nep-cfn 2006-02-26 papers

on Corporate Finance

Issue of 2006‒02‒26
two papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

The Effects of Short-Term Liabilities on Profitability: The Case of Germany By Christopher F. Baum; Dorothea Schaefer; Oleksandr Talavera
Investment and Uncertainty By Christopher F. Baum; Mustafa Caglayan; Oleksandr Talavera

The Effects of Short-Term Liabilities on Profitability: The Case of Germany

By:	Christopher F. Baum (Boston College); Dorothea Schaefer (DIW Berlin); Oleksandr Talavera (DIW Berlin)
Abstract:	Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable.
Keywords:	profitability, short-term liabilities, maturity structure, capital structure.
JEL:	G32 G30
Date:	2006–02–13
URL:	http://d.repec.org/n?u=RePEc:boc:bocoec:636&r=cfn

Investment and Uncertainty

By:	Christopher F. Baum (Boston College); Mustafa Caglayan (University of Glasgow); Oleksandr Talavera (DIW Berlin)
Abstract:	In this paper we investigate the linkages between firms' capital investment behavior and uncertainty. In our empirical investigation, we use measures of uncertainty derived from firms' daily stock returns and S\&P 500 index returns along with a CAPM-based risk measure. Using a panel of U.S. manufacturing firm data obtained from COMPUSTAT over the 1984-2003 period, we specifically find that increases in both intrinsic and CAPM-based measures of uncertainty have a significant negative impact on firms' investment spending. Our investigation also provides evidence that the relationship is nonlinear and more complex than previously considered.
Keywords:	capital investment, uncertainty, CAPM, dynamic panel data
JEL:	E22 D81 C23
Date:	2006–02–15
URL:	http://d.repec.org/n?u=RePEc:boc:bocoec:638&r=cfn

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