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Author: Nemiraja Jadiyappa
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
Prior literature has explored the impact of the type of financial system, (bank versus stock market based), on the capital structure of firms. In this study, we examine the influence of the structure of the debt market, (arms-length versus relationship-based), on the capital structure, (debt maturity choices), of firms in a cross-country approach involving 36 countries. We assess the importance of the bond market in a given economy by examining cross-country differences in leverage and debt maturity ratios. We also examine the effect of legal systems on this relationship between the bond market and the firm's capital (debt maturity) structure. Our results show a negative association between firm total leverage and bond market capitalization. However, the association turns positive in the case of long-term leverage. In the case of short-term debt, the banking system is found to have a significant and positive impact. We also find a significant impact of legal tradition on the association between bond markets and leverage. In general, the relation is positive in common law countries and negative in civil law countries for long-term debt. Firm size appears to be an important factor which determines the direction of association between bond markets and firm leverage. Irrespective of the legal tradition, the impact of bond markets is positive for large firms and negative for small firms.Furthermore, we find significant impact of bond markets on the debt maturity structure of firms as well. Supporting evidence is also found for the growth hypothesis: growth options are observed to bear a negative association with long-term leverage and debt maturity ratios only in those countries where bond markets are well developed.
Author: Nemiraja Jadiyappa
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
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Book Description
Prior literature has explored the impact of the type of financial system, (bank versus stock market based), on the capital structure of firms. In this study, we examine the influence of the structure of the debt market, (arms-length versus relationship-based), on the capital structure, (debt maturity choices), of firms in a cross-country approach involving 36 countries. We assess the importance of the bond market in a given economy by examining cross-country differences in leverage and debt maturity ratios. We also examine the effect of legal systems on this relationship between the bond market and the firm's capital (debt maturity) structure. Our results show a negative association between firm total leverage and bond market capitalization. However, the association turns positive in the case of long-term leverage. In the case of short-term debt, the banking system is found to have a significant and positive impact. We also find a significant impact of legal tradition on the association between bond markets and leverage. In general, the relation is positive in common law countries and negative in civil law countries for long-term debt. Firm size appears to be an important factor which determines the direction of association between bond markets and firm leverage. Irrespective of the legal tradition, the impact of bond markets is positive for large firms and negative for small firms.Furthermore, we find significant impact of bond markets on the debt maturity structure of firms as well. Supporting evidence is also found for the growth hypothesis: growth options are observed to bear a negative association with long-term leverage and debt maturity ratios only in those countries where bond markets are well developed.
Author: Jennifer Blouin
Publisher: International Monetary Fund
ISBN: 1484384644
Category : Business & Economics
Languages : en
Pages : 37
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Book Description
This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential data on the internal and total leverage of foreign affiliates of US multinationals, we find that thin capitalization rules significantly affect multinational firm capital structure. Specifically, restrictions on an affiliate’s debt-to-assets ratio reduce this ratio on average by 1.9%, while restrictions on an affiliate’s borrowing from the parent-to-equity ratio reduce this ratio by 6.3%. Also, restrictions on borrowing from the parent reduce the affiliate’s debt-to-assets ratio by 0.8%, which shows that rules targeting internal leverage have an indirect effect on the overall indebtedness of affiliate firms. The impact of capitalization rules on affiliate leverage is higher if their application is automatic rather than discretionary. Furthermore, thin capitalization regimes have aggregate firm effects: they reduce the firm’s aggregate interest expense but lower firm valuation. Overall, our results show than thin capitalization rules, which thus far have been understudied, have a substantial effect on the capital structure within multinational firms, with implications for the firm’s market valuation.
Author: Dragana Cvijanovic
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper examines the impact of real estate prices on firm capital structure decisions. For a typical US listed company, a one standard deviation increase in predicted value of firm pledgeable collateral translates into a 3 percentage points increase in firm market leverage ratio. The identification strategy employs a triple interaction of MSA level land supply elasticity, real estate prices and a measure of a firm's real estate holdings as an exogenous source of variation in firm collateral values. Firms significantly change their debt structure: they increase their bank but also arm's length financing and they decrease more expensive types of debt in response to collateral value appreciation. These results indicate the importance of collateral values in mitigating potential informational imperfections.
Author: Jean-Pierre Casey
Publisher: CEPS
ISBN: 9290795964
Category : Business & Economics
Languages : en
Pages : 142
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Book Description
Assessing regulatory measures taken at the EU level that impact European bond markets, this book examines the desirability, utility, and feasibility of certain policy measures.
Author: R. Glenn Hubbard
Publisher: University of Chicago Press
ISBN: 0226355942
Category : Business & Economics
Languages : en
Pages : 354
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Book Description
In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Author: Ronald W. Masulis
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 168
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Book Description
Author: Robert Danon
Publisher: Kluwer Law International B.V.
ISBN: 9403540354
Category : Law
Languages : en
Pages : 1053
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Book Description
It is well known that intercompany financing arrangements have become increasingly subject to scrutiny in contexts of applying transfer pricing and anti-tax avoidance-related rules. With contributions by more than 50 leading global transfer pricing and international tax experts from law firms, multinational enterprises, academia, and tax administrations, this book provides unparalleled insights into the application of the Arm’s Length Principle to different types of financial transactions, application of anti-avoidance rules to various intra-group financial arrangements as well as the business value creation process and the dispute management landscape that underlie intra-group financial transactions. With in-depth analysis of the legislation and market developments that fuel the diverse range of financing options available to market participants – and loaded with practical examples and case studies that cover the legal and economic considerations that arise when analysing intra-group finance – the contributors examine such topics and issues as the following: national anti-abuse rules applicable to financial transactions; tax treaty issues; role of credit ratings and impact of implicit support; loans, cash pooling, financial guarantees; transfer pricing aspects of performance guarantees; ‘mezzanine’ financing; considerations for crypto financing; impact of crises situations such as COVID-19; how treasury operations can be structured in a group and the decision-making process involved; how hedges offset or mitigate risks; how to apply the arm’s length principle to factoring and captive insurance transactions; comparability analysis for various transactions; special considerations for transactions carried out by a permanent establishment; EU state aid and its interaction with transfer pricing rules; dispute prevention and resolution tools under the OECD, UN, and EU frameworks; and developing countries’ perspectives, focusing on Brazil, India, and South Africa. Given the challenges facing taxpayers and tax authorities alike, this book will prove an immeasurably valuable reference guide to support tax practitioners, tax administrations, and tax scholars in developing standards and policies in dealing with intra-group financing issues.
Author: Victoria Krivogorsky
Publisher: Routledge
ISBN: 1315468638
Category : Business & Economics
Languages : en
Pages : 206
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Book Description
Financial globalization paired with the relaxation of constraints on capital flows between countries before the 2008 crisis, increased merger activities among the World’s largest stock exchanges. The financial crisis of 2008 had a severe impact on the development of equity markets, corporate financial stability, and corporate governance, and a multi-step approach is needed to fully appreciate the causes and effects of this event. This book engages the separate strands of literature to advance a more holistic understanding of whether and how the national institutional environments in selected countries around the world has been changed after the crisis. Institutions and Accounting Practices after the Financial Crisis: International Perspective sets out a framework for the analysis of institutional environments and accounting practices in in selected countries around the world during the pre-crisis period, followed by an examination of the impact of the crisis. It scrutinizes the changing roles of debt and equity markets; the shift in accounting practices and capital financing choices due to the economic downturn; and the lessons that can be obtained from the financial crisis, while considering the institutional architecture of international business environments. This ongoing process of integration and globalization increases interdependence between world markets, and allows shocks to propagate across national and continental lines, making the understanding of international markets vitally important to American investors. Aimed at primarily researchers, academics and students in the fields of international accounting, management and finance, Institutions and Accounting Practices after the Financial Crisis: International Perspective will additionally be of value to practitioners and policy makers, supplying them with information regarding the changes in accounting practices and risk evaluation due to the crisis.
Author: Asian Development Bank
Publisher: Asian Development Bank
ISBN: 9292578448
Category : Business & Economics
Languages : en
Pages : 69
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Book Description
The Asian Bond Markets Initiative (ABMI) was launched in December 2002 by the Association of Southeast Asian Nations (ASEAN) and the People’s Republic of China, Japan, and the Republic of Korea---collectively known as ASEAN+3 to strengthen financial stability and reduce the region’s vulnerability to the sudden reversal of capital flows. This paper also provides recommendations for addressing new sources of market volatility and other challenges within and outside the framework of the Asian Bond Markets Initiative.
Author: Christopher Parsons
Publisher: Now Publishers Inc
ISBN: 160198202X
Category : Business & Economics
Languages : en
Pages : 107
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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.
