nep-cfn New Economics Papers
on Corporate Finance
Issue of 2012‒09‒22
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Is there an environmental Kuznets curve for water use? A panel smooth transition regression approach By Rosa Duarte; Vicente Pinilla; Ana Serrano
  2. Systematic Risk, Debt Maturity and the Term Structure of Credit Spreads By Hui Chen; Yu Xu; Jun Yang

  1. By: Rosa Duarte (Department of Economic Analysis, Faculty of Economics and Business Studies, Universidad de Zaragoza); Vicente Pinilla (Department of Applied Economics and Economic History, Faculty of Economics and Business Studies, Universidad de Zaragoza); Ana Serrano (Department of Economic Analysis, Faculty of Economics and Business Studies, Universidad de Zaragoza)
    Abstract: This paper presents an analysis of the relationship between per capita water use and per capita income for 65 countries over the period 1962-2008 within the framework of the so-called environmental Kuznets curve (EKC). Consistent with the existing literature, a polynomial fixed effects model is firstly presented. Then, a logistic Panel Smooth Transition Regression (PSTR) is estimated, capturing individual heterogeneity and time variability of income elasticity. This empirical study yields several important findings. The nexus between water withdrawal per person and per capita GDP is non-linear, showing a peculiar U-inverted with a marked downward limb that dominates the nexus regardless the estimation method chosen. On the whole, water use income elasticity clearly decreases throughout the period; nevertheless it exhibits a great variability over the sample, reflecting the divergent patterns of water use depending on the level of income of each country and period.
    Keywords: Water use, Panel Smooth Transition Regression model, Environmental Kuznets Curve, nonlinearity, per capita income
    Date: 2012–03
  2. By: Hui Chen; Yu Xu; Jun Yang
    Abstract: We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt, long-term debt is less prone to rollover risks, but its illiquidity raises the costs of financing. The risk premium embedded in the bankruptcy costs causes firms with high systematic risk to favour longer debt maturity, as well as a more stable maturity structure over the business cycle. Pro-cyclical debt maturity amplifies the impact of aggregate shocks on the term structure of credit spreads, especially for firms with high leverage or high beta, and for firms with a large amount of long-term debt maturing when the aggregate shock arrives. However, endogenous maturity choice can also reduce and even reverse the effect of rollover risk on credit spreads. We provide empirical evidence for the model predictions on both debt maturity and credit spreads.
    Keywords: Asset Pricing; Debt Management
    JEL: G32 G33
    Date: 2012

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