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  • 1
    ISSN: 1573-692X
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Type of Medium: Electronic Resource
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  • 2
    ISSN: 1573-692X
    Keywords: capital structure ; capital budgeting
    Source: Springer Online Journal Archives 1860-2000
    Topics: Economics
    Notes: Abstract This paper analyzes the relationship between a firm's capital structure and its information acquisition prior to capital budgeting decisions. It is found that low-growth industries can sustain a large number of levered firms. In these industries, leverage is negatively related to a firm's incentive to acquire information during the capital budgeting process. In contrast, high-growth industries only sustain a small number of levered firms. In these industries, levered firms acquire more information than all-equity financed firms. The model yields empirical predictions regarding the effects of leverage on the expected amount and the volatility of corporate investment. While leverage does not affect firm value, highly levered firms generate a more volatile cash flow than firms with low debt levels.
    Type of Medium: Electronic Resource
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  • 3
    Publication Date: 1994-12-01
    Print ISSN: 0022-3808
    Electronic ISSN: 1537-534X
    Topics: Economics
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  • 4
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    Cologne: University of Cologne, Centre for Financial Research (CFR)
    Publication Date: 2019-01-16
    Description: This paper provides new evidence supporting the rationality of closed-end fund discounts by analyzing the time-series dynamics of individual fund discounts and their relation to portfolio performance and manager turnover. We show that discount changes reflect rational investor learning about fund manager skills, as well as investor anticipation of manager replacement events. Specifically, prior to the replacement of a manager, the fund's discount initially increases as fund performance worsens - for domestic equity funds, the peer-adjusted discount increases by about 3 percent during year -2 (relative to the manager replacement event), which is sizable, compared to the average closed-end fund discount of 5.6 percent at the end of 2002. However, after this initial increase, the discount does not respond to continuing underperformance by the manager, indicating that investors rationally anticipate that the manager will be replaced. Overall, our study demonstrates that a significant rational component exists in closed-end fund discounts.
    Keywords: ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 5
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    Cologne: University of Cologne, Centre for Financial Research (CFR)
    Publication Date: 2019-01-16
    Description: Based on the records of 1183 individual fund managers from 1985 to 2010, we investigate the compensation and discipline mechanisms in the closed-end fund industry and their implications for manager performance and fund premium. We find that managers generating high surplus, as proxied by fund premium, capture rents on their skills by expansions of assets under management and increases in management fees; however, managers with a high discount are not penalized accordingly. Managers with poor NAV performance suffer from asset contractions, but such discipline is insignificant for managers with long tenure. Consistent with manager entrenchment and decreasing returns to scale, NAV performance and premium decline with manager tenure and the size of assets under management. Finally, in support of the notion that adjustments of assets under management and management fees in response to extreme performance break the premium-performance relation, we find that the fund premium responds positively only to the medium-range NAV performance.
    Keywords: ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 6
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    Frankfurt a. M.: Goethe University, Center for Financial Studies (CFS)
    Publication Date: 2017-12-19
    Description: This paper takes a novel approach to estimating bankruptcy costs by inference from market prices of equity and put options using a dynamic structural model of capital structure. This approach avoids the selection bias of looking at firms in or near default and therefore permits theories of ex ante capital structure determination to be tested. We identify significant cross sectional variation in bankruptcy costs across industries and relate these to specific firm characteristics. We find that asset volatility and growth options have significant positive impacts, while tangibility and size have negative impacts. Our bankruptcy cost variable estimate significantly negatively impacts leverage ratios. This negative impact is in addition to that of other firm characteristics such as asset intangibility and asset volatility. The results provide strong support for the tradeoff theory of capital structure.
    Keywords: ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 7
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    Frankfurt a. M.: Goethe University, Center for Financial Studies (CFS)
    Publication Date: 2017-12-19
    Description: Credit risk has become an important factor driving government bond returns. We therefore introduce an asset pricing model which exploits information contained in both forward interest rates and forward CDS spreads. Our empirical analysis covers euro-zone countries with German government bonds as credit risk-free assets. We construct a market factor from the first three principal components of the German forward curve as well as a common and a country-specific credit factor from the principal components of the forward CDS curves. We find that predictability of risk premiums of sovereign euro-zone bonds improves substantially if the market factor is augmented by a common and an orthogonal country-specific credit factor. While the common credit factor is significant for most countries in the sample, the country-specific factor is significant mainly for peripheral euro-zone countries. Finally, we find that during the current crisis period, market and credit risk premiums of government bonds are negative over long subintervals, a finding that we attribute to the presence of financial repression in euro-zone countries.
    Keywords: ddc:330 ; Sovereign bond risk premiums ; Market and credit risk factors ; Financial repression
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
    Type: doc-type:workingPaper
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  • 8
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    Frankfurt a. M.: Goethe University, Center for Financial Studies (CFS)
    Publication Date: 2017-12-19
    Description: We examine the dynamics of assets under management (AUM) and management fees at the portfolio manager level in the closed-end fund industry. We find that managers capitalize on good past performance and favorable investor perception about future performance, as reflected in fund premiums, through AUM expansions and fee increases. However, the penalties for poor performance or unfavorable investor perception are either insignificant, or substantially mitigated by manager tenure. Long tenure is generally associated with poor performance and high discounts. Our findings suggest substantial managerial power in capturing CEF rents. We also document significant diseconomies of scale at the manager level.
    Keywords: G23 ; G34 ; ddc:330 ; Closed-end fund ; Closed-end fund discount ; Managerial rent
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 9
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    Frankfurt a. M.: Goethe University, Center for Financial Studies (CFS)
    Publication Date: 2017-12-19
    Description: This paper uses recent legislation in Austria to establish a link between sovereign reputation and yield spreads. In 2009, Hypo Alpe Adria International, a bank previously co-owned by the regional government of Carinthia, had been nationalized by Austria's central government in order to avoid a default triggering multi-billion Euro local government guarantees. In 2015, special legislation retroactively introduced collective action clauses allowing a haircut on both the bonds and the guarantees while avoiding formal default. We document that legislative and administrative action designed to partly abrogate the guarantees resulted in a loss of reputation, leading to higher yield spreads for sovereign debt. Our analysis of covered bonds uncovers an increase in yield spreads on the secondary market and a deterioration of primary market conditions.
    Keywords: ddc:330
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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  • 10
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    Frankfurt a. M.: Goethe University, Center for Financial Studies (CFS)
    Publication Date: 2017-12-19
    Description: This paper shows that long debt maturities eliminate equityholders' incentives to reduce leverage when the firm performs poorly. By contrast, short debt maturities commit equityholders to such leverage reductions. However, shorter debt maturities also lead to higher transactions costs when maturing bonds must be refinanced. We show that this tradeoff between higher expected transactions costs against the commitment to reduce leverage when the firm is doing poorly motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt.
    Keywords: G3 ; G32 ; ddc:330 ; debt maturity ; optimal capital structure choice
    Repository Name: EconStor: OA server of the German National Library of Economics - Leibniz Information Centre for Economics
    Language: English
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