nep-cfn New Economics Papers
on Corporate Finance
Issue of 2006‒06‒10
four papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Who gets private equity? The role of debt capacity, growth and intangible assets By K. BAEYENS; S. MANIGART
  2. Deteriorating Cost Efficiency in Commercial Banks Signals an Increasing Risk of Failure By Anca Podpiera; Jiri Podpiera
  3. Taxation, Dividend Payments and Ex-Day Price Changes By Daunfeldt, Sven-Olov; Selander, Carina; Wikström, Magnus
  4. Bankruptcy, Counterparty Risk, and Contagion By Holger Kraft; Mogens Steffensen

    Abstract: While informed private equity (PE) investors screen for the most promising ventures, firms may avoid raising of PE for issues of cost and control. A critical question therefore is: which firms get PE? We consider both supply and demand side arguments to study the characteristics of a sample of 231 firms that did receive PE and compare them to those of a matched sample. Supporting the pecking order theory, we show that firms rely on PE funding when there are no alternatives, i.e. when their debt capacity is limited, due to financial and bankruptcy risk and due to important investments in intangibles. PE investors, from their side, select firms with substantial growth options. Further, firms that receive PE have grown more before the funding event than companies that did not receive PE.
    Keywords: financing choice, private equity
    JEL: G32
    Date: 2006–02
  2. By: Anca Podpiera; Jiri Podpiera
    Abstract: While it is generally consented that management quality is often the key determinant of banks' success in a risky world, somewhat paradoxically early warning systems are mainly built on financial ratios driving management quality assessment to the periphery. In this paper we show, using estimated cost efficiency scores for the Czech banking sector, that cost inefficient management was a predictor of bank failures during the years of banking sector consolidation, and thus suggest the inclusion of cost efficiency in early warning systems.
    Keywords: Bank failure, cost efficiency, stochastic frontier, hazard model.
    JEL: J21 J28 E58
    Date: 2005–12
  3. By: Daunfeldt, Sven-Olov (Högskolan i Gävle); Selander, Carina (Department of Economics, Umeå University); Wikström, Magnus (Department of Economics, Umeå University)
    Abstract: The purpose of the paper is to study the effects of taxation on dividend payments and ex-dividend price changes in Sweden during 1991-1995. Under this period, dividends and capital gains were taxed at a flat rate. Tax changes in Sweden during the 1990s thus provide an opportunity to include direct measures of the tax treatment of dividends and capital gains in the empirical analysis, in contrast to previous studies. The results indicate that tax reforms have large effects on dividend payments, while the effects on ex-dividend price changes are less conclusive.
    Keywords: capital gain; censoring; dividend; flat tax; tax reform
    JEL: G12 G35 H24
    Date: 2006–06–02
  4. By: Holger Kraft (Fachbereich Mathematik, Universität Kaiserslautern); Mogens Steffensen (Department of Applied Mathematics and Statistics, University of Copenhagen)
    Abstract: This paper provides a unifying framework for the modeling of various types of credit risks such as contagion effects. We argue that Markov chains can efficiently be used to tackle these problems. However, our approach is not limited to pricing problems with contagion. Other applications include the modeling of a more sophisticated default process of a firm. On the theoretical side, we derive pricing formulas for three building blocks that are generalizations of contingent claims studied in Lando (1998). These claims can be thought of as atoms forming the basis for all credit risky payments. Furthermore, we demonstrate that, in general, all contingent claims exposed to credit risk satisfy a system of partial differential equations. This is the key result to calculate prices of credit risky claims explicitly and efficiently.
    Keywords: default risk; financial distress; default correlation; contagion; Markov chains
    JEL: G13
    Date: 2006–05

This nep-cfn issue is ©2006 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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