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on Corporate Finance |
| By: | Loncarski,Igor; Horst,Jenke ter; Veld,Chris (Tilburg University, Center for Economic Research) |
| Abstract: | We examine the wealth effects associated with the announcements of convertible debt offerings in the Canadian market for the period between 1991 and 2004. The average wealth effect for the three day event window is a significantly negative -2.7%. This result is in line with previous studies on other Anglo-Saxon markets, but it is different from other markets where generally no effect or even a positive effect is found. In addition, support is found for the negative effect of both debt- and equity-related agency costs. |
| Keywords: | Event study;convertible bonds;wealth effects;agency costs |
| JEL: | G14 G30 G32 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200665&r=cfn |
| By: | Wright,Mike; Renneboog,Luc; Simons,Tomas; Scholes,Louise (Tilburg University, Center for Economic Research) |
| Keywords: | Public-to-private;going private;LBO;MBO;IBO;Management buy-ins;Management buyouts;Leveraged buyouts |
| JEL: | G34 G32 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200670&r=cfn |
| By: | Degryse,Hans; Ongena,Steven (Tilburg University, Center for Economic Research) |
| Abstract: | How do banks react to increased competition? Recent banking theory offers conflicting predictions about the impact of competition on bank orientation - i.e., the choice of relationship based versus transactional banking. We empirically investigate the impact of interbank competition on bank branch orientation. We employ a unique data set containing detailed information on bank-firm relationships. We find that bank branches facing stiff local competition engage considerably more in relationship-based lending. Our results illustrate that competition and relationships are not necessarily inimical. |
| Keywords: | bank orientation;bank industry specialization;competition;lending relationships |
| JEL: | G21 L11 L14 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200668&r=cfn |
| By: | Renneboog,Luc; Szilagyi,Peter G. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper reopens the debate on the substitutability of dividends and shareholder control in mitigating free cash flow concerns, by examining dividend behavior when shareholder control is restricted in the firm. We consider the stakeholder-oriented governance regime of the Netherlands, where shareholdings are concentrated, but shareholder rights are often severely restricted by a legally imposed governance regime and anti-shareholder devices such as Dutch-style poison pills. We find that dividend payouts are generally low, unresponsive to earnings changes and show little relationship with size, leverage, and investment opportunities. Shareholder power restrictions affect dividend behavior to varying degrees, but those that do are used by the vast majority of Dutch listed firms. Once accounting for these, we find no evidence that strong shareholders would allow firms to relax their dividend policy, as has been proposed in the existing literature. As shareholders, institutional investors and managers actually force higher payouts. Thus, it seems that dividends often complement rather than substitute shareholders efforts to alleviate agency concerns. This finding is unlikely to be specific to the Netherlands, and could possibly be extended to other stakeholder-oriented governance regimes. |
| Keywords: | Dividend policy;Corporate governance;Shareholder power restrictions;Ownership and control |
| JEL: | G35 G32 G30 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200673&r=cfn |
| By: | Koijen,Ralph S.J.; Nijman,Theo E.; Werker,Bas J.M. (Tilburg University, Center for Economic Research) |
| Abstract: | We study the optimal consumption and portfolio choice problem over an individual's life-cycle taking into account annuity risk at retirement. Optimally, the investor allocates wealth at retirement to nominal, inflation-linked, and variable annuities and conditions this choice on the state of the economy. We also consider the case in which there are, either for behavioral or institutional reasons, limitations in the types of annuities that are available at retirement. Subsequently, we determine how the investor optimally anticipates annuitization before retirement. We find that i) using information on term structure variables and risk premia significantly improves the optimal annuity choice, ii) restricting the annuity menu to nominal or inflation-linked annuities is costly for both conservative and more aggressive investors, and iii) adjustments in the optimal investment strategy before retirement induced by the annuity demand due to inflation risk and time-varying risk premia are economically significant. This holds as well for sub-optimal annuity choices. The adjustment to hedge real interest rate risk is negligible. We estimate that the welfare costs of not taking these three factors into account at retirement are 9% for an individual with an average risk aversion ( = 5). Not hedging annuity risk before retirement causes an additional welfare costs between 1% and 13%, depending on the annuitization strategy implemented at retirement. |
| Keywords: | optimal life-cycle portfolio choice;annuity risk |
| JEL: | D91 G0 G11 G23 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200678&r=cfn |
| By: | Aliaksei Smolski (Vitebsk State Technological University) |
| Abstract: | The paper investigates becoming and development of bankruptcy institution in Republic of Belarus after USSR disintegration. It shows the approaches of government to regulation of bankruptcy at different stages of transitional economy development and its current state. The economical, legal and political problems of bankruptcy institution application in Belarus are reviewed. |
| Keywords: | transition economy, insolvency, bankruptcy |
| JEL: | E61 G33 K12 P21 |
| URL: | http://d.repec.org/n?u=RePEc:nos:wuwpfi:smolski_aliaksei.41567-11&r=cfn |
| By: | Pietro ALESSANDRINI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alberto ZAZZARO (Universita' Politecnica delle Marche, Dipartimento di Economia); Giorgio CALCAGNINI (Universit… di Urbino "Carlo Bo", Facolt… di Economia) |
| Abstract: | One of the most lively debated effects of banking acquisitions is the change in lending and asset allocation of the target bank in favour of transactional activities, at the expense of small and informational opaque borrowers. These changes may be the result of two distinct restructuring strategies of the asset portfolio of the bidder bank. An asset cleaning strategy (ACS), in which the acquiring bank makes a clean sweep of all the negative net present value activities in the portfolio of the acquired bank, and an asset portfolio strategy (APS), in which the acquiring bank permanently changes the portfolio allocation of the acquired bank. In this paper we focus on Italian bank acquisitions and test which asset restructuring strategy was predominantly pursued over the period 1997-2003. Moreover, we estimate both a model for the whole Italian banking industry and a model for the acquired banks located in economic backward Southern regions. At the national level we find evidence of a primacy of ACSs over APSs. When we concentrate on bank acquisitions that occurred in the Mezzogiorno (Italy’s Southern regions), evidence seems to reverse, i.e. APSs dominate over ACSs. |
| Keywords: | asset restructuring strategies, bank acquisitions, small business lending |
| JEL: | G21 L22 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:264&r=cfn |
| By: | Pietro ALESSANDRINI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alberto ZAZZARO (Universita' Politecnica delle Marche, Dipartimento di Economia); Andrea PRESBITERO ([n.a.]) |
| Abstract: | The wave of bank mergers and acquisitions experienced in European and U.S. credit markets during the Nineties has deeply changed the geography of banking industry. While the number of bank branches has increased in almost every country, reducing the operational distance between banks and borrowers, bank decisional centres and strategic functions have been concentrated in only a few places within each nation, increasing the functional distance between banks and local communities. In this paper, we carry out a multivariate analysis to assess the correlation of functional and operational distances with local borrowers' financing constraints. We apply our analysis on Italian data at the local market level defined as provinces. Our findings consistently show that increased functional distance makes financing constraints more binding, it being positively associated with the probability of firms being rationed, investment-cash flow sensitivity, and the ratio of credit lines utilized by borrowers to credit lines make available by banks. These adverse effects are particularly evident for small firms and for firms located in southern Italian provinces. Furthermore, our findings suggest that the negative impact on financing constraints following the actual increased functional distance over the period 1996-2003 has substantially offset (and sometimes exceeded) the beneficial effects of the increased diffusion of bank branches occurring during the same period. |
| Keywords: | financing constraints, funtional distance, local banking system, operational proximity |
| JEL: | G21 G34 R51 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:266&r=cfn |
| By: | Wagner,Wolf (Tilburg University, Center for Economic Research) |
| Abstract: | We show that the diversification of risks at financial institutions has unwelcome effects by increasing the likelihood of systems crises. As a result, complete diversification is not warranted adn the optimal degree of diversification is arbitrarily low. We also identify externalities that cause financial institutions to diversify beyond diversification may thus have reduced welfare. |
| Keywords: | diversification;financial consolidation;conglomeration;securitization;system risk |
| JEL: | G21 G28 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200671&r=cfn |
| By: | Degryse,Hans; Laeven,Luc; Ongena,Steven (Tilburg University, Center for Economic Research) |
| Abstract: | Recent theoretical models argue that a bank's organizational structure reflects its lending technology. A hierarchically organized bank will employ mainly hard information, whereas a decentralized bank will rely more on soft information. We investigate theoretically and empirically how bank organization shapes banking competition. Our theoretical model illustrates how a bank's geographical reach and loan pricing strategy is determined not only by its own organizational structure but also by organizational choices made by its rivals. We take our model to the data by estimating the impact of the rival banks' organization on the geographical reach and loan pricing of a singular, large bank in Belgium. We employ detailed contract information from more than 15,000 bank loans granted to small firms, comprising the entire loan portfolio of this large bank, and information on the organizational structure of all rival banks located in the vicinity of the borrower. We find that the organizational structure of the close rival banks matters for both branch reach and loan pricing. The geographical footprint of the lending bank is smaller when the close rival banks are large, hierarchically organized, and technologically advanced. Such rival banks may rely more on hard information. Large rival banks in the vicinity also lower the degree of spatial pricing. We also find that the effects on spatial pricing are more pronounced for firms that generate less hard information, such as small firms. In short, size and hierarchy of rival banks in the vicinity influences both branch reach and loan pricing of the lender. |
| Keywords: | banking sector;bank size;competition;mode of organization |
| JEL: | G21 L11 L14 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200667&r=cfn |