nep-cfn New Economics Papers
on Corporate Finance
Issue of 2009‒06‒17
four papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Leverage Bubbles. By Fares Triki
  2. Testing the Modigliani-Miller theorem directly in the lab: a general equilibrium approach By Jianying Qiu; Prashanth Mahagaonkar
  3. The economics of energy efficiency: barriers to profitable investments By Schleich, Joachim

  1. By: Fares Triki (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: This paper investigates the relation between liquidity and asset prices. It shows that, when banks balance sheets are marked to market and banks are targeting a financial leverage level - a situation similar to current environment - formation of Leverage Bubble phenomenon and suggests a new regulation rule based on a Dynamic Leverage Ratio (DLR) rule.
    Keywords: Financial crises, rational bubbles, dynamic leverage ratio, mark to market accounting, asset pricing, macroprudential regulation, market liquidity.
    JEL: G14 G18 G20 G28
    Date: 2009–05
  2. By: Jianying Qiu (Department of Economics, University of Innsbruck SOWI Building, Universitaetstrasse 15 6020 Innsbruck, Austria // Max Planck Institute of Economics, ESI Group, Kahlaische Str. 10, D-07745 Jena, Germany); Prashanth Mahagaonkar (Max Planck Institute of Economics, EGP Group, Kahlaische Str. 10, D-07745 Jena, Germany // Schumpeter School of Business and Economics, University of Wuppertal, Germany)
    Abstract: In this paper, we directly test the Modigliani-Miller theorem in the lab. Applying a general equilibrium approach and not allowing for arbitrage among firms with different capital structures, we are able to address this issue without making any assumptions about individuals' risk attitudes and initial wealth positions. We find that, consistent with the Modigliani-Miller theorem, experimental subjects well recognized the increased systematic risk of equity with increasing leverage and accordingly demanded higher rate of return. Furthermore, the correlation between the value of the debt and equity is -0.94, which is surprisingly comparable with the -1 predicted by the Modigliani-Miller theorem. Yet, a U shape cost of capital seems to organize the data better.
    Keywords: The Modigliani-Miller Theorem, Experimental Study, Decision Making under Uncertainty, General Equilibrium
    JEL: G32 C91 G12 D53
    Date: 2009–06
  3. By: Schleich, Joachim (Fraunhofer Institute for Systems and Innovation Research, Karlsruhe, Germany)
    Abstract: Improving energy efficiency is seen as a core strategy for a sustainable energy system, because it may contribute to cost savings for companies and private households, cost-effectively reduces greenhouse gas emissions and other pollutants, increases security of supply for required energy services. The thrust of engineering-economic analyses suggests that there is a large potential for energy efficiency measures that are also profitable, but - because of barriers to energy efficiency - are not being adopted. This paper presents a taxonomy of these barriers, distinguishing between barriers that would warrant policy intervention and those that do not. As a case study, barriers to energy efficiency in the German higher education sector and measures to overcome those barriers are discussed.
    Keywords: Energy efficiency; barriers; energy policy
    JEL: G31 Q40 Q49
    Date: 2007–06–25
  4. By: Cioponea, Cristina Mariana (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: The ame of this paper is to instruct in the subject of fiscal-budget circuit and his main components. Presentation of financial public relations manifested through budgetary and fiscal flows in terms of circuit, reveals the recognition of their complexity, their dynamic ability, their perpetuation from a period to another, the interdependence between them and the mutual influences of circuits in real economy. Presentation in a summary of the functioning fiscal-budget circuit, requires the achievement of groups of components in the system and participants in the transactions that occur within it.
    Keywords: fiscal-budget circuit; economic circuit; budgetary flows; fiscal flows
    JEL: G28 G38
    Date: 2009–06–01

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