In his seminal paper, Lewellen (1971) argues that a conglomerate merger between two firms with imperfectly correlated cash flows could reduce the risk of default and hence increase debt capacity. He predicts that such mergers produce a coinsurance effect that benefits both shareholders and bondholders. However, subsequent studies debate whether the coinsurance effect results in real wealth creation or a mere wealth transfer from stockholders to bondholders. Under varying model conditions, these studies generate different predictions about the distribution of merger gains between bondholders and stockholders. In a recent article, Leland (2007) argues that the coinsurance effect is not always positive, as postulated by Lewellen (1971). In addition, he suggests that the corporate coinsurance can be either wealth creation or wealth transfer depending on the specific merger conditions.
2008 was an historic year. Financial disruptions triggered by declining house prices in the US grew into a global credit crisis of systemic proportions. By the second half of the year, most advanced economies had entered a recession. The downturn spilled over into emerging markets, increasing the likelihood of a global contraction in 2009. Although the world has seen several financial crises, this one differs in two respects. First, it has demonstrated just how tightly interconnected globalization has made the world and its systems. Second, this crisis was driven by developed economies using unprecedented levels of debt and leverage throughout the financial system. Thus, risks that had been identified in the past two editions of this report – the risk of a global meltdown in asset prices (2007) and the widespread mispricing of risk and the potential implications of systemic financial risk (2008) – have materialized with huge consequences.
This year’s report focuses on the effects of the global financial crisis and its implications for those risks that came to the fore of the Global Risk Network assessment for 2009. They include: a sudden further drop in China’s growth to 6% or below; deteriorating fiscal positions; further asset price falls; increasing resource-related risks due to climate change; and the failure of global governance to mitigate global risks. The highly interconnected nature of these risks means that their impact is truly global. The economic outlook for 2009 is a grim one for most economies; markets remain volatile, liquidity has not returned, unemployment is rising, and consumer and business confidence has fallen to record lows. In this climate, risks become even more potent in their impact and, as discussed in previous reports, the tendency towards panic and short-term responses are more pronounced. This report explores the dangers of managing out of this crisis, without considering the broader, long-term consequences of today’s decisions. It also stresses the need for a determined, global focus on balancing the response to the immediate challenges with a concerted effort to mitigate longer term risks, not least those relating to climate change and resources.
Light emitting diode (LED) based exit signs and traffic signals have fulfilled their promise of an energy-efficient, long-lasting, compact, and low-maintenance light source in real-world commercial and industrial applications by saving millions of kilowatt-hours of electricity and thousands of maintenance hours.
While a number of technological and economic challenges have combined to limit the availability of LED consumer products beyond these existing niches, this trend is changing: a number of sources have projected that LED-based lighting will gradually replace 25% to 30% of incandescent lighting applications by 2025. The intent of this report is to provide an overview of the market for LED-based lighting systems in the U.S. in order to inform the Northwest Energy Efficiency Alliance (the Alliance) future funding and program decisions regarding this technology.
