|
on Corporate Finance |
| By: | Michi Nishihara (Graduate School of Economics, Osaka University); Takashi Shibata (Graduate School of Management, Tokyo Metropolitan University) |
| Abstract: | We develop a dynamic bankruptcy model with asset illiquidity. In the model, a distressed firm chooses between sell-out and default, as well as its timing under the assumption that sell-out is feasible only at Poisson jump times, where the arrival rate of acquirers stands for asset liquidity. With lower asset liquidity, the firm increases the sell-out region to mitigate the risk of not finding an acquirer until bankruptcy. Despite the larger sell-out region, lower asset liquidity increases the default probability and decreases the equity, debt, and firm values. In the optimal capital structure, with lower asset liquidity, the firm reduces leverage, but the cautious capital structure does not fully offset the increased default risk. The stock price reaction caused by sell-out depends on the sell-out timing. When the firm's asset value is not sufficiently high, the stock price jump size is an inverted U-shape with the economic state variable. Lower asset liquidity increases the jump size due to greater surprise. These results fit empirical observations. |
| Keywords: | liquidation; illiquidity; real option; M&A |
| JEL: | G13 G32 G33 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1912&r=all |
| By: | Li, Delong; Lu, Lei; Mu, Congming; Yang, Jinqiang |
| Abstract: | Overconfidence and overextrapolation are two behavioral biases that are pervasive in human thinking. A long line of research documents that such biases influence business decisions by distorting managers' expected productivity. We propose a new mechanism in which the biases change firms' precautionary motives when external financing is costly, finding that the influences of biases on investment, payouts, and refinancing are stronger for financially weaker firms. Moreover, biased and rational firms display di erential responses to economic booms and busts holding financial positions constant. Our work illustrates that managerial traits, when interacting with imperfect capital markets, drive firm dynamics in business cycles. |
| JEL: | E32 G31 G32 G35 |
| Date: | 2019–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofrdp:2019_018&r=all |
| By: | Dorota Podedworna-Tarnowska (SGH Warsaw School of Economics); Daniel Kaszy?ski (SGH Warsaw School of Economics) |
| Abstract: | The existence of underpricing effect in IPO has been investigated by a several studies conducted on the basis of stock exchanges in numerous countries. This phenomenon has been explained in the literature with the help of agency theory, signaling, cascading, behavioral theories among others. Numerous exogenous and endogenous factors of IPO underpricing has been identified in several empirical researches. The influence of these various determinants mostly depends upon different level of the capital market development, different structures of the markets, countries? specific regulation. The aim of this article is to present and investigate the degree of underpricing depending on the form of IPO: an issue of new shares in the shape of a public subscription, a sale of existing shares in the shape of a public subscription, a combination of both previous variants or an introducing shares into trading without sale offering. The research is based on the historical data available from the Warsaw Stock Exchange. The analysis is conducted among IPOs that took place over the period 2005-2018. The numerical results indicate the differential effect on the degree of underpricing effect in IPO resulting from various forms of IPO. |
| Keywords: | IPO, underpricing, public subscription, share sale, share issue, listing |
| JEL: | G11 G23 G32 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:9011477&r=all |
| By: | Dilger, Alexander; Schottmüller-Einwag, Ute |
| Abstract: | This paper examines how corporate governance reporting corresponds to actual conduct regarding severance payment caps for prematurely departing members of companies' executive boards in Germany. For this purpose, we first evaluate the declarations of conformity for all companies listed in the CDAX between 2010 and 2014, which we use to determine conformity and deviation rates, and analyse reasons for deviation. In a further full survey, we assess the compensation amounts of all severance payments made and published by DAX companies to their executive board members who were prematurely terminated, which allows us to compare the respective severance ratio with the cap recommended by the German Corporate Governance Codex (GCGC). We find that more than 20% of companies listed in the CDAX declared deviation in the declaration of conformity, and one-third of all deviations were justified by a rejection of the normative decision of the recommendation. Moreover, in 57% of actual severance cases where DAX companies had previously declared their compliance, the cap was exceeded; yet, none of the companies that had exceeded the cap in a severance case disclosed this in the following declaration of conformity. In the years under review, for the majority of severance cases in companies listed in the DAX, the GCGC's cap did not have any factual binding effect. Finally, in most cases the corporate reports deviated from reality and therefore could not serve as a suitable basis for decisions by the capital market. |
| JEL: | D86 G34 G38 J33 J63 J65 K12 K31 M12 M52 M55 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:umiodp:72019&r=all |
| By: | László Koloszár (University of Sopron Alexandre Lamfalussy Faculty of Economics) |
| Abstract: | An important business economics category is the cost of capital, which defines the core entrepreneurial purpose in the private ownership-based economy where property owners determine decision-making and investment. The cost of capital includes the estimated price of the capital used (risk-free interest rate) and the required risk premium. Determining the required rate of return depending on the capital structure (WACC) and using it in finance to measure a firm's cost of capital is becoming increasingly widespread. The present study examines how the cost of capital can be approached from business economics and finance perspectives. The paper analyses the comparable factual profitability indicators (return on investment, return on equity, etc.), and the contradictions between them, as well as determining if there are deductible economic meanings behind the comparisons. The study presents the results with a graphic analytical framework. |
| Keywords: | cost of capitalWACCreturn on investment (ROI)return on equity (ROE) |
| JEL: | M20 G30 |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:9211599&r=all |
| By: | Raphael A. Auer; Steven Ongena |
| Abstract: | Do macroprudential regulations on residential lending influence commercial lending behavior too? To answer this question, we identify the compositional changes in banks’ supply of credit using the variation in their holdings of residential mortgages on which extra capital requirements were uniformly imposed by the countercyclical capital buffer (CCyB) introduced in Switzerland in 2012. We find that the CCyB’s introduction led to higher growth in commercial lending although this was unrelated to conditions in regional housing markets. Interest rates and fees charged to the firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral. |
| Keywords: | macroprudential policy, spillovers, credit, bank capital, systemic risk |
| JEL: | E51 E58 E60 G01 G21 G28 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7815&r=all |
| By: | Detzer, Daniel |
| Abstract: | This article examines the spread of financialization in Germany before the financial crisis. It provides an up-to date overview on the literature on financialization and reviews which of the phenomena typically associated with financialization have emerged in Germany. In particular, the article aims to clarify how the prevailing institutional structure and its changes had contributed to or had countervailed the spread of financialization and how it had shaped the specific German variant of financialization. For this end, it combines the rich literature on Germany's institutional structure with the more macroeconomic oriented literature on financializaton. With the combination of those different perspectives the article sheds light on the reasons for the spread of financialization and the specific forms it has taken in Germany. |
| Keywords: | Banking,Corporate Governance,Financialization,Financial Sector,Financial Regulation,Varieties of Capitalism |
| JEL: | E44 F40 G20 G30 K22 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:1222019&r=all |
| By: | Cesar E. Tamayo; Jose E. Gomez-Gonzalez; Oscar M. Valencia |
| Keywords: | Bank competition, market power, Boone, Lerner, Colombia, cost of firm finance, loan-level data. |
| JEL: | G21 D22 O16 |
| Date: | 2019–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:col:000122:017404&r=all |
| By: | Ala' Rabi (Jerash University) |
| Abstract: | For the past twenty years, researchers have extensively debated the determinants of relationship between corporate governance and firm performance. Nevertheless, relationship between corporate governance and corporate social responsibility has received minimal attention in the extant literature, Particularly in developing countries. This paper seeks to fill the gap in the literature by examining the relationship between board characteristics and CSD. Using a sample 91 of non-financial listed companies in Amman Stock Exchange (ASE) for year ended 2017. Multiple regressions were used to confirm the relationship between board characteristics and CSD. As well as, the content analysis method was used to extract the items of corporate social disclosure from the company?s annual reports. The empirical results reveal that the level of corporate social disclosure is still relatively low compared to developed countries. Regarding board characteristics, the result show that (board size, INED) are each positive and significant relationship with the level of corporate social disclosure. |
| Keywords: | Corporate social disclosure, Board characteristics, Jordan |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:8711642&r=all |
| By: | Jaerim Choi (University of Hawaii at Manoa) |
| Abstract: | An abstract: This paper develops a model to study how suppliers’ financial constraints interact with suppliers’ position in a global value chain. I embed financial frictions into the property-rights model of the global value chain, as in Antr’and Chor (2013), to derive the optimal allocation of ownership rights along the global value chain. The model predicts that multinational firms are more likely to integrate downstream intermediate input suppliers in countries with weak financial institutions when the production process is sequential complements. Using U.S. intrafirm trade data for the years 2000–2010, together with a triple-interaction term between “downstreamness†of an industry, demand elasticity of an industry, and financial development of a country, I provide empirical evidence that supports the key prediction of the model. |
| Keywords: | Global value chain, Imperfect capital markets |
| JEL: | D23 F12 F23 L23 O16 |
| Date: | 2019–08 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201912&r=all |