Author: Haekwon LeePublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
Three Essays on Lending and Corporate Debt Structure
Author: Haekwon LeeThree Essays on Corporate Debt Financing
Author: Mahsa Somayeh KavianiPublisher:
ISBN:
Category :
Languages : en
Pages : 167
Book Description
In the first of three essays, we study the relationship between corporate debt structures and the strength of creditor rights. Firms use a more concentrated debt-type structure as a reaction mechanism to stronger creditor rights. We show that managers form more concentrated debt structures in response to stronger creditor rights in order to first, reduce bankruptcy costs and second, to provide more monitoring incentives for creditors. Across 46 countries, we document that firms have more concentrated debt-type structures in countries with stronger creditor rights. Based on an examination of the cross-sectional heterogeneity of firms to different creditor rights regimes, we confirm our two proposed mechanisms. This study extends the literature of debt structure to an international setting and is the first to document the effect of cross-country legal and institutional determinants on the choice of debt structures. In the second essay, we investigate how uncertainty about economic policies influence corporate credit spreads. We find a large and positive association between corporate credit spreads and a news-based index of policy uncertainty. We document that a one standard deviation increase in policy uncertainty results in 25 basis points increase in the credit spreads of corporate bonds controlling for bond, firm and macro-economic variables. We find that the influence of policy uncertainty on corporate credit spreads differs across firms and is more pronounced for firms with higher investment irreversibility and dependence on government spending. We also document a larger impact of policy uncertainty during economic recessions. Our results show that not only firm-level default probabilities, but also bond-CDS bases increase in response to elevated policy uncertainty. The third and final essay empirically measures the financial and economic costs (benefits) to firm value associated with deteriorations or improvements in the firm’s credit quality. We document that firms incur economically large and statistically significant costs to their values following credit-rating deteriorations. Consistent with an asymmetric effect, we find significant but smaller firm-value benefits associated with credit-rating upgrades. The financial costs to a firm’s market value associated with each notch downgrade to the investment and speculative grade categories are 7.1% and 14.8%, respectively, and these costs are generally larger than the economic costs to the firm value from credit rating downgrades. Using a continuous KMV distance to default model, we conclude that deteriorations (improvements) in a model-generated credit rating quality can also adversely (positively) affect firm value. Our findings have implications for corporate financing and leverage decisions, and for the unresolved underleverage puzzle (Graham, 2001).
Three Essays on the Corporate Debt Choice
Author: Matteo P. ArenaPublisher:
ISBN:
Category : Corporate debt
Languages : en
Pages :
Book Description
This dissertation examines the determinants of the corporate debt choice between different forms of debt financing and different countries. By examining the most extensive sample of U.S. debt issues to date, Essay 1 shows that firms that issue 144A debt are significantly different from firms that privately place non-bank debt without using the 144A rule. I also find that traditional private placements rather than bank loans are the favorite debt source for firms with good credit quality that cannot access the public market because of flotation costs and information asymmetry. Essay 2 examines how governance provisions that affect the cost of debt are related to the corporate debt choice. I find that firms with fewer takeover defenses and larger blockholder ownership are more likely to issue private debt. This result is consistent with the hypothesis that private debt claimants can reduce the expected negative impact of takeovers on debtholder value by enforcing stricter covenants or by renegotiating debt in case of takeover. Essay 3 examines the external debt financing choices of multinational firms by using a unique international dataset of firm-level debt offerings. I show that tax-based incentives, country-specific investor preferences, and difference in legal regimes across countries influence multinational firms in their debt location choice.
Three Essays on Corporate Debt, Capital Structure and Managerial Entrenchment
Author: Hao WangPublisher:
ISBN:
Category : Corporations
Languages : en
Pages : 276
Book Description
"In the third essay, we develop a valuation model that simultaneously captures credit risk and interest rate risk, and apply it to study the valuation of putable corporate bonds. We ask what risks put features provide insurance against in practice - credit risk, liquidity risk or interest rate risk - and to what degree? We find that they reduce the components of all three risks in bond spreads. The most important, perhaps surprisingly is default or spread risk, followed by term structure risk. The reduction in the liquidity component is present but rather small." --
Three essays on corporate investments and debt financing
Author: Nam Hoang NguyenThree essays on corporate debt policy
Author: Glenn E. MorganPublisher:
ISBN:
Category : Corporations
Languages : en
Pages : 250
Book Description
Three Essays on Capital Structures Determinants
Author: Hosein MalekiPublisher:
ISBN:
Category :
Languages : en
Pages : 175
Book Description
The first essay studies the influence of credit ratings on the time-series evolution of corporate capital structures. We show that better rated firms have significantly more stable leverage ratios over time. By comparing firms across the investment-grade cut-off, we conclude using treatment effects estimation, that assignment to more stable rating classes leads to more stable capital structures over time. Extending this study across the whole range of ratings, we show that a one standard deviation improvement in credit-rating quality can reduce the leverage hazard ratio by more than 70%. In alternative investigations, rated firms tend to have largely more stable leverage ratios compared to not-rated firms. Matching firms based on their propensity to have credit ratings, rated firms take between 1.5 and 9 years longer to change their leverage ratios to the same levels as their not-rated counterparts. Our results are robust to the choice of different time frames and variety of controls. They extend the literature of the effects of credit ratings on capital structures by highlighting the importance of credit ratings on the long-run financing behaviors of firms. The second essay studies the stability of various debt-structure dimensions. Survival and long-run clustering analyses are used to assess the stability of debt-rank orderings, debt heterogeneity and main debt type(s). Firms only maintain stability in their main debt type, while frequently changing the weights and priorities of other debt types, heterogeneity indexes and rank orderings. While all debt structure metrics are less stable with the assignment of a credit rating, the effect on the stability of the main debt type is minor. Firms with higher tax rates, market leverages and cash flow volatilities exhibit higher stability in their debt structures. The final essay investigates how the optimal corporate debt maturity is influenced by the strength of creditor rights and the efficiencies of contract enforcement mechanisms. Using a correlated random effects specification, we find that across 42 countries stronger creditor rights are associated with shorter corporate debt maturities while greater contract enforcement leads to longer maturities. These empirical results are consistent with the differing effects of creditor rights and contract enforcement on the choice of corporate maturity predicted by our model. Our results are robust to using different measures of debt maturity, individual components of creditor rights and different measures of contract enforcement. Our results are mostly driven by developed country debt and hold with the inclusion of various controls.
Three Essays in Empirical Corporate Finance
Author: Shage ZhangPublisher:
ISBN:
Category : Chief executive officers
Languages : en
Pages : 200
Book Description
Three Essays on International Loan Syndications
Author: Claudia ChampagnePublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
This thesis consists of three essays. The first essay (thesis chapter two) examines the relation between the terms of loans and the borrower's cross-listed situation for samples (un)differentiated by the state of economic development of the home country of the non-U.S. borrower and the distribution method. An important contribution is made to the cross-listing and capital structure literatures by providing evidence that the net benefit from being cross-listed for one debt component of the cost of capital (i.e., private corporate loans) depends upon whether or not the loan is syndicated. All else held equal, foreign borrowers that are cross-listed directly in the U.S. [U.K.] obtain loans with lower spreads [higher amounts] only for non-syndicated loans. Compared to their developed country counterparts, borrowers from emerging economies pay lower spreads and receive higher amounts and longer maturities on non-syndicated loans if cross-listed via Depositary Receipts (American or Global). These favorable effects for cross-listed borrowers are negated or become unfavorable if the loans are syndicated. The second essay (thesis chapter three) studies alliances between financial institutions in the syndicated loan market and finds that the odds of a current syndicate relationship between two lenders depend upon their previous alliances. For example, the odds are significantly higher [lower] and strongest for a current lead-participant relationship with a continuation [reversal] of their previous roles. Specifically, the odds are nearly four times higher when the two lenders have been allied in the previous five years and more than twice higher for every standard deviation increase in the relative number of past alliances. The strength of lead-participant syndicate relationships between two lenders with same-ordered roles is most sensitive to the lead bank's reputation and informationally opaque lenders tend to have stronger relationships with lead banks. Lenders appear to exhibit home bias in their syndicate alliances since ongoing relationships are stronger with domestic counterparts. The third essay (thesis chapter four) examines the impact of past syndicate alliances on the consolidation of financial institutions. The odds of a M & A between two lenders increases when both parties co-participated in previous syndicated loans and with the intensity of such participations during the five-year period prior to the M & A. The impact is higher for international M & As, for cross-industry alliances, and when the acquirer and target are participant and lead, respectively, in the common syndicate relationships. The odds of a particular lender being a target also decreases with increases in the target's leverage and ROE, and increases with increases in the target's size and growth opportunities. The significantly lower short- and long-term performances for both acquirers and targets previously co-involved in past syndicated loans disappear in the presence of various control variables. These control variables account for the less frequent use of cash payment, the greater incidence of divestitures and the higher percentage of shares acquired when the merging parties were co-involved in past loan syndications.
Essays in Corporate Financing and Investment Decisions
Author: Hoang Van VuPublisher:
ISBN:
Category :
Languages : en
Pages : 310
Book Description
The evolution of corporate debt markets in recent decades, especially short-term debt facilities and bank debt, has made funding more accessible for corporate borrowers. On the other hand, the changing environment of debt markets also creates new challenges for corporate borrowers. First, as the debt maturity structure has become shorter, companies face higher liquidity pressure. Second, since banks also increasingly rely on short-term wholesale funding, the maturity mismatch of bank assets and liabilities has widened, further increasing economy-wide liquidity risk. These problems were illustrated by the most recent liquidity crisis that lasted from 2007 to 2009. Understanding the implications of borrowing using short-term debt therefore is crucial for the modern corporate finance. Moreover, the issues regarding the maturity mismatch of the banking sector imply that fluctuations in bank credit might increase, as banks become more sensitive to liquidity constraints. This thesis explores a number of issues regarding the use of short-term debt by non-financial companies, as well as the implications of fluctuations in bank credit for corporate financial and investment policies. The thesis contains three empirical research essays, presented individually in Chapters 2, 3 and 4. The first essay investigates the implications of debt maturity structure on corporate investment activities in the presence of firm specific default risk. The second and the third essays examine the implications of bank credit cycles on corporate activities. Essay 2 studies the effect of bank credit cycles on firms' choice of external financing issues, whereas Essay 3 examines the effect of bank credit on corporate liquidity management policies and the spending on different types of investment.