nep-cfn New Economics Papers
on Corporate Finance
Issue of 2006‒08‒05
three papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Uncertainty Determinants of Firm Investment By Christopher F. Baum; Mustafa Caglayan; Oleksandr Talavera
  2. Business Groups in Emerging Markets – Financial Control and Sequential Investment By Christa Hainz
  3. General equilibrium of financial markets By Monique Florenzano

  1. By: Christopher F. Baum (Boston College); Mustafa Caglayan (University of Glasgow); Oleksandr Talavera (DIW Berlin)
    Abstract: We investigate the impact of measures of uncertainty on firms' capital investment behavior using a panel of U.S. firms. Increases in firm-specific and CAPM-based measures have a significant negative impact on investment spending, while market-based uncertainty has a positive impact.
    Keywords: capital investment, asymmetric information, financial frictions, uncertainty, CAPM
    JEL: E22 D81 C23
    Date: 2006–07–28
  2. By: Christa Hainz
    Abstract: Business groups in emerging markets perform better than unaffiliated firms. One explanation is that business groups substitute some functions of missing institutions, for example, enforcing contracts. We investigate this by setting up a model where firms within the business group are connected to each other by a vertical production structure and an internal capital market. Thus, the business group’s organizational mode and the financial structure allow a self-enforcing contract to be designed. Our model of a business group shows that only sequential investments can solve the ex post moral hazard problem. We also find that firms may prefer not to integrate.
    Keywords: business groups, self-enforcing contract, institutions, internal capital market
    JEL: G31 G32 G34 K49 L22
    Date: 2006
  3. By: Monique Florenzano (CES - Centre d'Economie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I])
    Abstract: The purpose of this paper is to explain the role of financial assets in allowing individual agents of an economy to make at time 0 some limited commitments into the future which, at some extent, redistribute their revenue among several time periods and different states of the world. It is done studying in different contexts the general equilibrium of a simple two-period exchange model, under weaker assumptions and in a more general setting than the ones usually described in the literature.<br />Several equilibrium existence theorems are stated and proved. Even in this simple framework, they often require a rather sophisticated mathematical background and are of a deep economic significance. Moreover, they are a necessary step towards further developments (including infinite horizon, continuous time, continuum of states of the world, defaut and collateral securities, ...).
    Keywords: general equilibrium; incomplete financial markets; arbitrage, numeraire assets; real assets; pseudo-equilibrium
    Date: 2006–07–17

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