nep-cfn New Economics Papers
on Corporate Finance
Issue of 2005‒12‒01
ten papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Was There a Nasdaq Bubble in the Late 1990s? By Pietro Veronesi; Lubos Pastor
  2. The Stock Market and the Allocation of Capital in a Production Economy By Joel Peress
  3. Bank Finance versus Bond Finance: What Explains the Differences Between US and Europe? By Harald Uhlig; Fiorella De Fiore
  4. Corporata Taxes, Growth and Welfare in a Schumpeterian Economy By Pietro F. Peretto
  5. Operating Leverage, Stock Market Cyclicality, and the Cross-Section of Returns By Francois Gourio
  6. Complete Markets, Enforcement Constraints and Intermediation By Eva Carceles-Poveda; Arpad Abraham
  7. Uninsured Risks, Loan Contracts and the Declining Equity Premium By Sanjay Banerjee; Parantap Basu
  8. Shareholder Protection, Stock Market Development, and Politics By Marco Pagano; Paolo Volpin
  9. Sharpe Ratio Maximization and Expected Utility when Asset Prices have Jumps By Morten Christensen; Eckhard Platen
  10. Fair value accounting and financial stability By Andrea Enria; Lorenzo Cappiello; Frank Dierick; Sergio Grittini; Andrew Haralambous; Angela Maddaloni; Philippe Molitor; Fatima Pires; Paolo Poloni

  1. By: Pietro Veronesi; Lubos Pastor (Finance, Graduate School of Business University of Chicago)
    Keywords: bubble, stock valuation
    Date: 2005
  2. By: Joel Peress
    Keywords: Stock Market, Capital Allocation, Production Economy, Information, Rational Expectations, Total Factor Productivity, Partial Revelation, Income, GDP, Concentration
    JEL: G14 O41 O16
    Date: 2005
  3. By: Harald Uhlig; Fiorella De Fiore (Directorate General Research European Central Bank)
    Keywords: Financial structure, agency costs, heterogeneity
    JEL: E20 E44 C68
    Date: 2005
  4. By: Pietro F. Peretto (Department of Economics Duke University)
    Keywords: Endogenous Growth, Market Structure, Dividends, Corporate Taxes
    Date: 2005
  5. By: Francois Gourio
    Keywords: Fama and French ; Operating Leverage; Tobin's q
    Date: 2005
  6. By: Eva Carceles-Poveda; Arpad Abraham
    Keywords: Production Economies, Enforcement Constraints, Financial Intermediation
    JEL: D5 E22
    Date: 2005
  7. By: Sanjay Banerjee; Parantap Basu
    Abstract: Using a two period model with moral hazard and uninsured risk, we argue that the decline in equity premium from its historically high level is due to a gradual elimination of barriers to universal banking. The loan contracts set up by financial intermediaries became more complete in nature with the advent of universal banking in the 90s following the Gramm-Leach-Billy Act. Hence, it is the nature of the loan contracts, not just the borrowing constraint and uninsured risks that is more fundamental in explaining the size of the equity premium.
    Date: 2005–08
  8. By: Marco Pagano (Università di Napoli Federico II, CSEF, CEPR and ECGI); Paolo Volpin (London Business School)
    Abstract: This paper presents a political economy model where there is mutual feedback between investor protection and stock market development. Better investor protection induces companies to issue more equity and thereby leads to a broader stock market. In turn, equity issuance expands the shareholder base and increases support for shareholder protection. This feedback loop can generate multiple equilibria, with investor protection and stock market size being positively correlated across equilibria. The model’s predictions are tested on panel data for 47 countries over 1993-2002, controlling for country and year effects and endogeneity issues. We also document international convergence in shareholder protection to best-practice standards, and show that it is correlated with cross-border M&A activity, consistent with the model.
    Keywords: political economy, shareholder protection, corporate governance, stock market deve
    JEL: G34 K22 K42
    Date: 2005–11–01
  9. By: Morten Christensen (University of Southern Denmark); Eckhard Platen (School of Finance and Economics, University of Technology, Sydney)
    Abstract: We analyze portfolio strategies which are locally optimal, meaning that they maximize the Sharpe ratio in a general continuous time jump-di®usion framework. These portfolios are characterized explicitly and compared to utility based strategies. In the presence of jumps, maximizing the Sharpe ratio is shown to be generally inconsistent with maximizing expected utility, but this is shown to depend strongly on market completeness and whether event risk is priced.
    Date: 2005–11–01
  10. By: Andrea Enria (Committee of European Banking Supervisors, London, United Kingdom.); Lorenzo Cappiello (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Frank Dierick (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Sergio Grittini (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Andrew Haralambous (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Angela Maddaloni (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Philippe Molitor (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Fatima Pires (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Paolo Poloni (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Accounting standard setters are considering the wider use of fair value accounting. This paper focuses on the financial stability implications of a move in the banking sector from the current accounting framework to full fair value accounting. A simulation exercise is performed on how various external shocks affect the balance sheet of an average European bank under the two frameworks. The paper further investigates the impact of the alternative framework on the main balance sheet items, and the interaction with banks’ risk management, supervisory tools and statistical requirements. It also examines how the application of fair value accounting to banks’ trading book has impacted their share price volatility. It is concluded that the introduction of full fair value accounting could have a significant effect in terms of income volatility, procyclicality of bank lending and more generally financial stability. Hence, any move towards this alternative accounting framework should be gradual.
    Keywords: accounting, banks, fair value, financial regulation, financial reporting, financial stability, risk management.
    JEL: G14 G21 G28 M41
    Date: 2004–04

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