nep-cfn New Economics Papers
on Corporate Finance
Issue of 2006‒02‒26
two papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

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

  1. 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
  2. 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

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