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on Corporate Finance |
| By: | Nur Ata Nurcan; Alena Bicakova |
| Abstract: | Counselling agencies assist borrowers in financial difficulties by administering repayment plans, the so-called debt management plans (DMPs). In this paper, we use unique administrative data from a major credit counselling agency in the UK to analyze the determinants of debt repayment performance of approximately 60,000 borrowers who are enrolled on a DMP. Employing survival analysis, we estimate that borrowers who smoke and who reported poor financial management as the reason for their repayment difficulties at the enrollment stage are significantly more likely to fail on a DMP even when controlling for a rich set of covariates including monthly DMP payments, income, expenditures, self-reported experiences of negative shocks prior to DMP (illness, job loss, divorce, pregnancy), gender, age, marital status, having a mortgage, and whether the consumer is self or full time employed. In particular, smoking increases the probability of failing on a DMP by 31 percent and admitting bad financial management increases by 12 percent. Our findings lend considerable support to the view that self-control considerations play a role in households’ indebtedness and consequent repayment difficulties. |
| Keywords: | Self-control and debt: evidence from data on credit counselling |
| JEL: | G2 G21 D14 D91 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:504&r=cfn |
| By: | Berger, Allen N.; Bouwman, Christa H. S.; Kick, Thomas; Schaeck, Klaus |
| Abstract: | Liquidity creation is one of banks' raisons d'être. But what happens to liquidity creation and risk taking when a bank is identified as distressed by regulatory bodies and subjected to regulatory interventions and/or receives capital injections? What are the long-run effects of such interventions? To address these questions, we exploit a unique dataset of German universal banks for the period 1999 - 2008. Our main findings are as follows. First, regulatory interventions and capital injections are followed by lower levels of liquidity creation. The probability of a decline in liquidity creation increases to up to around 50 percent when such actions are taken. Second, bank risk taking decreases in the aftermath of regulatory interventions and capital injections. Third, while banks' liquidity creation market shares decline over the five years following such disciplinary measures, they also reduce their risk exposure over this period to become safer banks. -- |
| Keywords: | Liquidity creation,bank distress,regulatory interventions,capital injections |
| JEL: | G21 G28 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:201005&r=cfn |
| By: | von Kalckreuth, Ulf; Silbermann, Leonid |
| Abstract: | This paper aims to shed light on some of the major allocative consequences of financial market bubbles. In March 1997, the Neuer Markt in Germany opened. Six years later, in June 2003, it closed forever. In the interim period lay the spectacular rise and fall of the first and most important European market for hi-tech stocks. Given investors' frenzy, the Neuer Markt was a special kind of natural experiment. For some time, financing constraints were virtually non-existent. Our model of corporate financing shows that bubbles on financial markets will induce entrepreneurs and providers of external finance to enter the 'wrong' contract. Incentive compatibility constraints designed to guarantee that corporate decision-makers behave constructively turn out to be invalid, and managers will know this before shareholders do. Thus, faulty valuation by stock markets may directly induce destructive corporate behaviour: slack, empire building, excessive risk-taking, and fraud. At the time of the IPO, a huge amount of liquidity is injected into the companies, and a dynamic analysis of the balance sheet ratios and income statement items in the following years can teach us the ways in which this liquidity is diffused. We analyse the corresponding dynamics of total assets, tangible assets and equity, as well as the evolution of sales and profits for 204 German non-financial companies out of a total of 326 companies that had their IPO at the Neuer Markt. On the basis of consecutive annual accounts, we retrace the events using a dynamic flow of funds analysis. We assess the explanatory power of our model using non-parametric methods [Median tests, Wilcoxon-Mann-Whitney tests, Kolmogorov-Smirnov tests] and quantile regressions. Our results indicate that valuation has strong and systematic effects on incentives. Experience, as proxied by age at IPO, is shown to have a beneficial effect, whereas support by VC and PE firms does not seem to matter for the success of the enterprises considered. -- |
| Keywords: | Bubbles,corporate governance,quantile regressions,nonparametric statistics |
| JEL: | G32 D82 D83 D92 C14 C21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp1:201015&r=cfn |