Всего статей в данном разделе : 5
Опубликовано на портале: 21-06-2006Nikolay Halov, Florian Heider Working Paper Series (SSRN). 2005.
This paper argues that firms may not issue debt in order to avoid the adverse selection cost of debt. Theory suggests that since debt is a concave claim, it may be mispriced when outside investors are uninformed about firms’ risk. The empirical literature has however paid little attention the caveat that the “lemons” problem of external financing first identified by Myers (1984) only leads to debt issuance, i.e. a pecking order, if debt is risk free or, if it is risky, that it is not mispriced. This paper therefore examines whether and for what firms the adverse selection cost of debt is more than a theoretical possibility? And how does this cost relate to other costs of debt such as bankruptcy? Absent any direct measure of something that is unknown to investors and thus cannot be in the econometrician’s information set, we present an extensive collage of strong and robust evidence in a large unbalanced panel of publicly traded US firms from 1971 to 2001 that firms avoid issuing debt when the outside market is likely to know little about their risk.
Опубликовано на портале: 21-06-2006Sreedhar T. Bharath, Paolo Pasquariello, Guojun Wu Working Paper Series (SSRN). 2006.
Using an information asymmetry index based on measures of adverse selection developed by the market microstructure literature, we test if information asymmetry is the sole determinant of capital structure decisions as suggested by the pecking order theory. Our tests rely exclusively on measures of the market's assessment of adverse selection risk rather than on ex-ante firm characteristics. We find that information asymmetry does affect capital structure decisions of U.S. firms over the period 1973-2002, especially when firms' financing needs are low and when firms are financially constrained. We also find a significant degree of intertemporal variability in firms' degree of information asymmetry, as well as in its impact on firms' debt issuance decisions. Our findings based on the information asymmetry index are robust to sorting firms based on size and firm insiders' trading activity, two popular alternative proxies for the severity of adverse selection. Overall, this evidence explains why the pecking order theory is only partially successful in explaining all of firms' capital structure decisions. It also suggests that the theory finds support when its basic assumptions hold in the data, as it should reasonably be expected of any theory.
History and the Equity Risk Premium [статья]
Опубликовано на портале: 21-06-2006Roger G. Ibbotson, William N. Goetzmann Yale ICF Working Paper. 2005. No. 05-04.
We summarize some of our own past findings and place them in the context of the historical development of the idea of the equity risk premium and its empirical measurement by financial economists. In particular, we focus on how the theory of compensation for investment risk developed in the 20th century in tandem with the empirical analysis of historical investment performance. Finally, we update our study of the historical performance of the New York Stock Exchange over the period 1792 to the present, and include a measure of the U.S. equity risk premium over more than two centuries. This last section is based upon indices constructed from individual stock and dividend data collected over a decade of research at the Yale School of Management, and contributions by other scholars.
The Effect of Managerial Overconfidence, Asymmetric Information, and Moral Hazard on Capital Structure Decisions. [статья]
Опубликовано на портале: 21-06-2006Richard J. Fairchild Working Paper Series (SSRN). 2006.
We examine the combined effects of managerial overconfidence, asymmetric information and moral hazard problems on the manager's choice of financing (debt or equity). We demonstrate the following; a) in the asymmetric information model, overconfidence is unambiguously bad. It induces excessive welfare-reducing debt, b) in the moral hazard model, the effect of overconfidence is ambiguous. It has a positive effect by inducing higher managerial effort. However, it may lead to excessive use of debt and higher expected bankruptcy costs. Overall, we contribute to the debate on managerial overconfidence by demonstrating that managerial overconfidence is not necessarily bad for shareholders.
The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt [статья]
Опубликовано на портале: 26-10-2007Stephen L. Ross, Xiaozhing Liang, John P. Harding Department of Economics University of Connecticut: Working papers. 2007. No. 2007-29.
The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bank's choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard as long as there is a significant financial burden associated with violating capital requirements. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially to future tax benefits) against the benefits of additional debt. Because our model includes all three contingent claims, our results differ from those of previous studies of the capital structure of banks that have generally found corner solutions (all equity or all debt) to the capital structure problem.