Three Essays on Long Term Borrowing, Corporate Finance and Exchange Rates PDF Download

Author: Srijana Dhakhwa
Publisher:
ISBN:
Category : Capital movements
Languages : en
Pages : 320

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Author: Haonan Qu
Publisher:
ISBN:
Category :
Languages : en
Pages : 224

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In this dissertation, I explore the interactions between financial markets and real economy activities. In the first chapter, I use the evidence from an emerging market to study how the development of its financial system could affect activities in its real economy. In the second chapter, I look at excess returns in the US treasury bond market and try to understand the economic fundamentals driving the risk premia. In the final chapter, I examine corporate financing decisions using publicly traded firms in the US. The patterns in their financing decision can be partially explained by the information embedded in the financial market. To what extent the development of sophisticated financial markets benefits emerging economies is an open question. In the first chapter, I use a unique data set on all currency derivative transactions by non-financial firms in 2006 and 2007 in Colombia to provide new evidence on one aspect of this question: the effect of participation in derivatives markets on firm capital formation. I use a difference-in-difference propensity score matching approach in order to control for self selection and common trends. I find a large positive effect: firms using currency derivatives invest on average 5.7 percent more, which is about 40 percent of their average investment rate. This investment-enhancing effect is entirely driven by firms taking long positions (i.e. dollar buying) in the derivatives market. For firms taking short positions, typically exporters, the use of derivatives does not have any discernible impact on investment. One possible explanation is the asymmetry in the impact of the exchange rate movement on exporting and importing firms. In the second chapter, I propose a latent variable approach within a present value model to estimate the expected short rate changes and bond risk premia. This approach aggregates information contained in the history of yield spreads and short rate changes to predict future bond excess returns and short rate changes. I find that the factor from Cochrane and Piazzesi (2005) fails to predict bond excess returns when I consider different maturities of the underlying short rate. From the proposed present value model, I find a significant predictable component in short rate changes with R-square ranging from 29 precent to 80 percent, and a moderate R-square about 12 percent for predicting bond excess returns. Both expected short rate changes and bond risk premia have a persistent component, but bond risk premia are more persistent than expected short rate changes. In addition, the bond risk premia become more persistent as I increase the maturity of the underlying short rate. Finally, I explore the source of the time variation in bond risk premia, and find that monetary policy plays an important role. In the third chapter, I document a strongly decreasing time trend in firms' leverage ratio at their IPO years over the period from 1975 to 2006. This trend survives when typical factors are controlled for, including industry fixed effect. Furthermore, I find that firms listed more recently are more adverse to debt financing. A deeper examination shows that the risk associated with firm's operation provides a limited explanation for this finding. However, the underpinnings of the observed pattern of firms' leverage ratios at IPO are still largely unresolved.

Author: Nam Hoang Nguyen
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Author: Martin Shubik
Publisher: MIT Press
ISBN: 9780262693110
Category : Business & Economics
Languages : en
Pages : 472

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This first volume in a three-volume exposition of Shubik's vision of "mathematical institutional economics" explores a one-period approach to economic exchange with money, debt, and bankruptcy. This is the first volume in a three-volume exposition of Martin Shubik's vision of "mathematical institutional economics"--a term he coined in 1959 to describe the theoretical underpinnings needed for the construction of an economic dynamics. The goal is to develop a process-oriented theory of money and financial institutions that reconciles micro- and macroeconomics, using as a prime tool the theory of games in strategic and extensive form. The approach involves a search for minimal financial institutions that appear as a logical, technological, and institutional necessity, as part of the "rules of the game." Money and financial institutions are assumed to be the basic elements of the network that transmits the sociopolitical imperatives to the economy. Volume 1 deals with a one-period approach to economic exchange with money, debt, and bankruptcy. Volume 2 explores the new economic features that arise when we consider multi-period finite and infinite horizon economies. Volume 3 will consider the specific role of financial institutions and government, and formulate the economic financial control problem linking micro- and macroeconomics.

Author: Byong-Ju Lee
Publisher: Stanford University
ISBN:
Category :
Languages : en
Pages : 132

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This thesis consists of three essays on international finance. The first essay is "Exchange rates and Fundamentals". A new open interest rate parity condition that takes account of economic fundamentals is developed from stochastic discount factors (SDFs) of two countries. Through this parity condition, business cycles or fundamentals are linked to exchange rates. Key empirical findings from this parity condition are as follows. First, this model beats the random walk hypothesis: economic fundamentals explain exchange rate movements for high interest rate currencies. Exchange rates of low interest rate currencies act like a random walk because they are less correlated with fundamentals owing to their low risk. For example, U.S. business cycles explain the direction of changes in exchange rates against the dollar. The same thing is true for Japan. Second, this model resolves the forward premium puzzle: the forward premium puzzle is not a general characteristic as regarded in previous studies. It happens when the risk awareness of investors is low, during economic expansions and for low risk currencies. The second essay is "Carry Trade and Global Financial Instability". Carry trade, an opportunistic investment strategy that takes advantage of interest rate differential across countries, is identified the cause of the large-scale depreciations of peripheral currencies in the later half of 2008. A simultaneous equations model, which is derived from a conceptual partial equilibrium model for a local foreign exchange market, is estimated from a cross-sectional sample. The results suggest that the larger appreciation of the yen than the dollar was brought about by a lack of the local supply of the yen rather than a more severe crunch of yen credits. The third essay is "The Economic Origin of Letters of Credit". This essay discusses the economic origin of letters of credit, an instrument widely used in international trade. A game theoretical analysis shows that letters of credit improve efficiency in trade settlements, increasing returns in trade. A few notable facts on letters of credit are discussed. First, the new institution is adopted by merchant banks to maximize their profits and in the process, an improvement in efficiency of international transactions is obtained. Second, the organization established by the legacy institution, bills of exchange, played a critical role in adopting the new institution. Third, the legal enforcement is not essential in this economic institution. Finally, two drivers are identified that improve efficiency of transactions: concentration and projection.

Author: Mazen Hammady Brho
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 164

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The objective of this three-essay dissertation are to develop a weighted cash conversion cycle (CCC_EVA) and empirically investigate its commensurability of corporate financial performance. Essay 1, titled "Supply Chain Finance: Developing a Weighted Cash Conversion Cycle to Proxy Operations Liquidity", presents the development and supporting empirical evidence of CCC_EVA measurability of operations liquidity. This essay shows the processes of scaling capital intensity and financing cost into time intervals captured by the traditional metric. Specifically, this essay investigates how accurately CCC_EVA indexes operations liquidity captured working capital, operational cash flow-to-modified working capital ratio, and quick ratio. The sample used in this essay consists of 4,333 firm-year observations of publicly traded industry classified firms listed on the U.S. exchange markets. The results of the empirical testing have statistically supported the essay hypotheses, that is CCC_EVA is a more accurate proxy of operations liquidity in comparison to the traditional metric (CCC_D). Essay 2, titled "Supply Chain Finance: Weighted Cash Conversion Cycle and Corporate Finance", expands the first essay findings by accounting for well-known financial measurements. Specifically, this essay examines the relations between CCC_EVA and operations liquidity and leverage, Market value, operating profitably and growth, and long-term asset management efficiency. This essay paper has used a sample of 24,127 firm-year observations of publicly traded firms listed on U.S. exchange markets from 1994 to 2016. The results support and extend the previous findings, that is CCC_EVA is a robust proxy of operations liquidity and can enhance its resiliency; maximize market value of corporate equity and debt; identify strategies to improve corporate profitability and credibility. Essay 3, titled "Supply Chain Finance: An Advanced Weighted Cash Conversion Cycle", advances the accuracy of CCC_EVA by differentiating between cash and credit forms of corporate sales and purchase transactions, and introducing operational cash flow into CCC_EVA. The advanced metric allows differences in inventory carrying cost and capital costs to be sources of the economic value added (EVA). Within a longitudinal case-based approach, the results show that the advanced metric is a potential decision tool to leverage on supply chain diversity and capitalize on its relation dynamics. Specifically, the implantation of the advanced metric can minimize the overall SC weighted average cost of capital (WACC) and its inventory carry cost (ICC); boost EVA of SC activities; and hedge liquidity risk. This three-essay dissertation has addressed the academic skepticism about CCC_D's commensurability by developing an advanced weighted metric (CCC_EVA) that accounts for capital intensity and financing cost. The three essays provide evidence of CCC_EVA testability and its adequacy of presenting corporate financial performance. The findings of this dissertation contribute to both industry and academia. Industry practitioners can implement CCC_EVA as a strategic decision instrument to balance SC liquidity distribution and resilience; hedge default risk of hidden deep-tier SC partners; increase overall SC profitability and creditability; boost equity value; and reveal existing opportunities of SC's EVA sources. Academically, these three essays initiate a fundamental and much-needed step for scholars to advance a systematically published metric, which can contribute to the implications, innovations, and knowledge of the SCF domain.

Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 304

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Author:
Publisher:
ISBN:
Category : Dissertation abstracts
Languages : en
Pages : 776

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Author: Ira Krasteva Petrova
Publisher:
ISBN:
Category : Banks and banking
Languages : en
Pages : 346

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Author: Robert N. McCauley
Publisher: MIT Press
ISBN: 9780262263665
Category : Business & Economics
Languages : en
Pages : 442

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An entertaining summary of the broad reshaping of U.S. corporate finance in the last decade and a half. The late 1980s saw a huge wave of corporate leveraging. The U.S. financial landscape was dominated by a series of high-stakes leveraged buyouts as firms replaced their equity with new fixed debt obligations. Cash-financed acquisitions and defensive share repurchases also decapitalized corporations. This trend culminated in the sensational debt-financed bidding for RJR-Nabisco, the largest leveraged buyout of all time, before dramatically reversing itself in the early 1990s with a rapid return to equity.This entertaining summary of the broad reshaping of U.S. corporate finance in the last decade and a half looks at three major issues: why corporations leveraged up in the first place, why and how the leverage wave came to an end, and what policy lessons are to be drawn.Using the Minsky-Kindleberger model as a framework, the authors interpret the rise and fall of leveraging as a financial market mania. In the course of chronicling the return to equity in the 1990s, they address a number of important corporate finance questions: How important was the return to equity in relieving corporations' debt burdens? How did the return to equity affect the ability of young high-tech firms to finance themselves without selling out to foreign firms?