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on Corporate Finance |
| By: | Justin Y. Lin (China Center for Economic Research); Yingyi Tsai (China Center for Economic Research); Ching-Tang Wu (China Center for Economic Research) |
| Abstract: | This paper provides an explanation for outsourcing based on uncertainty. We study an optimal capital investment model both with and without the possibility to outsource under uncertainty. We show, in the presence of uncertainty, that outsourcing is Pareto-improving and that a brand-producing monopolistic reduces its fixed-asset investment if outsourcing is possible. We also show that the cost of undertaking outsourcing can have a significant impact on the monopolist's choices of optimal capital investment and outsourcing quantity. |
| Keywords: | Outsourcing, Investment, Uncertainty |
| JEL: | D24 D40 D81 E22 L23 |
| Date: | 2003–11 |
| URL: | http://d.repec.org/n?u=RePEc:eab:microe:450&r=cfn |
| By: | Alexxandros Benos (University of Piraeus); George Papanastasopoulos (University of Peloponnese) |
| Abstract: | In this paper we have combined fundamental analysis and contingent claim analysis into a hybrid model of credit risk measurement. We have extended the standard Merton approach to estimate a new risk-neutral distance to default metric, assuming a more complex capital structure, adjusting for dividend payments, introducing randomness to the default point and allowing a fractional recovery when default occurs. Then, using financial ratios, other accounting based measures and the risk- neutral distance metric from our structural model as explanatory variables we calibrate the hybrid model with an ordered – probit regression method. Using the same econometric method, we calibrate a model using financial ratios and accounting variables as explanatory variables and a model using our risk-neutral distance to default metric as unique explanatory variable. Then, using cumulative accuracy plots we have test the classification power of those models to predict defaults out of sample. We have found that by enriching the risk-neutral distance to default metric with financial ratios and accounting variables into the hybrid model, we can improve both in of-sample fit of credit ratings and out-of-sample predictability of defaults. Our main conclusion is that financial ratios and accounting variables contain significant and incremental information, thus the risk-neutral distance to default metric does not reflect all available information regarding the credit quality of a firm. |
| Keywords: | credit risk, distance to default, financial ratios, accounting variables |
| JEL: | G |
| Date: | 2005–05–27 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpfi:0505020&r=cfn |
| By: | Jennifer A. Amyx (Australia–Japan Research Centre) |
| Abstract: | This paper examines the evolving political dynamics of regional financial cooperation in East Asia since the 1997–98 Asian financial crisis, examining in particular the factors contributing to the growing momentum behind the recent Asian bond market initiative being pursued by the Association for Southeast Asian (ASEAN) nations plus Japan, China and South Korea (referred to collectively as ‘ASEAN+3’). The paper argues that this initiative is making rapid progress because it resonates positively with the domestic political agendas of many leaders in the region, is an initiative that numerous countries can claim at least partial ‘ownership’ of, and elicits considerable support from actors outside the region. |
| Keywords: | Regional Bond Market, East Asia, Financial Cooperation, Asian financial crisis, ASEAN, Japan, China, South Korea |
| JEL: | E61 E62 F33 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:383&r=cfn |
| By: | Shigeki Morinobu (Ministry of Finance Japan) |
| Abstract: | In June 2004, the Government Tax Commission presented its report on the unified taxation system for financial income (hereinafter referred to as “integration of taxes on financial income”). Theoretically, the dual income tax (DIT) discussion introduced mainly in Nordic countries is at the core of the discussion about integration of taxes on financial income. The Tax Commission’s mid-term policy report (hereinafter referred to as “the mid-term policy report”), submitted in June 2002, lists DIT as a key issue for future consideration. Then, in the revised report submitted in November of the same year, the commission argues: “Establishing a tax system that is fair, simple, and easy to understand should be the basis of all taxes on financial assets. From this perspective, which meets the policy demand for a shift ‘from savings to investment,” with regard to the tax structure for financial transactions, the tax authorities should not only strive to ensure neutrality between financial instruments regarding taxes on interest, dividends, and capital gains but also aspire to integrate the various categories of financial income. In this case, the integration of taxes on financial income and the DIT should be considered as a future direction.” Specifically, in the FY 2003 tax reform, dividend income (large accounts excluded), which until then was taxed as part of aggregate income, is taxed as separate income and at the same rate as are capital gains and interest. In this paper, we will first give an overview of the discussions thus far on dual income tax, after which we will take up various issues surrounding the integration of taxes on financial income. |
| Keywords: | tax commision, financial income, dual income tax (DIT), |
| JEL: | H24 D14 H71 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:eab:financ:484&r=cfn |
| By: | Masamitsu Ohnishi (Graduate School of Economics, Osaka University); Yusuke Osaki (Graduate School of Economics, Osaka University) |
| Abstract: | The goal of this paper is the examination of the conditions on preferences to guarantee the monotonicity of asset prices, when their returns change in the sense of first- and second-order stochastic dominances. |
| Keywords: | Asset Price; Comparative Statics; First-order Stochastic Dominance; Second-order Stochastic Dominance. |
| JEL: | D81 G12 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0514&r=cfn |
| By: | Bruno S. Frey; Benno Torgler |
| Abstract: | Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. Concepts of Homo Economicus, endowed with a more refined motivation structure, help to shed light on the tax compliance puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 European countries. The findings suggest that a higher perceived tax evasion leads to a lower tax morale, also when controlling for additional factors in a multivariate analysis. |
| Keywords: | tax morale; tax compliance; tax evasion; pro-social behavior |
| JEL: | H26 H73 D64 |
| Date: | 2004–08 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2004-20&r=cfn |