nep-cfn New Economics Papers
on Corporate Finance
Issue of 2005‒09‒29
six papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Driver costs in small firms: empirical analysis for farms By Josep Maria Argilés and Josep Garcia Blandón
  2. Option Valuation As an Expectation in The Complex Domain: The Black-Scholes Case By Hortènsia Fontanals and Ramón A. Lacayo
  3. Testing the bivariate distribution of daily equity returns using copulas. An application to the Spanish stock market By Oriol Roch and Antonio Alegre
  4. Basel II and Bank Lending to Emerging Markets: Micro Evidence from German Banks By Liebig, Thilo; Porath, Daniel; Weder, Beatrice; Wedow, Michael
  5. Capital Structure Policies in Europe: Survey Evidence By Brounen, D.; Jong, A. de; Koedijk, C.G.
  6. Managing Systemic Liquidity Risk in Financially Dollarized Economy By Alain Ize; Miguel Kiguel; Eduardo Levy Yeyati

  1. By: Josep Maria Argilés and Josep Garcia Blandón (Universitat de Barcelona)
    Abstract: The agricultural sector has always been characterized by a predominance of small firms. International competition and the consequent need for restraining costs are permanent challenges for farms. This paper performs an empirical investigation of cost behavior in agriculture using panel data analysis. Our results show that transactions caused by complexity influence farm costs with opposite effects for specific and indirect costs. While transactions allow economies of scale in specific costs, they significantly increase indirect costs. However, the main driver for farm costs is volume. In addition, important differences exist for small and big farms, since transactional variables significantly influence the former but not the latter. While sophisticated management tools, such ABC, could provide only limited complementary useful information but no essential allocation bases for farms, they seem inappropriate for small farms.
    Keywords: cost behavior, Activity based costing, farm management accounting, small firms
    JEL: M10 M40 M41
    Date: 2005
  2. By: Hortènsia Fontanals and Ramón A. Lacayo (Universitat de Barcelona)
    Abstract: It is very well known that the first succesful valuation of a stock option was done by solving a deterministic partial differential equation (PDE) of the parabolic type with some complementary conditions specific for the option. In this approach, the randomness in the option value process is eliminated through a no-arbitrage argument. An alternative approach is to construct a replicating portfolio for the option. From this viewpoint the payoff function for the option is a random process which, under a new probabilistic measure, turns out to be of a special type, a martingale. Accordingly, the value of the replicating portfolio (equivalently, of the option) is calculated as an expectation, with respect to this new measure, of the discounted value of the payoff function. Since the expectation is, by definition, an integral, its calculation can be made simpler by resorting to powerful methods already available in the theory of analytic functions. In this paper we use precisely two of those techniques to find the well-known value of a European call.
    Keywords: European call, Laplace transform, Fourier transform, Generalized function, Error function.
    JEL: G13
    Date: 2005
  3. By: Oriol Roch and Antonio Alegre (Universitat de Barcelona)
    Abstract: In this paper we deal with the identification of dependencies between time series of equity returns. Marginal distribution functions are assumed to be known, and a bivariate chi-square test of fit is applied in a fully parametric copula approach. Several families of copulas are fitted and compared with Spanish stock market data. The results show that the t-copula generally outperforms other dependence structures, and highlight the difficulty in adjusting a significant number of bivariate data series.
    Keywords: Copulas, Daily equity returns, Bivariate chi-square statistic, Risk Management.
    Date: 2005
  4. By: Liebig, Thilo; Porath, Daniel; Weder, Beatrice; Wedow, Michael
    Abstract: This paper investigates whether the new Basel Accord will induce a change in bank lending to emerging markets using a new loan level data set on German banks' foreign exposure. We test two interlinked hypotheses on the conditions under which the change in the regulatory capital would leave lending flows unaffected. This would be the case if (i) the new regulatory capital requirement remains below the economic capital, and (ii) banks' economic capital to emerging markets already adequately reflects risk. On both accounts the evidence indicates that the new Basel Accord should have a limited effect on lending to emerging markets.
    Keywords: banking regulation; Basel accord; international lending
    JEL: F33 F34 G28
    Date: 2005–08
  5. By: Brounen, D.; Jong, A. de; Koedijk, C.G. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In this paper we present the results of an international survey among 313 CFOs on capital structure choice. We document several interesting insights on how theoretical concepts are being applied by professionals in the U.K., the Netherlands, Germany, and France and we directly compare our results with previous findings from the U.S. Our results emphasize the presence of pecking-order behavior. At the same time this behavior is not driven by asymmetric information considerations. The static trade-off theory is confirmed by the importance of a target debt ratio in general, but also specifically by tax effects and bankruptcy costs. Overall, we find remarkably low disparities across countries, despite the presence of significant institutional differences. We find that private firms differ in many respects from publicly listed firms, e.g. listed firms use their stock price for the timing of new issues. Finally, we do not find substantial evidence that agency problems are important in capital structure choice.
    Keywords: International economics;financial economics;capital structure;debt maturity;equity issues;
    Date: 2005–02–01
  6. By: Alain Ize; Miguel Kiguel; Eduardo Levy Yeyati
    Abstract: This paper evaluates ways to protect highly dollarized banking systems from systemic liquidity runs (such as the ones that took place recently in Argentina, Uruguay, and Paraguay). In view of the limitations of available (private or official) insurance schemes, and the distortions introduced by central bank lending of last resort (LOLR), the authors favor decentralized liquid foreign asset requirements on dollar deposits, supplemented by a scheme of “circuit breakers.” The latter combines the use of limited dollar liquidity to ensure the convertibility of transactional deposits with a mechanism that automatically limits the convertibility of dollar term deposits once triggered by a predetermined decline in banks’ liquidity.
    Date: 2005

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