Pub Date : 2008-08-01DOI: 10.1016/J.JFINECO.2007.11.001
B. Balachandran, R. Faff, M. Theobald
{"title":"Rights Offerings, Takeup, Renounceability, and Underwriting Status","authors":"B. Balachandran, R. Faff, M. Theobald","doi":"10.1016/J.JFINECO.2007.11.001","DOIUrl":"https://doi.org/10.1016/J.JFINECO.2007.11.001","url":null,"abstract":"","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"307 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"119555620","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}
Contrary to the assertions of de Meza and Webb (2006), we find that (i) there is no conflict between borrowing costs and the condition for rationing put forth in Stiglitz and Weiss (1981), and (ii) entrepreneurs finance production solely by debt. It is shown also that under the timing conventions of Stiglitz and Weiss (1981) borrowers use either none or all of their liquid endowments.
{"title":"The Stiglitz-Weiss Condition for Rationing and Endogenous Self-finance: A Comment","authors":"P. S. Faynzilberg","doi":"10.2139/ssrn.1151377","DOIUrl":"https://doi.org/10.2139/ssrn.1151377","url":null,"abstract":"Contrary to the assertions of de Meza and Webb (2006), we find that (i) there is no conflict between borrowing costs and the condition for rationing put forth in Stiglitz and Weiss (1981), and (ii) entrepreneurs finance production solely by debt. It is shown also that under the timing conventions of Stiglitz and Weiss (1981) borrowers use either none or all of their liquid endowments.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128484835","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 present a corporate bond pricing model. Based on this model we develop a construction of the default characteristics implied by historical data.
本文提出了一个公司债券定价模型。在此模型的基础上，我们建立了历史数据隐含的默认特征的构造。
{"title":"Default Characteristics of Corporate Bonds","authors":"I. Gikhman","doi":"10.2139/ssrn.1163383","DOIUrl":"https://doi.org/10.2139/ssrn.1163383","url":null,"abstract":"In this paper we present a corporate bond pricing model. Based on this model we develop a construction of the default characteristics implied by historical data.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129123846","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 current study briefly considers KLA-Tencor's 2007 $750 million accelerated stock repurchase (ASR). Companies commonly indicate ASRs contractually promise execution of stock buybacks at a discount to market. To the contrary, analysis of a small sample of 2006-2007 ASRs finds: 1) Inferior risk/reward relative to simple alternatives (inefficient execution), 2) Liability (ASRs are denied a 10b-18 safe harbor against charges of manipulation), 3) Disturbing, pre-deal, stock activity (prices rise 10% shortly preceding an ASR), 4) Idiosyncratic, incomplete, and sometimes misleading disclosures. KLA-Tencor's 2007 ASR shares the above listed shortcomings. In particular, by electing to execute a stock buyback through an ASR, KLA-Tencor appears to overpay by at least 3-6% ($23 - $45 million) though incomplete disclosure makes any calculation of excess cost simply an estimate. As with all ASRs, KLA-Tencor exposes itself to governance liability since it is denied a 10b-18 safe harbor.
{"title":"Accelerated Stock Repurchase Programs: Underreported and Overpriced? KLA-Tencor Addendum","authors":"M. Gumport","doi":"10.2139/ssrn.1156116","DOIUrl":"https://doi.org/10.2139/ssrn.1156116","url":null,"abstract":"The current study briefly considers KLA-Tencor's 2007 $750 million accelerated stock repurchase (ASR). Companies commonly indicate ASRs contractually promise execution of stock buybacks at a discount to market. To the contrary, analysis of a small sample of 2006-2007 ASRs finds: 1) Inferior risk/reward relative to simple alternatives (inefficient execution), 2) Liability (ASRs are denied a 10b-18 safe harbor against charges of manipulation), 3) Disturbing, pre-deal, stock activity (prices rise 10% shortly preceding an ASR), 4) Idiosyncratic, incomplete, and sometimes misleading disclosures. KLA-Tencor's 2007 ASR shares the above listed shortcomings. In particular, by electing to execute a stock buyback through an ASR, KLA-Tencor appears to overpay by at least 3-6% ($23 - $45 million) though incomplete disclosure makes any calculation of excess cost simply an estimate. As with all ASRs, KLA-Tencor exposes itself to governance liability since it is denied a 10b-18 safe harbor.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"170 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114419949","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 tests whether and how market timing explains public equity offerings and consequently firm leverage. Prior research has subsumed two mechanisms under the market timing terminology. One is a mispricing mechanism with irrational investors or managers, the other is due to fluctuations in adverse selection costs. Using a comprehensive sample of SEO and IPO firms I find no support for the mispricing mechanism, but evidence consistent with the adverse selection mechanism. When asymmetric information is low, firms rationally issue equity to finance future investment. Moreover, equity is not mispriced when issued. Inconsistent with both market timing arguments however, issuing firms releverage through increased debt issues and within three years eliminate the impact of market timing on leverage.
{"title":"Public Equity Issues and the Scope for Market Timing","authors":"Hannes F. Wagner","doi":"10.2139/ssrn.968345","DOIUrl":"https://doi.org/10.2139/ssrn.968345","url":null,"abstract":"This paper tests whether and how market timing explains public equity offerings and consequently firm leverage. Prior research has subsumed two mechanisms under the market timing terminology. One is a mispricing mechanism with irrational investors or managers, the other is due to fluctuations in adverse selection costs. Using a comprehensive sample of SEO and IPO firms I find no support for the mispricing mechanism, but evidence consistent with the adverse selection mechanism. When asymmetric information is low, firms rationally issue equity to finance future investment. Moreover, equity is not mispriced when issued. Inconsistent with both market timing arguments however, issuing firms releverage through increased debt issues and within three years eliminate the impact of market timing on leverage.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"182 11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125941757","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}
Domenico Delli Gatti, M. Gallegati, B. Greenwald, Alberto Russo, J. Stiglitz
We explore the properties of a credit network characterized by inside credit - i.e. credit relationships connecting downstream (D) and upstream (U) firms - and outside credit - i.e. credit relationships connecting firms and banks. The structure of the network changes over time due to the preferred-partner choice rule: each agent chooses the partner who charges the lowest price. The net worth of D firms turns out to be the driver of fluctuations. U production, in fact, is determined by demand of intermediate inputs on the part of D firms and production of the latter is financially constrained, i.e. determined by the availability of internal finance proxied by net worth. The output of simulations shows that at the macroeconomic level a business cycle can develop as a consequence of the complex interaction of the agents' financial conditions. We can also reproduce the main stylized facts of firms' demography, i.e. the power law distribution of firms' size and the Laplace distribution of firms' growth rates.
{"title":"Financially Constrained Fluctuations in an Evolving Network Economy","authors":"Domenico Delli Gatti, M. Gallegati, B. Greenwald, Alberto Russo, J. Stiglitz","doi":"10.3386/W14112","DOIUrl":"https://doi.org/10.3386/W14112","url":null,"abstract":"We explore the properties of a credit network characterized by inside credit - i.e. credit relationships connecting downstream (D) and upstream (U) firms - and outside credit - i.e. credit relationships connecting firms and banks. The structure of the network changes over time due to the preferred-partner choice rule: each agent chooses the partner who charges the lowest price. The net worth of D firms turns out to be the driver of fluctuations. U production, in fact, is determined by demand of intermediate inputs on the part of D firms and production of the latter is financially constrained, i.e. determined by the availability of internal finance proxied by net worth. The output of simulations shows that at the macroeconomic level a business cycle can develop as a consequence of the complex interaction of the agents' financial conditions. We can also reproduce the main stylized facts of firms' demography, i.e. the power law distribution of firms' size and the Laplace distribution of firms' growth rates.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116231825","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 study equity issues when the capacity of the market to absorb risk is limited and time-varying. The model can replicate the dynamics of prices and equity issues observed at the aggregate level. Firms issue equity at high prices and low market returns follow active issuance. In the cross-section, the model predicts that firms with more arbitrage risk are less likely to issue equity. We find empirically that firms with stocks that are harder to arbitrage-stocks with bad substitutes-are less likely to issue equity, issue less equity as fraction of their assets, and have higher leverage.
{"title":"Equity Issues, Market Timing, and Limits to Arbitrage","authors":"B. Larrain","doi":"10.2139/ssrn.1108008","DOIUrl":"https://doi.org/10.2139/ssrn.1108008","url":null,"abstract":"We study equity issues when the capacity of the market to absorb risk is limited and time-varying. The model can replicate the dynamics of prices and equity issues observed at the aggregate level. Firms issue equity at high prices and low market returns follow active issuance. In the cross-section, the model predicts that firms with more arbitrage risk are less likely to issue equity. We find empirically that firms with stocks that are harder to arbitrage-stocks with bad substitutes-are less likely to issue equity, issue less equity as fraction of their assets, and have higher leverage.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122889116","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}
Change-in-control covenants were first introduced at the tail-end of the LBO wave in the 1980s. We report that, like bondholders in the 1980s, bondholders lacking such covenant protection experience significantly negative wealth effects of -6.76% upon the announcement of an LBO, compared to 2.30% for bonds with protection. Furthermore, we document that firms with bonds lacking change-in-control covenants are twice as likely to be the target of an LBO. Thus, the potential for bondholder wealth expropriation plays an important role in both the design of bond contracts and the identification of suitable LBO targets.
{"title":"The Role of Bondholder Wealth Expropriation in LBO Transactions","authors":"Matthew T. Billett, Zhan Jiang, E. Lie","doi":"10.2139/ssrn.1107448","DOIUrl":"https://doi.org/10.2139/ssrn.1107448","url":null,"abstract":"Change-in-control covenants were first introduced at the tail-end of the LBO wave in the 1980s. We report that, like bondholders in the 1980s, bondholders lacking such covenant protection experience significantly negative wealth effects of -6.76% upon the announcement of an LBO, compared to 2.30% for bonds with protection. Furthermore, we document that firms with bonds lacking change-in-control covenants are twice as likely to be the target of an LBO. Thus, the potential for bondholder wealth expropriation plays an important role in both the design of bond contracts and the identification of suitable LBO targets.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132658888","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 paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the return on the company's assets, even if the company is not an exporter. Prudential regulations should therefore differentiate among loans depending on the extent to which borrowers have "natural hedges" of their foreign currency exposures.
{"title":"Credit Risk Spreads in Local and Foreign Currencies","authors":"D. Galai, Z. Wiener","doi":"10.2139/ssrn.1100768","DOIUrl":"https://doi.org/10.2139/ssrn.1100768","url":null,"abstract":"The paper shows how-in a Merton-type model with bankruptcy-the currency composition of debt changes the risk profile of a company raising a given amount of financing, and thus affects the cost of debt. Foreign currency borrowing is cheaper when the exchange rate is positively correlated with the return on the company's assets, even if the company is not an exporter. Prudential regulations should therefore differentiate among loans depending on the extent to which borrowers have \"natural hedges\" of their foreign currency exposures.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123191841","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 portfolio of non-performing loans needs economic capital. We present two models for forecasting the non-performing portfolio's loss and derive the probability distribution. In the first model, the loss for each loan is a Gaussian random variable, and the risk determinants are the portfolio concentration, as well as systematic and idiosyncratic risk. Our second model allows for diversification with a performing portfolio, because an investor typically owns a combination of performing and non-performing loans. This model is a mixture model. For both models, formulae for the economic capital and the fair contribution of a single loan are given. We calibrate the models with times series data and a benchmark portfolio. Our main finding is that the credit portfolio risk of non-performing loans depends on the volatility of economic activity, on the granularity of the portfolio and on the performing portfolio. Finally, we compare the economic capital charges for non-performing loans from our models with the regulatory capital charges of Basel II. The main difference is that our capital charges are sensitive to economic activity volatility, whereas the regulatory ones are not.
{"title":"Capital for Non-Performing Loans","authors":"R. Weißbach, Carsten von Lieres und Wilkau","doi":"10.2139/ssrn.1098998","DOIUrl":"https://doi.org/10.2139/ssrn.1098998","url":null,"abstract":"A portfolio of non-performing loans needs economic capital. We present two models for forecasting the non-performing portfolio's loss and derive the probability distribution. In the first model, the loss for each loan is a Gaussian random variable, and the risk determinants are the portfolio concentration, as well as systematic and idiosyncratic risk. Our second model allows for diversification with a performing portfolio, because an investor typically owns a combination of performing and non-performing loans. This model is a mixture model. For both models, formulae for the economic capital and the fair contribution of a single loan are given. We calibrate the models with times series data and a benchmark portfolio. Our main finding is that the credit portfolio risk of non-performing loans depends on the volatility of economic activity, on the granularity of the portfolio and on the performing portfolio. Finally, we compare the economic capital charges for non-performing loans from our models with the regulatory capital charges of Basel II. The main difference is that our capital charges are sensitive to economic activity volatility, whereas the regulatory ones are not.","PeriodicalId":437258,"journal":{"name":"Corporate Finance: Capital Structure & Payout Policies","volume":"68 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-02-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133330417","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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