The Capital Structure Decisions of New Firms Robb, Alicia M.; Robinson, David T.
Review of financial studies/The Review of financial studies,
01/2014, Letnik:
27, Številka:
1
Journal Article
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We study capital structure choices that entrepreneurs make in their firms' initial year of operation, using restricted-access data from the Kauffman Firm Survey. Firms in our data rely heavily on ...external debt sources, such as bank financing, and less extensively on friends-and-family-based funding sources. Many startups receive debt financed through the personal balance sheets of the entrepreneur, effectively resulting in the entrepreneur holding levered equity claims in their startups. This fact is robust to numerous controls, including credit quality. The reliance on external debt underscores the importance of credit markets for the success of nascent business activity.
This paper provides the first credible evidence on the economic value of “green buildings” derived from impersonal market transactions rather than engineering estimates. We analyze clusters of ...certified green and nearby buildings, establishing that “rated” buildings command substantially higher rents and selling prices than otherwise identical buildings. Variations in premiums are systematically related to energy-saving characteristics. Increased energy efficiency is associated with increased selling prices -- beyond the premiums paid for a labeled building. Evidence suggests that the intangible effects of the label itself may also play a role in determining the values of green buildings in the marketplace. (JEL G31,M14,Q52,R33)
We compare various bank capital regulation regimes using a dynamic equilibrium model of relationship lending in which banks are unable to access the equity markets every period and the business cycle ...determines loans' probabilities of default. Banks hold endogenous capital buffers as a precaution against shocks that impair their future lending capacity. We find that Basel II is more procyclical than Basel I but makes banks safer, and it is generally superior in welfare terms. For high social costs of bank failure, the optimal capital requirements are higher but less cyclically varying, like those currently targeted by Basel III.
This paper examines racial and ethnic differences in high-cost mortgage lending in seven diverse metropolitan areas from 2004 to 2007. Controlling for credit score and other risk factors, ...AfricanAmerican and Hispanic borrowers are 103% and 78% more likely to receive high-cost mortgages for home purchases. Alarge part of the increase is attributable to sorting across lenders (55%-65%), and this, in turn, can be largely accounted for by the lender’s ex post foreclosure risk. The remaining within-lender differences are also concentrated in high-risk lenders, revealing the central role of these institutions in explaining market-wide racial and ethnic differences.
The quality of the match between students and schools affects learning, but little is known about the magnitude of these effects or how they respond to changes in market structure. I develop a ...quantitative equilibrium model of school competition with horizontal competition in match quality. I estimate the model using data from Pakistan, a country with high private enrollment, and (1) quantify the importance of good matches, (2) show that profit-maximizing private schools’ choices of quality advantage wealthier students, increasing inequality and reducing welfare and learning, and (3) provide intuition for when interventions in the market are valuable.
Abnormal Audit Fees and Restatements Blankley, Alan I.; Hurtt, David N.; MacGregor, Jason E.
Auditing : a journal of practice and theory,
02/2012, Letnik:
31, Številka:
1
Journal Article
Recenzirano
SUMMARY
We investigate the relationship between audit fees and subsequent financial statement restatements in the years following the Sarbanes-Oxley Act of 2002 (SOX). After controlling for internal ...control quality, we find that abnormal audit fees are negatively associated with the likelihood that financial statements are subsequently restated. This result conflicts with prior work that finds that audit fees are positively associated with future restatements. Overall, our evidence is consistent with the notion that restatements reflect low audit effort or underestimated audit risk in the periods leading up to the restatement year.
ABSTRACT
We study secured lending contracts using a proprietary, loan‐level database of bilateral repurchase agreements containing groups of simultaneous loans backed by multiple tranches within a ...securitization. We show that lower‐quality loans (i.e., loans backed by lower‐rated collateral) have higher margins and spreads. We calibrate a model using collateral asset prices and find that lower‐quality loans are riskier despite the higher margins, yet cheaper for the borrower. This finding is consistent with a combination of lender optimism and reaching for yield. We also show that lower‐quality loans have longer maturity, consistent with models of rollover concerns with asymmetric information.
Using data from employer-provided health insurance and Medicare Part D, we investigate whether health care utilization responds to the dynamic incentives created by the nonlinear nature of health ...insurance contracts. We exploit the fact that because annual coverage usually resets every January, individuals who join a plan later in the year face the same initial (" spot") price of health care but a higher expected end-of-year ("future") price. We find a statistically significant response of initial utilization to the future price, rejecting the null that individuals respond only to the spot price. We discuss implications for analysis of moral hazard in health insurance.
The offshoring of knowledge services has become a phenomenon of increasing importance for firms, but many of its implications are yet to be discussed thoroughly. This paper analyzes whether R&D ...offshoring contributes to enhancing firms' innovation capabilities. Specifically, the study distinguishes between two governance models of offshoring - captive offshoring and offshore outsourcing - and two types of innovation outcomes - product and process innovations. We suggest that R&D offshoring has different impacts, depending on the innovation results and governance models considered. The study empirically tests these relationships using the Spanish Technological Innovation Panel. This survey contains information on a large sample of firms from diverse sectors for the period 2004-2007. The empirical findings allow us confirm our hypotheses, and highlight the strategic importance of R&D offshoring. The empirical evidence reveals a positive relation between offshoring and innovation performance, with a greater effect on product than on process innovations. The results for different governance models show that captive offshoring has a greater effect on innovation outcomes than offshore outsourcing. These findings lead us to conclude that firms that look overseas can benefit from location-specific and specialization advantages to improve innovation performance.
Although it is widely acknowledged that an understanding of mass attitudes about trade is crucial to the political economy of foreign commerce, only a handful of studies have addressed this topic. ...These studies have focused largely on testing two models, both of which emphasize that trade preferences are shaped by how trade affects an individual's income. The factor endowments or Heckscher-Ohlin model posits that these preferences are affected primarily by a person's skills. The specific factors or Ricardo-Viner model posits that trade preferences depend on the industry in which a person works. We find little support for either of these models using two representative national surveys of Americans. The only potential exception involves the effects of education. Initial tests indicate that educational attainment and support for open trade are directly related, which is often interpreted as support for the Heckscher-Ohlin model. However, further analysis reveals that education's effects are less representative of skill than of individuals' anxieties about involvement with out-groups in their own country and beyond. Furthermore, we find strong evidence that trade attitudes are guided less by material self-interest than by perceptions of how the U.S. economy as a whole is affected by trade.
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