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Author: Lorenzo Sasso Publisher: Kluwer Law International B.V. ISBN: 9041148515 Category : Law Languages : en Pages : 248
Book Description
Despite a clear distinction in law between equity and debt, the results of such a categorization can be misleading. The growth of financial innovation in recent decades necessitates the allocation of control and cash-flow rights in a way that diverges from the classic understanding. Some of the financial instruments issued by companies, so-called hybrid instruments, fall into a grey area between debt and equity, forcing regulators to look beyond the legal form of an instrument to its practical substance. This innovative study, by emphasizing the agency relations and the property law claims embedded in the use of such unconventional instruments, analyses and discusses the governance regulation of hybrids in a way that is primarily functional, departing from more common approaches that focus on tax advantages and internal corporate control. The author assesses the role of hybrid instruments in the modern company, unveiling the costs and benefits of issuing these securities, recognizing and categorizing the different problem fields in which hybrids play an important role, and identifying legal and contracting solutions to governance and finance problems. The full-scale analysis compares the U.K. law dealing with hybrid instruments with the corresponding law of the most relevant U.S. jurisdictions in relation to company law. The following issues, among many others, are raised: decisions under uncertainty when the risks of opportunism of the parties is very high; contract incompleteness and ex post conflicts; protection of convertible bondholders in mergers and acquisitions and in assets disposal; use of convertible bonds to reorganise and restructure a firm; timing of the conversion and the issuer’s call option; majority-minority conflict in venture capital financing; duty of loyalty; fiduciary duties to preference shareholders; and financial contract design for controlling the board’s power in exit events. Throughout, the analysis includes discussion, comparison, and evaluation of statutory provisions, existing legal standards, and strategies for protection. It is unlikely that a more thorough or informative account exists of the complex regulatory problems created by hybrid financial instruments and of the different ways in which regulatory regimes have responded to the problems they raise. Because business parties in these jurisdictions have a lot of scope and a strong incentive to contract for their rights, this book will also be of uncommon practical value to corporate counsel and financial regulators as well as to interested academics.
Author: Lorenzo Sasso Publisher: Kluwer Law International B.V. ISBN: 9041148515 Category : Law Languages : en Pages : 248
Book Description
Despite a clear distinction in law between equity and debt, the results of such a categorization can be misleading. The growth of financial innovation in recent decades necessitates the allocation of control and cash-flow rights in a way that diverges from the classic understanding. Some of the financial instruments issued by companies, so-called hybrid instruments, fall into a grey area between debt and equity, forcing regulators to look beyond the legal form of an instrument to its practical substance. This innovative study, by emphasizing the agency relations and the property law claims embedded in the use of such unconventional instruments, analyses and discusses the governance regulation of hybrids in a way that is primarily functional, departing from more common approaches that focus on tax advantages and internal corporate control. The author assesses the role of hybrid instruments in the modern company, unveiling the costs and benefits of issuing these securities, recognizing and categorizing the different problem fields in which hybrids play an important role, and identifying legal and contracting solutions to governance and finance problems. The full-scale analysis compares the U.K. law dealing with hybrid instruments with the corresponding law of the most relevant U.S. jurisdictions in relation to company law. The following issues, among many others, are raised: decisions under uncertainty when the risks of opportunism of the parties is very high; contract incompleteness and ex post conflicts; protection of convertible bondholders in mergers and acquisitions and in assets disposal; use of convertible bonds to reorganise and restructure a firm; timing of the conversion and the issuer’s call option; majority-minority conflict in venture capital financing; duty of loyalty; fiduciary duties to preference shareholders; and financial contract design for controlling the board’s power in exit events. Throughout, the analysis includes discussion, comparison, and evaluation of statutory provisions, existing legal standards, and strategies for protection. It is unlikely that a more thorough or informative account exists of the complex regulatory problems created by hybrid financial instruments and of the different ways in which regulatory regimes have responded to the problems they raise. Because business parties in these jurisdictions have a lot of scope and a strong incentive to contract for their rights, this book will also be of uncommon practical value to corporate counsel and financial regulators as well as to interested academics.
Author: Ryoonhee Kim Publisher: ISBN: Category : Languages : en Pages :
Book Description
Capital structure and corporate governance are the important areas that represent salient part of corporate finance research. By studying various aspects of the two areas, this study attempts to deepen our understanding of the two. First, this study provides both a theoretical model and empirical evidence on the interaction between capital structure and managerial incentive compensation (one of key measures of corporate governance). Researchers acknowledge that the two interact to each other and the interaction should affect their optimal determination, but few studies formally consider the interaction. This study shows that due to the interaction through agency conflicts, key firm characteristics that represent agency costs affect leverage and managerial incentive compensation in opposite directions. After controlling for the opposite interactions, the two are shown to be positively related. Second, this study provides empirical evidence on the interaction between financial structure and product market performance by examining business group affiliated firms. The firms that are affiliated to a business group is not only affected by their own financial position, but also affected by the position of business groups which the firms belong to. The empirical investigation suggests that affiliated firms lose market shares to their rivals in their product market when their business group is financially weak due to high group leverage. Third, this study examines whether special governance structure of business groups is actually beneficial to the groups0́9 member firms. The study exploit unique dataset of firms that were once stand alone, but later acquired by business groups. The empirical methodology we employ can account for the fact that the firms which are acquired by business groups can be very different from other firms which are not acquired. The findings from matching estimator suggest that performance increase of the acquired firms is significantly greater than the performance of matched stand alone firms, implying that business groups are actually helping their affiliated firms to perform better than stand alone firms.
Author: Yamini Agarwal Publisher: John Wiley & Sons ISBN: 111820316X Category : Business & Economics Languages : en Pages : 208
Book Description
Inside the risk management and corporate governance issues behind capital structure decisions Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties. Dynamic paradigm shifts and the multi-dimensional operations of firms further complicate the situation. Financial leaders are under constant pressure to outdo their competitors, but how to do so is not always clear. Capital Structure Decisions offers an introduction to corporate finance, and provides valuable insights into the decision-making processes that face the CEOs and CFOs of organizations in dynamic multi-objective environments. Exploring the various models and techniques used to understand the capital structure of an organization, as well as the products and means available for financing these structures, the book covers how to develop a goal programming model to enable organization leaders to make better capital structure decisions. Incorporating international case studies to explain various financial models and to illustrate ways that capital structure choices determine their success, Capital Structure Decisions looks at existing models and the development of a new goal-programming model for capital structures that is capable of handling multiple objectives, with an emphasis throughout on mitigating risk. Helps financial leaders understand corporate finance and the decision-making processes involved in understanding and developing capital structure Includes case studies from around the world that explain key financial models Emphasizes ways to minimize risk when it comes to working with capital structures There are a number of criteria that financial leaders need to consider before making any major capital investment decision. Capital Structure Decisions analyzes the various risk management and corporate governance issues to be considered by any diligent CEO/CFO before approving a project.
Author: Christian Funke Publisher: GRIN Verlag ISBN: 3638284166 Category : Business & Economics Languages : en Pages : 105
Book Description
Diploma Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1,1 (A), European Business School - International University Schloß Reichartshausen Oestrich-Winkel (Endowed-Chairf for Corporate Finance and Capital Markets), language: English, abstract: The idea that the general characteristics of a firm’s ownership structure can affect performance has achieved considerable attention and related research brought forward relatively consistent empirical evidence e.g. on the positive impact of managerial ownership on firm performance. However, the evidence on the relation between ownership and capital structure is less consistent and numerous, although there are good reasons to believe that there may be such a relationship. Since the capital structure irrelevance propositions of MODIGLIANI/MILLER economists have devoted considerable time to studying cross-sectional and time-series variations in capital structure. More recent work following the seminal contribution by JENSEN/MECKLING has employed an agency theory perspective in the search for an explanation of capital structure variations. With this managerial perspective capital structure is not only explained by variations in internal and external contextual factors of the firm, but also by the values, goals, preferences and desires of managers. Corporate financing decisions are influenced by managers’ incentives and the incentives for managers to act opportunistically can be influenced by the ownership structure of the firm. However, most empirical work analyzing a firm’s capital structure in cross-sectional and time-series studies ignores the equity ownership structure as a possible explanatory variable. This can be partly explained by problems associated with the availability of ownership data, when compared to readily available accounting and market data on other relevant variables. Notwithstanding, it entails a problem of model misspecification as omitting a relevant variable may cause misleading empirical conclusions. Additionally, the problem arises that the studies taking ownership structure into account do not bring forward consistent results. They find contradictory evidence without any side clearly dominating the discussion, neither theoretically nor empirically. The objective of this thesis is to contribute to the empirical debate of those two problems by investigating whether the structure of equity ownership can help in explaining cross-sectional variation in capital structure for the case of Germany. Since corporate managers and external block holders are two groups who have considerable influence on a firm’s decisions, this thesis focuses on the effects of managerial share ownership and external block ownership on capital structure.
Author: Li-Kai (Connie) Liao Publisher: ISBN: Category : Languages : en Pages : 41
Book Description
Morellec, Nikolov, and Schürhoff (2012) predict that a self-interested manager prefers a leverage level that is lower than the shareholders' desired level, and effective corporate governance encourages timely capital structure rebalancing. In a U.S. sample during 1996-2008, we confirm that both a higher level of financial leverage and a faster speed of adjustment of leverage toward the shareholders' desired level are associated with a better corporate governance quality as defined by a more independent board featuring CEO-Chairman separation and greater presence of outside directors, coupled with larger institutional shareholding. In contrast, managerial incentive compensation on average discourages use of debt or adjustments toward the shareholders' desired level, consistent with its entrenchment effect. The effect of corporate governance on leverage adjustments is most pronounced when the initial leverage is between the manager's desired level and the shareholders' desired level where the interests of managers and shareholders conflict.
Author: Baliira Kalyebara Publisher: Springer Science & Business Media ISBN: 3642359078 Category : Business & Economics Languages : en Pages : 234
Book Description
The primary contribution of this book is to integrate the important disciplines which simultaneously impact the investment appraisal process. The book presents a study that develops a new approach to investment appraisal which uses a multiple objective linear programming (MOLP) model to integrate the selected disciplines which include capital markets, corporate governance and capital budgeting. The research covers two case studies, one in the e-commerce sector and another in the airline industry in which the above disciplines are integrated. Readers from the areas of corporate governance, regulation, and accounting would find the survey of different approaches and the new integrated optimization approach particularly useful.
Author: Anton Miglo Publisher: Springer ISBN: 3319307134 Category : Business & Economics Languages : en Pages : 266
Book Description
This book focuses on microeconomic foundations of capital structure theory. It combines theoretical results with a large number of examples, exercises and applications. The book examines fundamental ideas in capital structure management, some of which are still not very well understood in the business community, such as Modigliani and Miller’s irrelevance result, trade-off theory, pecking-order theory, asset substitution, credit rationing and debt overhang. Chapters also cover capital structure issues that have become very important following the recent financial crisis. Miglo discusses the ways in which financial economists were forced to look critically at capital structure, as the problems faced by many companies stemmed from their financing policies following the crisis. The book also discusses links between capital structure and firm’s performance, corporate governance, firm’s strategy and flexibility, and covers such topics as life cycle approach to capital structure management, capital structure of small and start-up companies, corporate financing versus project financing and examples of optimal capital structure analyses for different companies. This comprehensive guide to capital structure theory will be of interest to all students, academics and practitioners seeking to understand this fast-developing and critical area of business management.
Author: Stefan Detscher Publisher: GRIN Verlag ISBN: 3638842401 Category : Business & Economics Languages : en Pages : 76
Book Description
Research Paper (undergraduate) from the year 2003 in the subject Business economics - Investment and Finance, grade: 2,0 (B), European Business School - International University Schlo Reichartshausen Oestrich-Winkel (Corporate Finance and Capital Markets), language: English, abstract: This book examines the links between corporate finance and the theory of the firm. As a basis for this analysis, theoretical foundations in corporate finance and the theory of the firm are provided. Furthermore, current research on the theory of the firm and corporate finance for the recently emerged type of firm of the human-capital intensive firm is presented. The most significant part of the analysis is the evaluation of the interrelation between corporate finance and the theory of the firm using a 3x3 matrix. This matrix compares three important theoretical frameworks of the firm (the firm as a nexus of contracts, as a collection of growth options and as a collection of assets) with three major fields of corporate finance (capital structure, corporate governance and valuation). This assessment is done for the traditional asset-intensive industrial firm, one of two basic types of firms in today's economy. For giving an additional insight into current research, the recently emerged human-capital intensive firm is shortly described in comparison to the traditional asset-intensive firm, and implications for corporate finance for this new type of firm are explained. As a conclusion, three major results can be stated: firstly, the theory of the firm definitely influences corporate finance for all described views of the firm, and it is thus an important basis for corporate finance. This fact makes it necessary to consider the underlying issue of the theory of the firm for each problem in corporate finance. Secondly, different views of the theory of the firm have different implications for corporate finance. For example, the appropriate valuation method depends on the considered view of t
Author: Sanjai Bhagat Publisher: MIT Press ISBN: 9780262524384 Category : Business & Economics Languages : en Pages : 138
Book Description
An investigation of the relationships among takeovers, takeover defenses, management turnover, corporate performance, corporate capital structure, and corporate ownership performance.
Author: Christopher Parsons Publisher: Now Publishers Inc ISBN: 160198202X Category : Business & Economics Languages : en Pages : 107
Book Description
Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.
Author: Lorenzo Sasso
Author: Lorenzo Sasso
Author: Ryoonhee Kim
Author: Yamini Agarwal
Author: Christian Funke
Author: Li-Kai (Connie) Liao
Author: Baliira Kalyebara
Author: Anton Miglo
Author: Stefan Detscher
Author: Sanjai Bhagat
Author: Christopher Parsons