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1 – 10 of over 16000Kelsey Gamel and Pham Hoang Van
The purpose of this paper is to estimate benefits to debt reduction by using the natural experiment provided by the debt relief programs: the Heavily Indebted Poor Countries…
Abstract
Purpose
The purpose of this paper is to estimate benefits to debt reduction by using the natural experiment provided by the debt relief programs: the Heavily Indebted Poor Countries Initiative launched by the International Monetary Fund and World Bank in 1996 and the Multilateral Debt Relief Initiative extension in 2005.
Design/methodology/approach
The authors apply a time-shifted difference-in-differences strategy to evaluate the effects of this intervention. The date of each country’s decision to participate in the program is used as one treatment point while the date of the completion of the debt relief program is used as another treatment point. The exercise compares different economic outcomes such as domestic and foreign investment, schooling, and employment of the treated observations to the counterfactual of untreated country-years. The period between the decision and completion points is a short run while the period after the completion point is considered a long run.
Findings
The authors found that debt relief increased capital investment as much as 1.63 percent in the short run and 5.79 percent in the long run. However, there was no effect on foreign direct investment suggesting that debt overhang does not affect incentives of foreign investors. Output and schooling enrollment increased both in the short and long run.
Originality/value
This paper exploits a natural experiment of debt relief in a number of developing countries to shed light on the possible benefits to debt reduction. The authors are able to separate the short- and long-run effects of debt reduction. The finding that domestic but not foreign investment responds to debt reduction is suggestive of the differences in incentives across these two sources of investment.
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Rebecca Abraham and Charles Harrington
Seasoned equity offerings (SEOs) are sales of stock after the initial public offering. They are a means to raise funds through the sale of stock rather than the issuance of…
Abstract
Seasoned equity offerings (SEOs) are sales of stock after the initial public offering. They are a means to raise funds through the sale of stock rather than the issuance of additional debt. We propose a method to predict the characteristics of firms that undertake this form of financing. Our procedure is based on logistic regression where firm-specific variables are obtained from the perspective of the firm's need to raise cash such as high debt ratios, high current liabilities, reduction and changes in current debt, significant increase in capital expenditure, and cash flows in terms of cash as a percentage of assets.
I. Introduction For over forty years, a model for Third World development has gained widespread acceptance. Three key premises underpin the traditional development model: (1) the…
Abstract
I. Introduction For over forty years, a model for Third World development has gained widespread acceptance. Three key premises underpin the traditional development model: (1) the identification of “development” with the maximization of the rate of national economic growth; (2) the quest to achieve Western living standards and levels of industrialization which require the transfer of labor from the agricultural to the industrial sector as well as increased consumerism; and (3) the integration into the interdependence of Third World nations in the global economy and the global marketplace. Increasing the demand for a Third World nation's exports (in other words, export‐led growth) is viewed as leading to the maximization of a nation's Gross National Product (GNP).
Stephanos Papadamou and Trifon Tzivinikos
This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while…
Abstract
Purpose
This paper aims to investigate the effects of contractionary fiscal policy shocks on major Greek macroeconomic variables within a structural vector autoregression framework while accounting for debt dynamics.
Design/methodology/approach
The sign restriction approach is applied to identify a linear combination of government spending and government revenue shock simultaneously while accounting for debt dynamics. Additionally, output and unemployment responses to fiscal shocks under different scenarios concerning the amalgamation of austerity measures are considered.
Findings
The results indicate that a contractionary consumption policy shock, namely, a 1 per cent decrease in government consumption and a 1 per cent increase in indirect taxes, is preferred, as it produces a minor decrease in output and substantially decreases public debt, while a contractionary wage policy shock is suitable only when the government aims to sharply reduce public debt, as the consequences for the economy are harsh. A contractionary investment policy shock is not recommended, as it triggers a rise in unemployment and a fall in output, while the effect on the public debt is minor.
Practical implications
Policymakers should focus their efforts on reducing unproductive government consumption on the expenditure side. Concerning revenues, the reinforcement of tax administration is recommended to ensure that indirect taxes will be collected.
Originality/value
This paper contributes to the existing literature by providing a disaggregated analysis of the effects of fiscal policy actions in Greece by implementing several fiscal policy scenarios and accounting for the level of public debt. All scenarios are in the vein of the economic adjustment programs guidelines.
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Bruce Greig, Peter Nuthall and Kevin Old
The purpose of this paper is to investigate a farm manager’s personal characteristics (personality, age, education, objectives, experience, etc.) as drivers of debt payback…
Abstract
Purpose
The purpose of this paper is to investigate a farm manager’s personal characteristics (personality, age, education, objectives, experience, etc.) as drivers of debt payback success and rates. Traditionally bankers have used historic business statistics, and equity levels, to assess loans and credit worthiness. It is hypothesised that a managers’ personal characteristics are likely to be a better predictor of future debt payback performance.
Design/methodology/approach
The literature was searched to isolate the managers’ personal variables likely to determine debt payback. The information led to defining a quantitative model based on the theory of planned behaviour (TPB) which was hypothesised as determining payback rates where a choice was available. A postal random stratified survey of NZ owner operator farm managers provided the data to test the model and define its parameters using regressions, structural equation modelling and statistical comparisons.
Findings
The modelling results make it clear a manager’s personal characteristics are highly correlated with debt payback and, logically, are very likely to be the drivers. Four random effects equations and a comparison of high- and low-debt payback managers led to this conclusion.
Practical implications
Bankers should use the managers’ personal characteristics, as defined in the regressions, alongside traditional measures when assessing farm business loan requests. This approach is opposite to the traditional methods using mainly historic data.
Originality/value
The use of the TPB in assessing debt payback is a new and novel approach showing how enduring personal characteristics can be used in assessing proposals, and particularly, entrepreneurs’ adventurist investments in situations where historic data are not available.
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Debt‐equity swaps represent a new market‐based mechanism, by which debtor countries and creditor banks can defuse the acute problems associated with the international debt crisis…
Abstract
Debt‐equity swaps represent a new market‐based mechanism, by which debtor countries and creditor banks can defuse the acute problems associated with the international debt crisis. This paper describes, analyzes and evaluates debt‐equity swaps from the standpoint of the debtor country. It also discusses some of the possible advantages and disadvantages for LDCs that might contemplate the use of such swaps. The paper demonstrates how a successful debt‐equity swap program could play an important role in alleviating the IDCs' debt problem as well as contributing to their future economic growth.
Nicola Raimo, Alessandra Caragnano, Massimo Mariani and Filippo Vitolla
In recent years, policymakers have increasingly pushed firms to disclose non-financial information. In Europe, integrated reporting (IR) is an increasingly adopted tool to fully…
Abstract
Purpose
In recent years, policymakers have increasingly pushed firms to disclose non-financial information. In Europe, integrated reporting (IR) is an increasingly adopted tool to fully comply with the requirements of the Directive 2014/95/EU. This study aims to examine the financial benefits of IR quality and specifically the effect on the cost of debt.
Design/methodology/approach
A manual content analysis is performed to measure the quality of the information contained in integrated reports. A panel regression model is used to test the effect of the IR quality on the cost of debt on a sample of 399 observations (a balanced panel of 133 European listed firms for the period 2017–2019).
Findings
Results demonstrate a negative relationship between IR quality and the cost of debt, showing that firms that provide higher quality integrated reports benefit from access to third party financial resources at better conditions.
Research limitations/implications
The results of this study offer important implications for managers and policymakers. The capacity of IR quality to allow a cost of debt reduction should push managers to a greater propensity towards transparency and the dissemination of high quality integrated reports. In addition, in light of the benefits connected to the IR quality, policymakers should push towards the adoption of IR as a solution to fulfil the regulatory obligations deriving from Directive 2014/95/EU.
Practical implications
Results show the goodness of IR as an ideal solution to fulfil the obligations imposed by Directive 2014/95/EU. The important financial benefits associated with IR quality make the high quality integrated report an ideal tool capable of fulfilling regulatory obligations and at the same time guaranteeing a reduction in the cost of debt.
Originality/value
To the best of the authors’ knowledge, this is the first work that analyses the relationship between IR quality and cost of debt.
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Richard P.C. Brown and Timothy J. Bulman
The regularity of default by countries on their sovereign debt has led to the establishment of a number of evolving institutions or “Clubs”. These institutions' objective is to…
Abstract
Purpose
The regularity of default by countries on their sovereign debt has led to the establishment of a number of evolving institutions or “Clubs”. These institutions' objective is to optimise the impact of imminent default or actual default on both international lending and borrowing. The purpose of this article is to discuss the informal institutions concerned with managing debt between national governments – the Paris Club, between governments and commercial banks – the London Club – and the currently ad hoc dealings with sovereign bonds.
Design/methodology/approach
The Clubs' changing approaches through the increasing depth and number of international financial crises from the Latin American debt crises of the 1980s, the Asian financial crisis of the late 1990s and the circumstances of the ex‐Soviet economies, plus the ongoing debt sub‐Saharan African debt crisis are discussed.
Findings
The shifts in the principles underlying the debt management system are manifest by the changing content of reschedulings, from simply deferring payments to actual reduction in their present value.
Practical implications
The functioning of principles of comparable treatment of all creditors are discussed with respect to the growing need for a body representing bondholders' interests.
Originality/value
The paper highlights the IMF's multiple and sometimes conflicting roles in the international financial system.
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Susan Newberry and June Pallot
This article explains the structures and rules built into the New Zealand government’s financial management system which encourage entry into commitments such as public private…
Abstract
This article explains the structures and rules built into the New Zealand government’s financial management system which encourage entry into commitments such as public private partnerships. That the system provides a means of escape from the tight constraints imposed by fiscal targets, and escapes public and parliamentary scrutiny in the process, seems at odds with espoused objectives of fiscal responsibility, debt reduction and transparency. In terms of furthering a privatization agenda, however, it is highly logical.
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Mohammed Ibrahimi and Hicham Meghouar
The purpose of this paper is to investigate the determiners to create and destroy value in horizontal mergers and acquisitions (M&A) using accounting indicators supposed to…
Abstract
Purpose
The purpose of this paper is to investigate the determiners to create and destroy value in horizontal mergers and acquisitions (M&A) using accounting indicators supposed to influence the new entity’s value.
Design/methodology/approach
Using a sample of 90 French listed companies and stepwise regression method, the authors test eight accounting indicators supposed to influence the new entity’s value.
Findings
To create value after a horizontal M&A, it is necessary to concentrate on turnover and the restructuring of charges without neglecting the control of debt capacity. To avoid destroying value after a horizontal M&A, it is necessary to concentrate on the control of debt capacity and restructuring of charges in order to reduce financial charges and financial risk. Horizontal M&A also create value through the reduction of investment costs and through tax optimization.
Research limitations/implications
This paper is different from other contributions in that the majority of existing literature concerning the sources of value creation in M&A has been based on abnormal returns or microeconomic data. This paper analyzes accounting data that are likely to be influenced over the long term by corporate decision making. These kinds of decisions influence the firm’s value as well as the long-term gains that industrial investors may hope to obtain.
Originality/value
This study makes a significant contribution to the existing literature insofar as it seeks to divide the sources of value creation into three categories: sales synergy, cost synergies and hybrid synergies. To the best of the authors’ knowledge, this is also the first study to provide explanations from companies’ accounting data, which can lead managers to a greater vision of post-merger strategy management, reinforcing the mechanism for value creation.
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