Risk-shifting incentives and signalling through corporate capital structure

by Kose John

Publisher: Salomon Brothers Center for the Study of Financial Institutions, Graduate School of Business Administration, New York University in New York

Written in English
Published: Pages: 40 Downloads: 978
Share This


  • Corporations -- Finance -- Mathematical models,
  • Securities

Edition Notes

Statementby Kose John
SeriesWorking paper / Salomon Brothers Center for the Study of Financial Institutions -- no.411
ContributionsSalomon Brothers Center for the Study of Financial Institutions
The Physical Object
Pagination40 p. ;
Number of Pages40
ID Numbers
Open LibraryOL14425082M

  Moral Hazard, Dividends, and Risk in Banks Onali, it is during economic slowdowns that bank charter values are low and risk‐shifting through dividends and share repurchases is more likely. My findings suggest that a more thorough theoretical analysis of the impact of the countercyclical capital buffer on risk‐shifting incentives is. Rethinking Financial Stability Speech given by Andrew G Haldane, Chief Economist, Bank of England (on banks being in distress versus safe) through risk-shifting by %. Risk-taking incentives are, in effect, book-ended by the leverage and capital constraints. Dynamic Capital Structure under Managerial Entrenchment This paper develops a model in which managers voluntarily choose debt to credibly constrain their own future empire-building. Llymically consistent capital structure is derived as the optimul response in each period of partially entrenched managers trading-of empire-building ambitions with. The effects of firm characteristics and economic factors on capital structures have been researched in many countries. Various South African studies have been conducted on this topic; however, limited research was found where both the firm characteristics and economic factors were included in the same study.

Chapter 6: here we turn to corporate finance issues, treating the decision over a corporation’s capital structure. The essential issue is what levels of debt and equity finance should be chosen in order to maximise firm value.5/5(1).   Read "An integrated model of capital structure to study the differences in the speed of adjustment to target corporate debt maturity among developed countries, International Journal of Banking, Accounting and Finance" on DeepDyve, the largest online rental service for scholarly research with thousands of academic publications available at your fingertips. The Federal Reserve Board of Governors in Washington DC. Abstract: Since the beginning of , the United States has undertaken unprecedented tariff increases, with one goal of these actions being to boost the manufacturing sector. In this paper, we estimate the effect of the tariffs—including retaliatory tariffs by U.S. trading partners—on manufacturing employment, . Much of the literature investigating the impact on capital structure and risk-taking of the opposing incentives of safety net subsidies and financial distress costs has generally concentrated on the potential for moral hazard without much discussion of the incentives for choosing lower-risk business strategies.

“risk-shifting”behaviorincreasestheborrowers’ probability of default. Finally, Fostel and Geanakoplos [] show that the introduction of naked CDS may generate underinvestment, and that financial innovations such as CDS can change the collateral capacity of durable assets, which may further alter investment deci-.   We examine whether the proportion of CEO inside debt holdings (pension and deferred compensation) to stock holdings benefit both shareholders and debtholders by relating CEO inside debt to a firm’s dividend payout policies. Based on the positive association of CEO inside debt and the propensity and the size of the dividend payout, we find that firms paying Author: Nilakshi Borah, Hui Liang James, Jung Chul Park. Chapter 9 Venture Capital PAUL GOMPERS VOLUME 2 Preface: Empirical Corporate Finance PART 3: DIVIDENDS, CAPITAL STRUCTURE, AND FINANCIAL DISTRESS Chapter 10 Payout Policy AVNER KALAY and MICHAEL LEMMON Chapter 11 Taxes and Corporate Finance JOHN R. GRAHAM Chapter 12 Tradeoff and Pecking Order Theories of Debt MURRAY Z. FRANK . MN MSc Corporate Finance. Semester 2, Lecturer: Dr Richard Fairchild Office: WH Email: [email protected] Personal home page: .

Risk-shifting incentives and signalling through corporate capital structure by Kose John Download PDF EPUB FB2

Cited by: Dailami, Mansoor & Hauswald, Robert, "Risk shifting and long-term contracts: evidence from the Ras Gas Project," Policy Research Working Paper SeriesThe World uc-Kunt, Asli, "Developing country capital structures and emerging stock markets," Policy Research Working Paper SeriesThe World i, Mansoor &.

We analyze CEO incentives for risk-shifting and the cost of corporate bank debt. • We find that firms pay higher loan rates as their CEOs have higher risk incentives. • Banks set up more covenants in loans as risk-shifting incentives increase in firms. • Risk-shifting incentives are less relevant for firms with stronger bank by: 3.

Capital structure: the Modigliani–Miller theorem: capital structure irrelevancy; taxation, bankruptcy costs and capital structure; weighted average cost of capital; Modigliani-Miller 2nd proposition; the Miller equilibrium; asymmetric information: 1) the under-investment problem, asymmetric information; 2) the risk-shifting problem.

The impacts of corporate ownership structure on the incentive of using capital structure to signal Article in Studies in Economics and Finance 24(June) June with 14 Reads.

Litigation Exposure, Capital Structure, and Shareholder Value: The Case of Brooke Group Article in Journal of Corporate Finance 9(3) June with 41 Reads How we measure 'reads'. This course is aimed at students who are interested in understanding asset pricing and corporate finance.

It provides a theoretical framework used to address issues in project appraisal and financing, the pricing of risk, securities valuation, market efficiency, capital structure, and mergers and acquisitions.

Myers, Stewart C. & Majluf, Nicholas S., "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages, Kose, "Risk-Shifting Incentives and Signalling through Corporate Capital Structure," Journal of Finance, American Finance Association, vol.

Jensen, M. ()-“Agency costs of free cash flow, corporate finance, and takeover” American Economic Review, 76, pp. John, K. () “Risk-shifting incentives and signalling through corporate capital structure”- Journal of Finance, pp.

Theory of Capital Structure - A Review Stein Frydenberg. Ap ABSTRACT This paper is a review of the central theoretical literature.

The most important arguments for what could determine capital structure is the pecking order theory and the static trade off theory. These two theories are reviewed, but neither of them provides a complete.

The theoretical review delves predominantly on the definitions provided by writers on capital structure, theories of capital structure and financial performance. The concept capital structure The term capital structure is a widely known terms in the finance world, many scholars have given their own version in terms of definitions since the.

DeAngelo, H., and Masulis, R. Optimal capital structure under corporate and personal taxation. Journal of Financial Economics, –29, K. Risk-shifting incentives and signalling through corporate capital structure.

Journal of Finance, –, Buy this book on publisher's site; Reprints and Permissions; Personalised Cited by: 2. Risk-Shifting Incentives and Signalling Through Corporate Capital Structure, " (). Risk, Return And Equilibrium: Empirical Tests, "Author: Kenneth Kaoma Mwenda.

As pointed out by Siddiqi (), who uses simulation techniques to derive the optimal financing mix, agency costs of risk-shifting are very sensitive to the capital structure choice. Our paper contributes to the literature by measuring risk-shifting incentives and quantifying the economic significance of the risk-mitigating role of convertible Cited by: A survey of the relation between capital structure and corporate strategy Abstract This paper responds to the general call for integration between finance and strategy research by examining how financial decisions are related to corporate strategy.

In particular, the paper focuses on the link between capital structure and strategy. The authors recognize this point and do not claim that their results constitute a theory of capital structure.

Gertner, et al. () also consider a model in which firms use capital structure as a signal in the output market (as well as in the capital market).Cited by: Risk-shifting Incentives and Signalling through Corporate Capital Structure", ().

Risky Debt Maturity Choice in a Sequential Equilibrium",Author: Yilmaz Gűney. capital structure and executive compensation affects managerial behavior is provided by Sundaram and Yermack (). They sam-ple Fortune companies over a 7-year period, and find evi-dence for the proposition that if the executive debt-equity ratio exceeds that of the firm, then CEOs adopt a conservative manage-File Size: KB.

• Signalling o Signalling through dividends o Signalling through capital structure References * Grinblatt M. and S. Titman () 2nd Edition “Financial Markets and Corporate Strategy” McGraw-Hill Chapter 19 (only section ) Bhattacharya S. () Imperfect Information, Dividend Policy and the Bird in the Hand Fallacy.

Bell Journal of. capital structure in the value of firm. The assumptions of Modigliani and Miller () were based on frictionless financial markets. Nevertheless, whenever we add to the analysis the market imperfections, the capital structure turns relevant for the firm value.

Whereas high levels of debt might reduce the agency costs of outside equity, theAuthor: Paolo Saona. the paper focuses on the link between capital structure and strategy. Corporate strategies complement traditional finance paradigms and extend our insight into a firm’s decisions regarding capital structure.

Equity and debt must be considered as financial instruments as well as strategic instruments of corporate governance (Williamson ).Cited by: 4. Although recent literature has confirmed the importance of viewing a firm’s capital structure choices of leverage and debt maturity as jointly determined, to date there has been little analysis of the importance of traditional governance variables on a firm’s capital structure decisions using a simultaneous equations approach.

We examine the influence of managerial Cited by: Green Arrow, Vol 3 book Read 61 reviews from the world's largest community for readers New Brad Meltzer puts his own s Green Arrow 2 Après un combat éprouvant contre les Outsiders, qui lui révéla le secret de ses origines, Oliver Queen revient à.

FN Corporate Finance Page 1 of 2 Course information –16 the pricing of risk, securities valuation, market efficiency, capital structure, and mergers and acquisitions. It provides students with the tools required for further studies in financial intermediation and investments.

information and signalling through dividend policy. "Incentives to Innovate and Financial Crisis" Journal of Financial Economics (1), Januarypp. "Managerial Autonomy, Allocation of Control Rights, and Optimal Capital Structure" with Arnoud Boot Review of Financial Studies 24(10), Octoberpp.

"Shareholder-Manager Disagreement and Corporate Investment". SMEs in Mauritius may show a different capital structure with limited access to external finance due to the under developed nature of the financial market. What influences SMEs’ capital structure decisions still remains unexplored in the Mauritian context.

This is the focus of the project. Section On one hand – why to use debt financing. In the second stage, we regress each collection of feedback measures on Tobin's q and [2] to see why the information content of dividend and capital structure policies varies across firms.

We expand this quadratic regression model to account for both the potential influence of other firm characteristics on each feedback measure and.

Firm Financing in the Euro Area: How asset risk affects capital structure decisions within the monetary union - Marco Botta - Textbook - Business economics - Investment and Finance. Capital Structure and Firm Value. MM irrelevance MM Diagrams. Without tax, firm value is independent of capital structure.

With Tax debt maximises firm value!!. Debt capacity, fin distress, agency costs, signalling. New BBA4 capital structure topics agency costssignalling. Product market competition.

Behavioural Finance. Finally, in. Capital Structure and Corporate Strategy CHRIS PARSONS and SHERIDAN TITMAN Chapter 14 Bankruptcy and the Resolution of Financial Distress EDITH S. HOTCHKISS, KOSE JOHN, ROBERT M. MOORADIAN and KARIN S. THORBURN PART 4: TAKEOVERS, RESTRUCTURINGS, AND MANAGERIAL INCENTIVES Chapter 15 Corporate Takeovers File Size: 3MB.

This study aims at examining the determinants of debt maturity by estimating the model specified in equation 1: where Maturity is the fraction of long-term debt over total debt.

are a vector of firm characteristics that account for agency costs of : Ghada Tayem. incentives. Moreover, when capital is costly to raise, the combina-tion of tail risk and less-catastrophic (“non-tail”) risk can compli-cate the relationship between capital and risk shifting, making it non-monotonic: although an increase in bank capital from low lev-els tends to deter risk shifting, at even higher levels the bank mayAuthor: Andrew Winton.Capital IQ) rating data as a proxy for corporate credit risk.7 In addition to the corporate data, we also collect country- and industry-speci c data from several other sources, including ve-year sovereign CDS spreads from Markit, and measures of a country’s overall exposureFile Size: KB.International Finance is an important part of financial economics.

It mainly discusses the issues related with monetary interactions of at least two or more countries. International finance is concerned with subjects such as exchange rates of currencies, monetary systems of the world, foreign direct.