Find out more about the research

Read Cláudia Custódio’s paper here

Entrepreneurship

Knowledge Categories

Academic area

Can banks and policy makers help small businesses through recessions?

Main image: Brothers91 / iStock via Getty Images

4 minute read

Off

Dr Harsha Dutta on finance, development and inclusion

Shamita Harsh — Wed, 15 Jan 2025 12:14:02 +0000

Dr Harsha Dutta on finance, development and inclusion

Shamita Harsh Wed, 15/01/2025 - 12:14

More blogs

13 April 2026 Knowledge

Expert Q&A: Henry Dimbleby on the hidden ways ultra-processed foods harm our health and why the government must act now

20 March 2026 Knowledge

'Boomerasking': How to break the annoying habit hurting your workplace relationships

12 March 2026 Knowledge

Who decided what ambition looks like?

6 October 2025

Dr Harsha Dutta joined 51�Թ�� Business School as Assistant Professor of Finance, bringing with him a research agenda that bridges financial economics with development and political economy. Dr Dutta joins us after finishing his PhD in Finance at The Hong Kong University of Science & Technology (HKUST).

His work scrutinises the unique incentives and constraint that households and firms face in developing economies, shedding light on how financial markets and local politics in these economies shape long-term growth and inequality.

“I’m looking forward to working alongside 51�Թ��’s exceptional business scholars and the broader research community,” he says. “London's historical position as a global financial centre, combined with its rich archival resources, provides an inspiring environment for uncovering new insights from the past to inform modern financial policies.”

Finance findings with an inclusion lens

Dr Dutta’s research focuses on how changes to incentives force strategic adaptations that result in different economic outcomes for different sections of the society. His work uncovers insights from novel and unconventional empirical settings, using unique datasets to answer questions that are often difficult to explore in traditional markets. His findings not only advance finance scholarship but also generate insights relevant for policymakers seeking to design more inclusive and effective institutions.

His research draws insights from both contemporary economies and historical contexts. For example, his paper “Unequal Legacies of Financial Crises: Evidence from the Panic of 1873” traces the long-term effects of America’s first major economic depression. Using railroad records and census data across four generations, he shows how urban families displaced during the crisis experienced enduring disadvantages—poorer education, jobs and wealth compared to the unaffected. Such findings provide fresh perspectives on how financial shocks can shape inequality for more than a century.

Dr Dutta’s research has been recognised by leading institutions. He was awarded the SBM PhD Research Excellence Award (2024–25) at HKUST, where he completed his doctoral studies, as well as the Best PhD Paper Award at the HKUST Business School PhD Conference. His work has also attracted grant funding from the NSE–NYU Stern Initiative on the Study of Indian Capital Markets, a joint venture of the National Stock Exchange of India (NSE) and the Center for Global Economy and Business at NYU Stern School of Business.

By examining evidence from distinctive historical and development settings, Dr Dutta illuminates mechanisms often hidden in conventional data. His approach underscores not only the economic but also the social and political implications of financial systems.

His broader academic contributions include publications in top-tier general interest journals such as Science Advances. His work has enabled him to provide new evidence on key questions in financial economics while generating insights relevant for both academic research and policy design.

Shaping financial dialogue for students at 51�Թ��

Dr Dutta is eager to continue exploring how the interplay between financial systems and institutions shapes economic outcomes, while contributing to the School’s interdisciplinary approach to business research. By drawing on his expertise in both historical and contemporary settings, he aims to teach students to think beyond conventional boundaries and uncover hidden patterns, fostering dialogue across economics and policy and equip them with know-how to identify how today's policy changes and market shifts will create tomorrow's unintended consequences.

Dr Dutta brings fresh perspectives to the study of finance and his arrival at 51�Թ�� signals an exciting step forward in the School’s ambition to deepen understanding of how financial systems can promote growth while addressing inequality in an interconnected world.

Read about the new faculty joining the Business School

Explore our latest faculty appointments

Inequality

Knowledge Categories

Academic area

Exploring how finance shapes growth and opportunity through the lens of history

Main image: Harsha Dutta

3 minute read

When winning comes at a price: The business of pay-to-win add-ons

Mushegh Harutyunyan — Wed, 15 Jan 2025 12:14:02 +0000

When winning comes at a price: The business of pay-to-win add-ons

Mushegh Harutyunyan Wed, 15/01/2025 - 12:14

More blogs

13 April 2026 Knowledge

Expert Q&A: Henry Dimbleby on the hidden ways ultra-processed foods harm our health and why the government must act now

20 March 2026 Knowledge

'Boomerasking': How to break the annoying habit hurting your workplace relationships

12 March 2026 Knowledge

Who decided what ambition looks like?

17 September 2025

The video game industry is booming. According to Statista, more than three billion people played video games worldwide in 2024. As per PwC’s Global Entertainment and Media Outlook 2022-26, the gaming industry is tipped to maintain its recent rapid growth, and could be worth $321 billion by 2026. A big slice of that — $82 billion in 2024 — came from in-game purchases such as cosmetic “skins”, virtual currency, map packs, and more. In the UK, a recent Censuswide poll revealed that gamers, on average, spend £540 a year on in-game purchases (£22 a month) and subscriptions (£23 a month).

One of the most debated forms of in-game spending is the pay-to-win add-on, a digital item that gives players a clear advantage in player-versus-player games. A special weapon in Call of Duty: Warzone, a premium camouflage in Escape from Tarkov, or unique cards in Hearthstone can tilt the odds decisively in favor of paying players. For the buyer, these items boost the chance of winning; for everyone else, they create a frustrating disadvantage. One gamer described their game experience bluntly: “It was absurd and halfway to unplayable if you didn’t drain your wallet.”

The developer’s dilemma

At first glance, offering P2W add-ons seems like easy money. They cost little to produce and appeal directly to players’ powerful motivations: the desire to win and the dread of losing. Yet our research shows that the business case is more nuanced.

Unlike traditional add-ons (like hotel WiFi or an extended warranty), the value of P2W items is shaped by network effects. Their appeal grows when few players own them, because they confer an advantage over many others. But as adoption of P2W items spreads, their edge diminishes.

Players who do not spend on P2W may abandon the game entirely as they face a daunting competitive disadvantage against the large number of P2W owners. The fewer non-buyers remain, the smaller is the pool of players against whom P2W will bring an advantage, further eroding the add-on’s value. This negative network effect created by the P2W add-ons calls for a careful assessment of market conditions before introducing them. We find that ironically, when a large share of players is willing to buy, introducing P2W can reduce profits, leaving developers better off without it.

The psychology of competition makes this balance even trickier. Players who are highly motivated by winning make the add-on more lucrative: the thrill of victory increases their willingness to pay. But the story is different with loss sensitivity. If defeats sting only mildly, add-ons hold little attraction. If they sting too much, non-buyers disengage altogether. Developers can influence these sensitivities through design choices — making victories more rewarding while keeping defeats painful but not unbearable.

Design and pricing

One might assume that the stronger the add-on, the better for profits. Yet our findings suggest otherwise. Making the add-on too powerful discourages non-buyers from playing at all, shrinking the competitive field and eroding the add-on’s value. In highly competitive genres, developers may actually benefit from deliberately limiting the power of pay-to-win items, ensuring the game remains engaging for all.

The introduction of P2W items forces developers to lower the base game price to keep P2W-non-buyers in the fold, compensating their disadvantage against P2W-buyers. In some cases, this means shifting to a freemium model, or even — in theory — setting a negative price, paying players to participate because their presence sustains the market for add-ons. And while lower prices might seem to discourage investment in quality, the opposite can happen: when losses feel especially painful for non-buyers, developers are pushed to raise quality to keep them engaged.

Perhaps most surprising is what this means for players themselves. P2W is often accused of undermining fairness and reducing enjoyment. Yet under the right conditions, our analysis shows it can actually increase player surplus. By broadening the player base and motivating higher investment in quality, the system can leave players better off than in a world without P2W.

Keeping the pond healthy

Players are often categorised into "whales" (big spenders), "dolphins" (moderate spenders) and "minnows" (low or non-spenders). For developers, pay-to-win add-ons are a tempting way to extract more profits from the less price-sensitive whales and dolphins. Yet their very success depends on the participation of the more price-sensitive minnows. These players may never spend much, but their presence ensures that competitive advantages remain meaningful for others. If minnows abandon the game, the pond dries up — and the value of P2W erodes with it.

The lesson is clear: introducing P2W is not simply about monetizing the biggest spenders. It is about keeping the entire ecosystem in balance. Developers who want sustainable profits must design their games so that whales, dolphins, and minnows can all swim in the same pond — even if not on equal terms.

Explore key findings

Access the paper by Mushegh Harutyunyan and Esma Koca

Digital Transformation

Technology

Knowledge Categories

Academic area

Analytics & Operations

Marketing

Pay-to-win (P2W) add-ons are controversial in the gaming industry. New research by Mushegh Harutyunyan and Esma Koca reveals when a game developer should introduce a P2W add-on and how to design and price it.

Main image: Milan_Jovic / iStock via Getty Images Plus

5 minute read

The Banker quotes Professor Gilles Chemla on HSBC's new gold token for retail investors in Hong Kong

Evie Burrows-Taylor — Mon, 15 Apr 2024 14:42:30 +0000

The Banker quotes Professor Gilles Chemla on HSBC's new gold token for retail investors in Hong Kong Evie Burrows-Taylor Mon, 15/04/2024 - 14:42

2 April 2024

Banking

Centre for Climate Finance and Investment

Sustainability: 7 articles to inspire business leaders

Evie Burrows-Taylor — Fri, 17 Feb 2023 09:21:33 +0000

Sustainability: 7 articles to inspire business leaders

Evie Burrows-Taylor Fri, 17/02/2023 - 09:21

20 February 2023

Sustainability is a core area of research at 51�Թ�� Business School, with academics focusing on themes including climate, energy and sustainable business models. Here, we take a look at some of our most popular sustainability-themed articles

1. What is climate risk?

The financial implications of climate risk are increasingly discussed. In this article, 51�Թ�� Business School researcher Bob Buhr explains how he is helping investors, lenders and regulators address the financial implications of climate change.

2. Phasing out coal would save the world $78 trillion

The most common concern voiced with phasing out coal is that it would be too costly. But 51�Թ�� Business School researchers have found the move would save 1.2 per cent of current world GDP every year until the end of the century.

3. Why renewable energy outperforms fossil fuels

Analysis by 51�Թ��’s Centre for Climate Finance & Investment shows how renewable energy has benefitted from technological improvements, policy support and lower financing costs.

4. 6 ways to reduce the environmental impact of your business

It is now widely accepted that climate change exists – and that there are ways we can help to stop the worst of its effects. Here, 51�Թ�� Business School researcher Mili Fomicov reveals six ways you and your business can help in the fight against climate change.

5. Why tackling climate change requires nothing less than a business revolution

Climate change is arguably the biggest crisis to face humanity in our history. But effecting a true green recovery will require changes that are even more profound, and which involve a fundamental reassessment of how businesses operate.

6. Banks are already considering climate change in their lending decisions

New research shows larger banks are lending less to small farms affected by abnormally high temperatures, with potentially huge repercussions for a large portion of the world’s population.

7. Agribusiness is not ready for the sudden shocks of climate change

Climate change models suggest temperatures will gradually rise, but the agriculture sector is not prepared for the acute risk of extreme weather events.

Corporate Social Responsibility

Monthly newsletter

Receive the latest insights from 51�Թ�� Business School

MSc Climate Change, Management & Finance

MSc Climate Change, Management & Finance is a one-year programme that gives graduates the interdisciplinary skills required in business on issues relating to climate change and sustainability.

Download PDF

Knowledge Categories

Centre for Climate Finance and Investment

Davos 2023: Five insights for business leaders and policy makers

Michael Mills — Thu, 12 Jan 2023 14:20:59 +0000

Davos 2023: Five insights for business leaders and policy makers

Michael Mills Thu, 12/01/2023 - 14:20

13 January 2023

Whether you're attending the World Economic Forum Annual Meeting, one of the fringe events, or following the discussions from abroad, here's a selection of five articles from IB Knowledge which provide insights into the key topics you can apply all year round

1. How to plan the future of sustainable energy

Sustainable energy has been one of the defining concepts of the 21st century so far, changing the way governments, businesses and individuals operate – possibly forever. But to meet sustainability goals, our future power systems will need to change dramatically over the next 50 years and the right solution is critical to shaping policy.

2. Restarting the future: why the intangible economy isn’t working and how we can fix it

Since the turn of the century, businesses have been putting more money into intangible assets, making them a cornerstone of the economy. Despite this, the pace of investment is slowing and developed countries find themselves in a strange position: the world is richer than it’s ever been, yet their economies are suffering from major issues, including stagnation, inequality, and dysfunctional competition.

3. What African tech startups can teach us about digital innovation

The latest figures show some $4 billion of investment was funnelled into African tech startups in 2021 and six unicorns have emerged on the continent. But what makes certain tech businesses flourish in these unique circumstances?

4. Could engaging in corporate social impact work damage your career?

Companies that offer employees the chance to engage in social impact work benefit from improved recruitment, mitigation against adverse employee behaviour and improved employee retention. However, it does not necessarily translate that those who volunteer benefit in terms of career advancement. In fact, 51�Թ�� researchers have found that, in some cases, it can hold them back.

5. Ukraine: what armed conflict means for climate change

The question of the impact of climate change on geopolitical risk has been circulating in research circles for a while. But, until now, few have turned the question around and asked: “How do armed conflicts affect the fight against climate change?”

51�Թ�� Business School will be in Davos alongside the World Economic Forum from 16 to 20 January 2023. We will be holding a series of events via our Centre for Digital Transformation and the Leonardo Centre on Business for Society.

Careers

Climate Change

Climate Finance

Culture and Inclusion

Digital Transformation

Research Centre

Leonardo Centre on Business for Society

Academic area

Management & Entrepreneurship

Knowledge Categories

Strategy & Leadership

2022 in business: 10 of the top IB Knowledge articles of the year

Evie Burrows-Taylor — Thu, 22 Dec 2022 09:33:12 +0000

2022 in business: 10 of the top IB Knowledge articles of the year

Evie Burrows-Taylor Thu, 22/12/2022 - 09:33

22 December 2022

We take a look at some of this year's most-read IB Knowledge articles

Over the past year, 51�Թ�� Business School academics have written about subjects as varied as climate change, AI and digital transformation, healthcare, and the challenges of scaling up a business. From practical tips for entrepreneurs and business owners to cutting-edge research, they've covered a lot of ground.

Here's a selection of some of our most popular articles of 2022.

1. What African tech startups can teach us about digital innovation

During the last decade, the African continent has pushed the frontiers of digital innovation. As the African tech startup landscape undergoes radical change, we take a look at what is helping certain businesses thrive in this new environment.

2. 9 digital transformation mistakes all organisations make – and how to avoid them

When it comes to digital transformation, we tend to focus on the success stories but 87 per cent of digital transformations fail to meet expectations. In this article, three experts reveal how you can avoid some of the most common digital transformation mistakes.

3. Could engaging in corporate social impact work damage your career?

These days many people are looking for more from their professional roles than the duties listed in their job description, and corporations are increasingly offering employees the chance to engage in social impact work. But is doing social good also good for your career?

4. Ukraine: what armed conflict means for climate change

5. 3 AI trends to look out for in 2022

Artificial intelligence looks set to transform every sector of the global economy. Here, we look at some of the most interesting AI trends for business, including creative AI, the metaverse and cybersecurity.

6. What is climate risk?

The financial implications of climate risk are increasingly discussed. In this article, an 51�Թ�� Business School researcher explains how he is helping investors, lenders and regulators address the financial implications of climate change.

7. 6 ways to reduce the environmental impact of your business

It is now widely accepted that climate change exists – and that there are ways we can help to stop the worst of its effects. Here, an 51�Թ�� Business School researcher reveals six ways you and your business can help in the fight against climate change.

8. The pandemic divide: how COVID-19 has increased health inequalities

The pandemic has exacerbated pre-existing inequalities, hitting people on lower incomes and those from ethnic minority backgrounds hardest. But why did these groups experience the most disruption to hospital care from cancelled and delayed hospital appointments?

9. Phasing out coal would save the world $78 trillion

10. How to scale up in an emerging market

Launching a business is certainly a challenge, but sustaining it and scaling up is something else entirely. Luckily, a new form of entrepreneurial support is here to help.

Download PDF

Research Centre

Centre for Climate Finance & Investment

Centre for Health Economics & Policy Innovation

Academic area

Management & Entrepreneurship

Knowledge Categories

Entrepreneurship & Innovation

Strategy & Leadership

Technology

How central bank's interest rate rises affect the richest and poorest families

José-Luis Peydró — Thu, 08 Sep 2022 10:03:58 +0000

How central bank's interest rate rises affect the richest and poorest families

José-Luis Peydró Thu, 08/09/2022 - 10:03

21 September 2022

Received wisdom has it that low rates boost economic growth, spreading wealth across society. But Professor José-Luis Peydró and his colleagues have been able to reveal the truth

Higher fuel costs stoked by the crisis in Ukraine have refocused attention on the inequalities of income and wealth. Rising prices threaten to hit the poorest the hardest, but at the same time higher interest rates can hit families with mortgages and consumer loans; both of which could fuel a recession that would again make life harder for lower income households.

But lower rates, which have been the norm in developed economies for the last decade, aren’t an economic cure-all.

Examining the effects of interest rates through tax records

We’ve been able to investigate in granular detail who gains, and by how much, when central banks ease rates, in a bid to understand the underlying dynamics of wealth and income. With access to individual-level tax records of the entire Danish population over the course of nearly three decades, we’ve been able to get their levels of income, spending, assets and debts. This amounts to some 70 million individual observations between 1987 and 2014.

By looking at information such as salaries, share dividends, costs of debt, deposits, value of stocks and houses, and spending (via a record of car purchases), we’ve established a clear idea of how families across economic spectrum fare when rates rise and fall.

There are some clear winners and losers. When rates fall, disposable income rises for high and low earners, but it’s households within the top one per cent of income who benefit most. We found a one percentage point drop in interest rates boosted the incomes of these top earners by five per cent over two years, while the lowest earners saw only a 0.5 per cent rise. Those in the middle saw an increase of 1.5 per cent in their income.

What is going on?

While lower rates do indeed boost employment, particularly among people with lower incomes, these higher earnings are eclipsed by the benefits the better off enjoy, in terms of healthier share dividends, better business income and cheaper interest costs.

We witness a similar imbalance if we examine the impact of lower rates on the value of assets such as property and stocks. Again, cheaper money brings gains across the board, but these are more pronounced among the better off. A similar rate drop over two years boosts the value of assets such as property by 20 per cent of disposable income among poorer families, but by 75 per cent at the top of the scale. Lower rates have a larger impact upon the value of assets than they do upon disposable income – and the wealthier have more financial and real assets.

When rates fall, disposable income rises for high and low earners, but it’s households within the top one per cent of income who benefit most

We also find younger people get the rough end of the deal. In terms of income, middle-aged households are more likely to be self-employed and have more debt. Lower monetary policy rates mean they earn more, have access to cheaper finance and better business benefits than their younger and older counterparts. In terms of wealth, the elderly are more likely to have investments and property portfolios, and hence benefit the most.

In order to ensure our readings are accurate, we used this data to model the results of a similar easing of rates – and the results backed up our findings. Our exercise showed lower rates boost disposable income for the wealthiest by some 3.5 per cent over two years, but for the lowest on the rung, incomes fall by nearly two per cent.

Interest rates – monetary policy – are one of the main methods that central banks possess to try to prevent entrenched inflation and ensure a robust economy. But this data dispels the fantasy that lower rates make for a balanced economy where everyone benefits – rather they serve to increase than reduce inequality.

This article draws on findings from "Monetary Policy and Inequality" by Asger Lau Andersen (University of Copenhagen), Niels Johannesen (University of Copenhagen), Mia Jørgensen (University of Copenhagen) and José-Luis Peydró (51�Թ�� London).

Banking

Culture and Inclusion

Academic area

Knowledge Categories