We examine the probability of exit for different types of investors in the syndicated loan market, as well as how the entry and exit of different types of investors is associated with changes in loan characteristics. Nonbanks, particularly CLOs, closed-end funds, and mutual funds, are more likely than bank lenders to exit the syndicate rather than to participate in the renegotiated loan. For mutual funds, greater net fund outflows imply a greater likelihood of exit, and this finding is consistent with nonbank lending creating greater systemic risk (Stein 2013). For most nonbanks, the likelihood of an exit increases if the financial condition of the borrower improves and the potential for higher spreads wanes. Controlling for borrower risk, the addition of most nonbank institutions, in contrast to banks, is accompanied by an increase in loan spreads, but no significant increase in the number or tightness of covenants.
{"title":"Institutional Investors and Loan Dynamics: Evidence from Loan Renegotiations","authors":"M. Beyhaghi, Ca Nguyen, John K. Wald","doi":"10.2139/ssrn.2989972","DOIUrl":"https://doi.org/10.2139/ssrn.2989972","url":null,"abstract":"We examine the probability of exit for different types of investors in the syndicated loan market, as well as how the entry and exit of different types of investors is associated with changes in loan characteristics. Nonbanks, particularly CLOs, closed-end funds, and mutual funds, are more likely than bank lenders to exit the syndicate rather than to participate in the renegotiated loan. For mutual funds, greater net fund outflows imply a greater likelihood of exit, and this finding is consistent with nonbank lending creating greater systemic risk (Stein 2013). For most nonbanks, the likelihood of an exit increases if the financial condition of the borrower improves and the potential for higher spreads wanes. Controlling for borrower risk, the addition of most nonbank institutions, in contrast to banks, is accompanied by an increase in loan spreads, but no significant increase in the number or tightness of covenants.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"505 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133070182","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}
I compare the U.S. capacity expansion decisions of public and private producers of 7 commodity chemicals from 1989 to 2006. I find that private firms invest differently than public firms. Private firms are more likely than public firms to increase capacity prior to a positive demand shock (an increase in price and quantity) and less likely to increase capacity before a negative demand shock. Potential mechanisms include public firm overextrapolation of past demand shocks and agency problems arising from greater separation between ownership and control.
{"title":"Do Public and Private Firms Behave Differently? An Examination of Investment in the Chemical Industry","authors":"A. Sheen","doi":"10.2139/ssrn.2792410","DOIUrl":"https://doi.org/10.2139/ssrn.2792410","url":null,"abstract":"I compare the U.S. capacity expansion decisions of public and private producers of 7 commodity chemicals from 1989 to 2006. I find that private firms invest differently than public firms. Private firms are more likely than public firms to increase capacity prior to a positive demand shock (an increase in price and quantity) and less likely to increase capacity before a negative demand shock. Potential mechanisms include public firm overextrapolation of past demand shocks and agency problems arising from greater separation between ownership and control.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122511547","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 article examines the determinants of cyber insurance participation, the amount of coverage offered, and the performance of current cyber insurers. Our results support the competitive advantage hypothesis, are in line with the coordinated risk management hypothesis, but only partially support the business growth constraint hypothesis. We find that insurers offer cyber insurance to capitalize on their competitive advantage in understanding and pricing cyber risks and to balance their risks between investment and underwriting. We find limited evidence that insurers participate in cyber insurance to compensate for constraints on business growth. In addition, the type of coverage offered (standalone or packaged) and the amount of coverage offered vary substantially across firm characteristics. Standalone coverage incurs higher loss ratios than packaged coverage, demonstrating its riskier nature. Changes in cyber insurance loss ratios are not driven by premium growth, but by claim frequency and severity growth, emphasizing the significance of cyber insurance policy design.
{"title":"Cyber Insurance Supply and Performance: An Analysis of the U.S. Cyber Insurance Market","authors":"Xiaoying Xie, Charles M. C. Lee, M. Eling","doi":"10.2139/ssrn.3440919","DOIUrl":"https://doi.org/10.2139/ssrn.3440919","url":null,"abstract":"This article examines the determinants of cyber insurance participation, the amount of coverage offered, and the performance of current cyber insurers. Our results support the competitive advantage hypothesis, are in line with the coordinated risk management hypothesis, but only partially support the business growth constraint hypothesis. We find that insurers offer cyber insurance to capitalize on their competitive advantage in understanding and pricing cyber risks and to balance their risks between investment and underwriting. We find limited evidence that insurers participate in cyber insurance to compensate for constraints on business growth. In addition, the type of coverage offered (standalone or packaged) and the amount of coverage offered vary substantially across firm characteristics. Standalone coverage incurs higher loss ratios than packaged coverage, demonstrating its riskier nature. Changes in cyber insurance loss ratios are not driven by premium growth, but by claim frequency and severity growth, emphasizing the significance of cyber insurance policy design.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115969973","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}
Empirical evidence shows that diversified banks (i.e. financial conglomerates) trade at a discount compared to a matched portfolio of specialized stand-alone banks. While one strand of research explains this puzzle primarily with inefficiencies in the cash flow management, we analyze whether this evidence is due to expected returns which compensate investors for skewness exposure. Our empirical findings support this hypothesis. We implement different (co-)skewness measures proposed by the previous literature. We illustrate that diversified banks have asset returns with lower skewness, and, as a consequence of lower upside potential, investors demand for these stocks a higher discount or, vice versa, higher expected returns. Different robustness checks corroborate our main result.
{"title":"The Financial Conglomerate Discount: Insights from Stock Return Skewness","authors":"S. Bressan, Alex Weissensteiner","doi":"10.2139/ssrn.3339579","DOIUrl":"https://doi.org/10.2139/ssrn.3339579","url":null,"abstract":"Empirical evidence shows that diversified banks (i.e. financial conglomerates) trade at a discount compared to a matched portfolio of specialized stand-alone banks. While one strand of research explains this puzzle primarily with inefficiencies in the cash flow management, we analyze whether this evidence is due to expected returns which compensate investors for skewness exposure. Our empirical findings support this hypothesis. We implement different (co-)skewness measures proposed by the previous literature. We illustrate that diversified banks have asset returns with lower skewness, and, as a consequence of lower upside potential, investors demand for these stocks a higher discount or, vice versa, higher expected returns. Different robustness checks corroborate our main result.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-02-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129381224","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 investigate whether and how shocks propagate through trade credit. We exploit a large negative liquidity shock to firms in the Brazilian food industry, resulting from the announcement of a fraud investigation named Operation Weak Flesh. Using a differences-in-differences analysis, we show that quarterly accounts payable of the affected firms drop by 20-30 percent. Their suppliers reduce the provision of trade credit by 5-6 percent. The evidence suggests that risk mitigation concerns dominate business relationship concerns or bargaining power effects. Suppliers mitigate the increased credit risk in the supply chain rather than supporting their customers with additional trade credit.
{"title":"Shock Propagation Through Trade Credit: Evidence From Operation Weak Flesh","authors":"V. Dahan, Lars Norden","doi":"10.2139/ssrn.3274636","DOIUrl":"https://doi.org/10.2139/ssrn.3274636","url":null,"abstract":"We investigate whether and how shocks propagate through trade credit. We exploit a large negative liquidity shock to firms in the Brazilian food industry, resulting from the announcement of a fraud investigation named Operation Weak Flesh. Using a differences-in-differences analysis, we show that quarterly accounts payable of the affected firms drop by 20-30 percent. Their suppliers reduce the provision of trade credit by 5-6 percent. The evidence suggests that risk mitigation concerns dominate business relationship concerns or bargaining power effects. Suppliers mitigate the increased credit risk in the supply chain rather than supporting their customers with additional trade credit.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133887844","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}
Compared to using the variance of index returns, managing investment by the average of the variance of index components (AV) produces significant return and ratio performance improvements. AV managed investment in the market index takes less extreme leverage making it more practical and cheaper while generating more substantial utility gains. AV management highlights the fundamental risk make up of portfolio return variance. AV management provides key information for optimal investment by signaling changes in the mix of compensated and uncompensated risk. As such, investors can use equity AV as a signal to manage assets across the economy.
{"title":"Average Volatility Managed Investment Timing","authors":"Jeramia Poland","doi":"10.2139/ssrn.3208630","DOIUrl":"https://doi.org/10.2139/ssrn.3208630","url":null,"abstract":"Compared to using the variance of index returns, managing investment by the average of the variance of index components (AV) produces significant return and ratio performance improvements. AV managed investment in the market index takes less extreme leverage making it more practical and cheaper while generating more substantial utility gains. AV management highlights the fundamental risk make up of portfolio return variance. AV management provides key information for optimal investment by signaling changes in the mix of compensated and uncompensated risk. As such, investors can use equity AV as a signal to manage assets across the economy.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"48 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127404030","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 number of private equity (PE) fund management firms (GPs) have sought listings on public stock exchanges; also, investors, regulators, and PE firms, are showing interest in permanent PE investment capital raised on public markets. However concerns have been expressed that both of these developments weaken the incentives for private equity firms to make good deals and make them work. In this study, we construct a novel and comprehensive dataset of buyout deal performance measures for public and private PE firms. We find little difference in deal size or performance for deals by private GPs and permanent PE firms. However, deals by public GPs are on average 3 times larger than those of private GPs, and they earn 22% higher deal multiples.
{"title":"Do Publicly Listed Private Equity Firms Make Bad Deals?","authors":"M. McCourt","doi":"10.2139/ssrn.2941380","DOIUrl":"https://doi.org/10.2139/ssrn.2941380","url":null,"abstract":"A number of private equity (PE) fund management firms (GPs) have sought listings on public stock exchanges; also, investors, regulators, and PE firms, are showing interest in permanent PE investment capital raised on public markets. However concerns have been expressed that both of these developments weaken the incentives for private equity firms to make good deals and make them work. In this study, we construct a novel and comprehensive dataset of buyout deal performance measures for public and private PE firms. We find little difference in deal size or performance for deals by private GPs and permanent PE firms. However, deals by public GPs are on average 3 times larger than those of private GPs, and they earn 22% higher deal multiples.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125628330","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}
Do depositors react to negative non-financial information about their banks? By using branch level data for the United States, I show that banks, that financed the highly controversial Dakota Access Pipeline, experienced significant decreases in deposit growth, especially in branches located closest to the pipeline. These effects were greater for branches located in environmentally or socially conscious counties, and data suggests that savings banks were among the main beneficiaries of this depositor movement. Using a global hand-collected dataset on tax evasion, corruption, and environmental scandals related to banks, I show that negative deposit growth as a reaction to scandals is a widespread phenomenon.
{"title":"Depositors Disciplining Banks: The Impact of Scandals","authors":"Mikael Homanen","doi":"10.2139/ssrn.3293254","DOIUrl":"https://doi.org/10.2139/ssrn.3293254","url":null,"abstract":"Do depositors react to negative non-financial information about their banks? By using branch level data for the United States, I show that banks, that financed the highly controversial Dakota Access Pipeline, experienced significant decreases in deposit growth, especially in branches located closest to the pipeline. These effects were greater for branches located in environmentally or socially conscious counties, and data suggests that savings banks were among the main beneficiaries of this depositor movement. Using a global hand-collected dataset on tax evasion, corruption, and environmental scandals related to banks, I show that negative deposit growth as a reaction to scandals is a widespread phenomenon.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126628455","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 study assesses the impact of the quality of bankruptcy data on the estimation and evaluation of bankruptcy prediction models. To meet this objective, we develop a systematic methodology to obtain bankruptcy information from corporate news releases and public sources. Then, applying this methodology to the German market, we create a bankruptcy database that includes a higher number of and more accurate bankruptcy events as well as more accurate bankruptcy dates than those in the frequently used databases of Bureau van Dijk and Compustat Global. We use our bankruptcy data to conduct two empirical analyses. First, using our more accurate database, we compare the performance of several bankruptcy prediction models in the context of Germany. Second, we compare our database with Bureau van Dijk data and find that the quality of bankruptcy data significantly affects the parameter estimates and the out-of-sample evaluation of bankruptcy prediction models. Therefore, we suggest revising evidence presented by bankruptcy studies that use inaccurate bankruptcy information.
本研究评估破产数据质量对破产预测模型估计与评价的影响。为了实现这一目标，我们开发了一种系统的方法，从公司新闻稿和公共资源中获取破产信息。然后，将此方法应用于德国市场，我们创建了一个破产数据库，其中包括比Bureau van Dijk和Compustat Global常用数据库中更多数量和更准确的破产事件以及更准确的破产日期。我们利用我们的破产数据进行了两个实证分析。首先，使用我们更准确的数据库，我们比较了德国背景下几种破产预测模型的表现。其次，我们将我们的数据库与Bureau van Dijk的数据进行比较，发现破产数据的质量显著影响破产预测模型的参数估计和样本外评价。因此，我们建议修改使用不准确破产信息的破产研究提供的证据。
{"title":"The Quality of Bankruptcy Data and its Impact on the Evaluation of Prediction Models: Creating and Testing a German Database","authors":"Martin Huettemann, Tobias Lorsbach","doi":"10.2139/ssrn.3219239","DOIUrl":"https://doi.org/10.2139/ssrn.3219239","url":null,"abstract":"This study assesses the impact of the quality of bankruptcy data on the estimation and evaluation of bankruptcy prediction models. To meet this objective, we develop a systematic methodology to obtain bankruptcy information from corporate news releases and public sources. Then, applying this methodology to the German market, we create a bankruptcy database that includes a higher number of and more accurate bankruptcy events as well as more accurate bankruptcy dates than those in the frequently used databases of Bureau van Dijk and Compustat Global. We use our bankruptcy data to conduct two empirical analyses. First, using our more accurate database, we compare the performance of several bankruptcy prediction models in the context of Germany. Second, we compare our database with Bureau van Dijk data and find that the quality of bankruptcy data significantly affects the parameter estimates and the out-of-sample evaluation of bankruptcy prediction models. Therefore, we suggest revising evidence presented by bankruptcy studies that use inaccurate bankruptcy information.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121960373","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}
The goal of this ‘Green Paper’ is to contribute, in a neutral way, to a conversation that has been going on for some time amongst a variety of actors, concerning whether mandatory reporting standards are a prerequisite for effective ‘sustainability’ or ‘nonfinancial’ corporate reporting. Specifically, we ask whether the existing standard-setting regime for financial reporting – that of the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) – should be extended to include setting standards for nonfinancial information.
{"title":"Should FASB and IASB Be Responsible for Setting Standards for Nonfinancial Information?","authors":"R. Barker, R. Eccles","doi":"10.2139/SSRN.3272250","DOIUrl":"https://doi.org/10.2139/SSRN.3272250","url":null,"abstract":"The goal of this ‘Green Paper’ is to contribute, in a neutral way, to a conversation that has been going on for some time amongst a variety of actors, concerning whether mandatory reporting standards are a prerequisite for effective ‘sustainability’ or ‘nonfinancial’ corporate reporting. Specifically, we ask whether the existing standard-setting regime for financial reporting – that of the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) – should be extended to include setting standards for nonfinancial information.","PeriodicalId":375725,"journal":{"name":"SPGMI: Capital IQ Data (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-10-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123823503","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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