Het rapporteren van alternatieve financiële prestatiemaatstaven (APM’s) door ondernemingen is in de afgelopen jaren sterk toegenomen. In deze studie wordt onderzocht of, en op welke wijze, leverage ...(de verhouding tussen rentedragende langlopende schulden en de totale activa) en verlieslatendheid invloed hebben op de mate waarin APM’s worden gepubliceerd. Op basis van theorie (signaling-theorie, agency-theorie en opportunisme) en wet- en regelgeving zijn de hypothesen geformuleerd dat er sprake is van een positief verband tussen leverage en de toepassing van leningsconvenant-gerelateerde APM’s en een negatief verband tussen leverage en APM’s die gerelateerd zijn aan de waardering van de onderneming (bedrijfswaardering-gerelateerde APM’s). De hypothesen worden getoetst met data die – door toepassing van een geautomatiseerde tekstanalysator – is verkregen uit de jaarverslagen (2009–2017) van de 600 grootste Europese ondernemingen (STOXX Europe 600). De resultaten tonen dat als de leverage toeneemt meer leningsconvenant-gerelateerde APM’s worden gerapporteerd, terwijl, naarmate een groter deel van de activa is gefinancierd met rentedragend vreemd vermogen, er minder bedrijfswaardering-gerelateerde APM’s worden gepubliceerd. Verder tonen de resultaten dat de context waarin het gebruik van (specifieke) APM’s plaatsvindt van belang is. Meer specifiek, het verband tussen leverage en de rapportering van bedrijfswaardering-gerelateerde APM’s wordt beïnvloed door het wel of niet verlieslatend zijn van een onderneming.
I exploit the adoption of state-level labor protection laws as an exogenous increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure ...decisions. I find that firms reduce debt ratios following the adoption of these laws, with this result stronger for firms that experience larger increases in firing costs. I also document that, following the adoption of these laws, a firm's degree of operating leverage rises, earnings variability increases, and employment becomes more rigid. Overall, these results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.
The relationship between profitability and leverage is controversial in the capital structure literature. We revisit this relation in light of a novel quasi-natural experiment that increases market ...power for a subset of firms. We find that treated firms increase their profitability throughout the treatment period. However, they only transiently reduce financial leverage, gradually reverting to their preshock level. Firms respond differently according to size with large firms gradually adjusting their leverage toward a new target and small firms reducing it. The patterns are broadly consistent with dynamic trade-off models with both fixed and variable adjustment costs.
This paper was accepted by Gustavo Manso, finance.
Supplemental Material:
The online appendix and data are available at
https://doi.org/10.1287/mnsc.2021.4235
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The relative size and inflexibility of labor expenses lead to a form of operating leverage, which we call labor leverage. We derive a set of conditions for the existence of labor leverage even when ...labor markets are frictionless. Our model provides theoretical support for the use of firm-level labor share as a measure of labor leverage. Using Compustat/CRSP and confidential Census data, we provide evidence for the existence and for the economic significance of labor leverage: high labor share firms have operating profits that are more sensitive to economic shocks and have higher expected returns.
The mystery of zero-leverage firms Strebulaev, Ilya A.; Yang, Baozhong
Journal of financial economics,
07/2013, Letnik:
109, Številka:
1
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We present the puzzling evidence that, from 1962 to 2009, an average 10.2% of large public nonfinancial US firms have zero debt and almost 22% have less than 5% book leverage ratio. Zero-leverage ...behavior is a persistent phenomenon. Dividend-paying zero-leverage firms pay substantially higher dividends, are more profitable, pay higher taxes, issue less equity, and have higher cash balances than control firms chosen by industry and size. Firms with higher Chief Executive Officer (CEO) ownership and longer CEO tenure are more likely to have zero debt, especially if boards are smaller and less independent. Family firms are also more likely to be zero-levered.
More than 30 percent of Compustat firms overshoot target leverage within one to two years, contrary to the partial leverage adjustment model’s (PLAM) central tenet of incremental adjustments year by ...year. Because overshooting involves large adjustments, the presence of overshooting firms can skew researchers’ inferences drawn from the PLAM. This study reveals that if we remove overshooting firms from the dataset, the estimated leverage-adjustment speed is much lower and, more importantly, the average firm stops moving toward the target well before the halfway point. Ironically, the conclusion of firms’ partial and steady movements toward target leverage in the PLAM research looks like a statistical artifact arising from the preponderance of overshooting.
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•This study critically evaluates the partial leverage adjustment model (PLAM).•More than 30 % of U.S. firms overshoots target leverage within one or two years.•Ironically, widespread overshooting creates the misleading perception of steady, gradual adjustments toward target leverage.•The PLAM’s central narrative of steady, gradual adjustments stands on a shaky ground.
Our paper provides a complete characterization of leverage and default in binomial economies with financial assets serving as collateral. Our Binomial No-Default Theorem states that any equilibrium ...is equivalent (in real allocations and prices) to another equilibrium in which there is no default. Thus actual default is irrelevant, though the potential for default drives the equilibrium and limits borrowing. This result is valid with arbitrary preferences and endowments, contingent or noncontingent promises, many assets and consumption goods, production, and multiple periods. We also show that only no-default equilibria would be selected if there were the slightest cost of using collateral or handling default. Our Binomial Leverage Theorem shows that equilibrium Loan to Value (LTV) for noncontingent debt contracts is the ratio of the worst-case return of the asset to the riskless gross rate of interest. In binomial economies, leverage is determined by down risk and not by volatility.
Leverage Dynamics without Commitment DEMARZO, PETER M.; HE, ZHIGUO
The Journal of finance (New York),
June 2021, 2021-06-00, 20210601, Letnik:
76, Številka:
3
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ABSTRACT
We characterize equilibrium leverage dynamics in a trade‐off model in which the firm can continuously adjust leverage and cannot commit to a policy ex ante. While the leverage ratchet effect ...leads shareholders to issue debt gradually over time, asset growth and debt maturity cause leverage to mean‐revert slowly toward a target. Investors anticipate future debt issuance and raise credit spreads, fully offsetting the tax benefits of new debt. Shareholders are therefore indifferent toward the debt maturity structure, even though their choice significantly affects credit spreads, leverage levels, the speed of adjustment, future investment, and growth.
Using a real options model, Sarkar (2020) recently demonstrated that operating and financial leverage are not necessarily substitutes. Once a firm is allowed to optimize their operating capacity ...(hence operating leverage), an increase in one could in fact lead to an increase in the other. Contrary to the claims made in Sarkar (2020), however, we demonstrate in this note that appealing to a firm’s capacity decision is not necessary to produce such results. Specifically, we show that if a firm’s embedded abandonment option is sufficiently valuable, the operating–financial leverage relationship can also become positive, irrespective of the firm’s operating choices.
•Operating leverage and financial leverage are not always substitutes.•Appealing to operating flexibility is not necessary to explain a positive relationship between the two types of leverage.•A firm’s embedded abandonment option can induce a positive relationship if the option is sufficiently valuable.•Firms with high cash-flow uncertainty are more likely to observe such a positive relationship.
•This paper introduces and validates a novel measure of capital structure by normalizing firms’ leverage ratios based on their business risks.•We empirically evaluate the new measure using both ...static and dynamic leverage models.•We calculate individual firms’ leverage adjustment speeds, which demonstrates significant predictive power concerning firms’ future capital structure adjustments.•Based on empirical results, SDL appears to be a more reliable indicator of firms’ actual capital structure.
This paper proposes and validates a new measure of capital structure by normalizing firms’ leverage ratios by their business risks, assuming asset values follow a geometric Brownian motion. We empirically test the new measure with both static and dynamic leverage models, and we find that the standardized leverage (SDL) ratio: 1) performs similarly to book leverage in static leverage regressions, and 2) presents a more realistic speed of adjustment (SOA) in dynamic leverage adjustment models. Within the framework of SDL, we also compute individual firms’ leverage adjustment speeds, which is shown to have significant predictive power regarding firms’ future capital structure adjustments. Overall, the empirical results suggest that the SDL exhibits strong candidacy to serve as a more reliable measure for firms’ real capital structure.
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