There are many pathways explaining the relationship between socioeconomic status and health; one possibility is that some normally unobservable characteristic causes people to invest both in their financial well-being and their health. Here we consider the possibility that the decision making processes are similar across domains and that the steps individuals take to make decisions can help to explain the correlation in outcomes across domains. We focus particularly on retirement savings decisions and decisions in the health domain. Choices in both domains have long-term consequences and therefore require foresight and the ability to process complex information. Our results suggest that up to 44% of the correlation between wealth and health is due to the processes that people use to make these choices.
{"title":"The Role of Decision Making Processes in the Correlation Between Wealth and Health","authors":"J. Binswanger, K. Carman","doi":"10.2139/ssrn.1752216","DOIUrl":"https://doi.org/10.2139/ssrn.1752216","url":null,"abstract":"There are many pathways explaining the relationship between socioeconomic status and health; one possibility is that some normally unobservable characteristic causes people to invest both in their financial well-being and their health. Here we consider the possibility that the decision making processes are similar across domains and that the steps individuals take to make decisions can help to explain the correlation in outcomes across domains. We focus particularly on retirement savings decisions and decisions in the health domain. Choices in both domains have long-term consequences and therefore require foresight and the ability to process complex information. Our results suggest that up to 44% of the correlation between wealth and health is due to the processes that people use to make these choices.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"17 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134292552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Dividend initiations are an economically significant event that has important implications for a firm’s future financial capacity. Given the market’s expectation of a consistent payout, managers of IPO firms must approach the initial dividend decision cautiously. We compare the long run performance of IPO firms that initiated a dividend with that of similarly-matched non-payers, and find robust results that firms which initiated a dividend perform significantly better up to five years after the initiation date. Further tests show that the post-initiation firm performance is explained mostly by dividend theory of signalling rather than free cash flow.
{"title":"Dividend Initiations and Long Run IPO Performance","authors":"J. How, K. Ngo, P. Verhoeven","doi":"10.2139/ssrn.1717200","DOIUrl":"https://doi.org/10.2139/ssrn.1717200","url":null,"abstract":"Dividend initiations are an economically significant event that has important implications for a firm’s future financial capacity. Given the market’s expectation of a consistent payout, managers of IPO firms must approach the initial dividend decision cautiously. We compare the long run performance of IPO firms that initiated a dividend with that of similarly-matched non-payers, and find robust results that firms which initiated a dividend perform significantly better up to five years after the initiation date. Further tests show that the post-initiation firm performance is explained mostly by dividend theory of signalling rather than free cash flow.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"116 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133956251","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Achleitner, Georg Metzger, Uwe Reiner, Margarita Tchouvakhina
As a consequence of the global financial crisis, which peaked in fall 2008 with the failure of the fourth largest US investment bank Lehman Brothers, the German private equity market showed considerably signs of change. This is confirmed by a recent study jointly conducted by the KfW Bankengruppe and the KfW Endowed Chair in Entrepreneurial Finance at the Technical University of Munich. Major objectives of this study were to analyze to which extent supply of private equity, investment behavior, excess demand as well as public programs in this sector have changed over time. Apparently, in the years 2007 to 2009, the German private equity market experienced ongoing professionalization as well as a shift of the investment activity: private investors continue to move away from high-risk early stage investments towards more predictable returns of the later stage. Due to favorable financing and fundraising opportunities ahead of the crisis, the average investment size as well as the average committed capital per fund increased substantially. At a more granular level, however, this result can only be confirmed for later stage investments. As a result, a “decoupled” development between the venture capital and private equity sub-markets can be observed. Finally, growing excess demand for growth capital is another important finding of this study. In partially closing this gap, public investors made an important contribution to the overall stabilization of the German private equity market. Der Beteiligungsmarkt in Deutschland hat sich im Zuge der Finanzkrise sichtbar verandert. Dies zeigt eine Studie der KfW Bankengruppe und des KfW-Stiftungslehrstuhls fur Entrepreneurial Finance an der Technischen Universitat Munchen. Vergleichbare Untersuchungen wurden bereits in den Jahren 2003 und 2006 veroffentlicht, um aufzuzeigen inwieweit sich Anbieterstrukturen, Verhaltensmuster, Marktlucken und Forderbedarf auf dem deutschen Beteiligungsmarkt im Laufe der Zeit verandert haben. Danach ist in den Jahren 2007 bis 2009 eine zunehmende Professionalisierung und Verlagerung des Finanzierungsschwerpunktes der Marktteilnehmer auf die so genannte Spatphase zu beobachten. Die Volumina der am Markt agierenden Fonds und die durchschnittlichen Investitionssummen sind dementsprechend deutlich gestiegen. Allerdings wird dabei deutlich, dass sich unterschiedliche Entwicklungen innerhalb der Fruh- und Spatphase beobachten lassen. So profitierte vor allem die Spatphase von einem gunstigen Investitionsumfeld in den Jahren vor der Krise. Dieser Entwicklung stehen hingegen zunehmende Angebotslucken beim Beteiligungskapital in der Fruh- und Wachstumsphase gegenuber. Wagniskapitalgeber aus dem offentlichen Sektor haben in der Krise zwar einen wesentlichen Beitrag zur Stabilisierung des Beteiligungsmarktes im Fruhphasensegment geleistet, konnten diese Lucke aber nur zum Teil schliesen.
全球金融危机在2008年秋季达到顶峰，美国第四大投资银行雷曼兄弟(Lehman Brothers)破产。受此影响，德国私人股本市场出现了相当大的变化迹象。德国复兴信贷银行集团(KfW Bankengruppe)和慕尼黑工业大学(Technical University of Munich) KfW创业金融特聘教授最近联合进行的一项研究证实了这一点。本研究的主要目的是分析私募股权的供给、投资行为、过剩需求以及该领域的公共项目随着时间的推移发生了多大程度的变化。显然，从2007年到2009年，德国私募股权市场经历了持续的专业化和投资活动的转变:私人投资者继续从高风险的早期投资转向更可预测的后期回报。由于危机前有利的融资和筹资机会，平均投资规模和每只基金的平均承诺资本大幅增加。然而，在更细粒度的层面上，这一结果只能在后期投资中得到证实。因此，可以观察到风险资本和私募股权子市场之间的“脱钩”发展。最后，增长资本的过剩需求是本研究的另一个重要发现。在部分缩小这一差距的过程中，公共投资者为德国私募股权市场的整体稳定做出了重要贡献。德国的德国金融市场(Der Beteiligungsmarkt)表示，它是德国金融市场(Zuge Der Finanzkrise sichtbar verandert)的一部分。德国复兴信贷银行集团研究中心、德国复兴信贷企业金融研究中心和慕尼黑工业大学。2003年至2006年，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国，在德国。2007年6月1日，德国《经济学家》杂志发表了一篇文章，称2009年9月1日，德国《经济学家》杂志发表了一篇文章，称2009年12月1日，德国《经济学家》杂志发表了一篇文章。市场研究基金和德国研究基金的研究报告。变应原译为:变应原译为:变应原译为:变应原译为:变应原译为:变应原译为:变应原译为:变应原译为:所以proftierte vorallem die Spatphase von einem gunstigen investigation in den Jahren verder Krise。德语:德语:德语:德语:德语:德语:德语:德语:德语:德语:德语:德语:德语wagniskapitalgeberddem offentlichen sector在德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国，德国。
{"title":"German Private Equity Market After the Financial Crisis: Optimistic Outlook yet Increasingly Excess Demand for Growth Capital (German)","authors":"A. Achleitner, Georg Metzger, Uwe Reiner, Margarita Tchouvakhina","doi":"10.2139/SSRN.1713749","DOIUrl":"https://doi.org/10.2139/SSRN.1713749","url":null,"abstract":"As a consequence of the global financial crisis, which peaked in fall 2008 with the failure of the fourth largest US investment bank Lehman Brothers, the German private equity market showed considerably signs of change. This is confirmed by a recent study jointly conducted by the KfW Bankengruppe and the KfW Endowed Chair in Entrepreneurial Finance at the Technical University of Munich. Major objectives of this study were to analyze to which extent supply of private equity, investment behavior, excess demand as well as public programs in this sector have changed over time. Apparently, in the years 2007 to 2009, the German private equity market experienced ongoing professionalization as well as a shift of the investment activity: private investors continue to move away from high-risk early stage investments towards more predictable returns of the later stage. Due to favorable financing and fundraising opportunities ahead of the crisis, the average investment size as well as the average committed capital per fund increased substantially. At a more granular level, however, this result can only be confirmed for later stage investments. As a result, a “decoupled” development between the venture capital and private equity sub-markets can be observed. Finally, growing excess demand for growth capital is another important finding of this study. In partially closing this gap, public investors made an important contribution to the overall stabilization of the German private equity market. Der Beteiligungsmarkt in Deutschland hat sich im Zuge der Finanzkrise sichtbar verandert. Dies zeigt eine Studie der KfW Bankengruppe und des KfW-Stiftungslehrstuhls fur Entrepreneurial Finance an der Technischen Universitat Munchen. Vergleichbare Untersuchungen wurden bereits in den Jahren 2003 und 2006 veroffentlicht, um aufzuzeigen inwieweit sich Anbieterstrukturen, Verhaltensmuster, Marktlucken und Forderbedarf auf dem deutschen Beteiligungsmarkt im Laufe der Zeit verandert haben. Danach ist in den Jahren 2007 bis 2009 eine zunehmende Professionalisierung und Verlagerung des Finanzierungsschwerpunktes der Marktteilnehmer auf die so genannte Spatphase zu beobachten. Die Volumina der am Markt agierenden Fonds und die durchschnittlichen Investitionssummen sind dementsprechend deutlich gestiegen. Allerdings wird dabei deutlich, dass sich unterschiedliche Entwicklungen innerhalb der Fruh- und Spatphase beobachten lassen. So profitierte vor allem die Spatphase von einem gunstigen Investitionsumfeld in den Jahren vor der Krise. Dieser Entwicklung stehen hingegen zunehmende Angebotslucken beim Beteiligungskapital in der Fruh- und Wachstumsphase gegenuber. Wagniskapitalgeber aus dem offentlichen Sektor haben in der Krise zwar einen wesentlichen Beitrag zur Stabilisierung des Beteiligungsmarktes im Fruhphasensegment geleistet, konnten diese Lucke aber nur zum Teil schliesen.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125313431","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-11-08DOI: 10.1111/j.1467-629X.2010.00350.x
Nives Botica Redmayne, M. Bradbury, S. Cahan
This study examines whether auditors adjust their effort and pricing decisions for political visibility. We argue, from the behavioural literature, that political visibility will create the need for more justification by auditors. Using data on actual audit fees, hours and billing rates for a sample of New Zealand public sector companies, we find that total audit fees are positively related to the number of press mentions (our proxy for political visibility). Consistent with our expectations we find that audit fees are monotonically related to audit fees. We also find that auditors increase the hours spent on the audit but not billing rates, which further suggests defensive bolstering by auditors.
{"title":"The Effect of Political Visibility on Audit Effort and Audit Pricing","authors":"Nives Botica Redmayne, M. Bradbury, S. Cahan","doi":"10.1111/j.1467-629X.2010.00350.x","DOIUrl":"https://doi.org/10.1111/j.1467-629X.2010.00350.x","url":null,"abstract":"This study examines whether auditors adjust their effort and pricing decisions for political visibility. We argue, from the behavioural literature, that political visibility will create the need for more justification by auditors. Using data on actual audit fees, hours and billing rates for a sample of New Zealand public sector companies, we find that total audit fees are positively related to the number of press mentions (our proxy for political visibility). Consistent with our expectations we find that audit fees are monotonically related to audit fees. We also find that auditors increase the hours spent on the audit but not billing rates, which further suggests defensive bolstering by auditors.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128066198","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-11-08DOI: 10.1111/j.1467-629X.2010.00354.x
Paul Kato, Jens Hagendorff
The recent financial crisis has highlighted the inadequacy of present supervisory arrangements to identify reliable ex-ante indicators of banking distress. For a sample of US bank holding companies, we analyse the extent to which distance to default based on market data can be explained using accounting-based indicators of risk. We show that a larger number of bank fundamentals help predict default for institutions that issue subordinated debt. For banks that issue sub-debt, we find that higher charter values and low bank capitalizations further increase the power of bank fundamentals to predict default risk.
{"title":"Distance to Default, Subordinated Debt, and Distress Indicators in the Banking Industry","authors":"Paul Kato, Jens Hagendorff","doi":"10.1111/j.1467-629X.2010.00354.x","DOIUrl":"https://doi.org/10.1111/j.1467-629X.2010.00354.x","url":null,"abstract":"The recent financial crisis has highlighted the inadequacy of present supervisory arrangements to identify reliable ex-ante indicators of banking distress. For a sample of US bank holding companies, we analyse the extent to which distance to default based on market data can be explained using accounting-based indicators of risk. We show that a larger number of bank fundamentals help predict default for institutions that issue subordinated debt. For banks that issue sub-debt, we find that higher charter values and low bank capitalizations further increase the power of bank fundamentals to predict default risk.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121686102","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2010-11-08DOI: 10.1111/j.1467-629X.2010.00351.x
Chong Wang
Using a sample of reverse leveraged buyout (‘reverse-LBO’) firms, I find that discretionary accruals quality (AQ), the quality of accruals that are subject to management discretion, significantly improves from pre-LBO to post-reverse LBO. Moreover, buyout houses’ board seats and the length of firms’ stay-in-private periods are significant explanatory variables for the cross-sectional variation in discretionary AQ for post-reverse-LBO firms. My findings suggest that the monitoring provided by private equity buyout houses improves discretionary AQ, consistent with the view of Jensen (1989a,b) that LBOs are a solution to inefficiencies that arise from agency problems.
{"title":"Does the Monitoring Role of Buyout Houses Improve Discretionary Accruals Quality?","authors":"Chong Wang","doi":"10.1111/j.1467-629X.2010.00351.x","DOIUrl":"https://doi.org/10.1111/j.1467-629X.2010.00351.x","url":null,"abstract":"Using a sample of reverse leveraged buyout (‘reverse-LBO’) firms, I find that discretionary accruals quality (AQ), the quality of accruals that are subject to management discretion, significantly improves from pre-LBO to post-reverse LBO. Moreover, buyout houses’ board seats and the length of firms’ stay-in-private periods are significant explanatory variables for the cross-sectional variation in discretionary AQ for post-reverse-LBO firms. My findings suggest that the monitoring provided by private equity buyout houses improves discretionary AQ, consistent with the view of Jensen (1989a,b) that LBOs are a solution to inefficiencies that arise from agency problems.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"43 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131486855","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Even with the passage of the Patient Protection and Affordable Care Act (ACA), the U.S. health care system is and will remain predominantly private and market-based. Market forces, then, heavily influence the characteristics and costs of the U.S. health system. In particular, market structure defined by the degree of consolidation in the hospital and insurance industries is a key determinant of the price paid for hospital services, affecting both the revenue earned by hospitals and the costs to indemnity insurers, self-funded employer plans and policyholders. In this essay, I draw on the large and growing body of research on the history and consequences of hospital and insurer market concentration to support hypotheses about how provisions of the ACA may differentially affect hospitals, insurers and consumers in the public and private health care market sectors. I also offer suggestions for areas where antitrust policy and health economics research need more attention in order to prepare for the changes ahead.
即使通过了《患者保护和平价医疗法案》(Patient Protection and Affordable Care Act, ACA)，美国的医疗保健系统现在是、将来也将继续以私营和市场为主导。因此，市场力量在很大程度上影响着美国卫生系统的特点和成本。特别是，由医院和保险业整合程度决定的市场结构是医院服务价格的关键决定因素，既影响医院的收入，也影响赔偿保险公司、自筹资金雇主计划和保单持有人的成本。在这篇文章中，我借鉴了大量和不断增长的关于医院和保险公司市场集中度的历史和后果的研究，以支持关于ACA条款如何在公共和私人医疗保健市场部门对医院、保险公司和消费者产生不同影响的假设。我还对反垄断政策和卫生经济学研究需要更多关注的领域提出了建议，以便为未来的变化做好准备。
{"title":"The Future of Health Care Costs: Hospital-Insurer Balance of Power","authors":"A. Frakt","doi":"10.2139/SSRN.1788132","DOIUrl":"https://doi.org/10.2139/SSRN.1788132","url":null,"abstract":"Even with the passage of the Patient Protection and Affordable Care Act (ACA), the U.S. health care system is and will remain predominantly private and market-based. Market forces, then, heavily influence the characteristics and costs of the U.S. health system. In particular, market structure defined by the degree of consolidation in the hospital and insurance industries is a key determinant of the price paid for hospital services, affecting both the revenue earned by hospitals and the costs to indemnity insurers, self-funded employer plans and policyholders. In this essay, I draw on the large and growing body of research on the history and consequences of hospital and insurer market concentration to support hypotheses about how provisions of the ACA may differentially affect hospitals, insurers and consumers in the public and private health care market sectors. I also offer suggestions for areas where antitrust policy and health economics research need more attention in order to prepare for the changes ahead.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126800693","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we study the impact of the degree of concentration of a financial system on the aggregate demand for housing as well as the feedback effect of the size of the mortgage loan market on lenders’ profits, internal capital accumulation, loan losses and potential bailouts. In a general equilibrium framework with endogenous borrowing constraints, we show that, contrary to the traditional view, competitive lenders can generate larger profits and accumulate more internal capital than monopolistic lenders. Furthermore, in the event of a severe economic downturn, a competitive financial system can withstand a financial crisis just as well as a concentrated financial system. We provide empirical evidence consistent with the main predictions of our model.
{"title":"Strategic Behavior in Capital Markets and Asset Prices","authors":"Iulian Obreja","doi":"10.2139/ssrn.1701221","DOIUrl":"https://doi.org/10.2139/ssrn.1701221","url":null,"abstract":"In this paper we study the impact of the degree of concentration of a financial system on the aggregate demand for housing as well as the feedback effect of the size of the mortgage loan market on lenders’ profits, internal capital accumulation, loan losses and potential bailouts. In a general equilibrium framework with endogenous borrowing constraints, we show that, contrary to the traditional view, competitive lenders can generate larger profits and accumulate more internal capital than monopolistic lenders. Furthermore, in the event of a severe economic downturn, a competitive financial system can withstand a financial crisis just as well as a concentrated financial system. We provide empirical evidence consistent with the main predictions of our model.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"62 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114393734","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We want to assess the relationship between the equity and the debt cost of capital. Using a very simple dividend discount model we compute the implied discount rate and we compare it with the corresponding premium on the corporate credit default swap using a cointegration approach. We demonstrated the existence of a cointegrating relationship between those two variables and we found weak evidence of Granger causality from CDS premium to the discount factor. Our findings are also robust to the choice of different parameter assumptions and model specification.
{"title":"The Relationship Between Credit Default Swap and Cost of Equity Capital","authors":"G. Barone-Adesi, M. Brughelli","doi":"10.2139/ssrn.1719006","DOIUrl":"https://doi.org/10.2139/ssrn.1719006","url":null,"abstract":"We want to assess the relationship between the equity and the debt cost of capital. Using a very simple dividend discount model we compute the implied discount rate and we compare it with the corresponding premium on the corporate credit default swap using a cointegration approach. We demonstrated the existence of a cointegrating relationship between those two variables and we found weak evidence of Granger causality from CDS premium to the discount factor. Our findings are also robust to the choice of different parameter assumptions and model specification.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116587223","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the effects of systematic distress and sectoral distress in the context of default/bankruptcy prediction using a large sample of U.S. public company default data from 1991 to 2009. I construct measures to proxy for economy-wide systematic distress and sectoral distress based on distance to default, which is a powerful proxy to evaluate a firm's credit risk. I find that including such distress factors as covariates can improve the intensity model's performance to predict defaults. Therefore the systematic and sectoral distress factors are important macroeconomic and industry-level covariates that are missing in the previous literature. I also examine the credit contagion effects using the Hawkes specification. Contrary to Lando and Nielson (2010), I find strong evidence that credit contagion effects do exist in the sample. After adding the systematic and sectoral distress factors to such model, the credit contagion effects are much less significant which indicates that these distress measures are able to capture the pre-default as well as post-default contagion effects.
{"title":"Determinants of Corporate Default: Systematic Distress, Sectoral Distress and Credit Contagion","authors":"Tao Wang","doi":"10.2139/ssrn.1647576","DOIUrl":"https://doi.org/10.2139/ssrn.1647576","url":null,"abstract":"This paper studies the effects of systematic distress and sectoral distress in the context of default/bankruptcy prediction using a large sample of U.S. public company default data from 1991 to 2009. I construct measures to proxy for economy-wide systematic distress and sectoral distress based on distance to default, which is a powerful proxy to evaluate a firm's credit risk. I find that including such distress factors as covariates can improve the intensity model's performance to predict defaults. Therefore the systematic and sectoral distress factors are important macroeconomic and industry-level covariates that are missing in the previous literature. I also examine the credit contagion effects using the Hawkes specification. Contrary to Lando and Nielson (2010), I find strong evidence that credit contagion effects do exist in the sample. After adding the systematic and sectoral distress factors to such model, the credit contagion effects are much less significant which indicates that these distress measures are able to capture the pre-default as well as post-default contagion effects.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"219 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131455882","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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