We examine whether differences in legal protection affect the size, maturity, and interest rate spread on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of ...contracts by reducing loan amounts, shortening loan maturities, and increasing loan spreads. These effects are both statistically significant and economically large. While stronger creditor rights reduce spreads, they do not seem to matter for loan size and maturity. Overall, we show that variation in enforceability of contracts matters a great deal more to how loans are structured and how they are priced. Copyright (c) 2009 the American Finance Association.
"This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market ...leverage are: median industry leverage (+ effect on leverage), market-to-book assets ratio ( - ), tangibility (+), profits ( - ), log of assets (+), and expected inflation (+). In addition, we find that dividend-paying firms tend to have lower leverage. When considering book leverage, somewhat similar effects are found. However, for book leverage, the impact of firm size, the market-to-book ratio, and the effect of inflation are not reliable. The empirical evidence seems reasonably consistent with some versions of the trade-off theory of capital structure." Copyright (c) 2009 Financial Management Association International..
We examine corporate investment spending around the asset price bubble in Japan in the late 1980s and make three contributions to our understanding of how stock valuations affect investment. First, ...investment responds significantly to nonfundamental components of stock valuations during asset price shocks; fundamentals matter less. Clearly, the stock market is not a sideshow. Second, the time series variation in the investment cash flow sensitivity is affected more by changes in monetary policy than by shifts in collateral values. Third, asset price shocks primarily affect firms that rely more on bank financing and not necessarily those that use equity financing.
We use industry commodity flows information to measure vertical relations in completed mergers from 1962 to 1996. Almost one-third of the mergers display vertical relatedness. Vertical merger ...activity is more intensive in the 1980s and 1990s and less so in the 1960s and the 1970s. Vertical mergers generate positive wealth effects that are significantly larger than those for diversifying mergers; the wealth effects in vertical mergers are comparable to those in pure horizontal mergers.
This paper examines the relative importance of many factors in the capital structure decisions of publicly traded American firms from 1950 to 2003. The most reliable factors for explaining market ...leverage are: median industry leverage (+ effect on leverage), market-to-book assets ratio (−), tangibility (+), profits (−), log of assets (+), and expected inflation (+). In addition, we find that dividend-paying firms tend to have lower leverage. When considering book leverage, somewhat similar effects are found. However, for book leverage, the impact of firm size, the market-to-book ratio, and the effect of inflation are not reliable. The empirical evidence seems reasonably consistent with some versions of the trade-off theory of capital structure.
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