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The purpose of this paper is to examine the debt structure of group affiliated firms in Pakistan for the period of 2009-2011. The study seeks to know the level of debt specialization in group affiliated firms. If they do; then how are they different from stand-alone firms?

The study primarily uses Herfindahl-Hirschman Index and Excl90 as measures of debt specialization, which are further used in cluster, threshold and conditional analysis. Corporate groups are characterized to subsidize their affiliates through internal debt market and loan guarantee. Logistic regression model is used to analyze association among the measures of debt specialization and firm-specific characteristics for group affiliated and stand-alone firms.

The results show that about 85 percent firms use more than 50 percent of debt from one debt type. However, group affiliated firms are more inclined toward debt specialization than stand-alone firms. Tangibility and book leverage are negatively and significantly associated to the measures of debt specialization. Moreover, internal debt market and loan guarantee are suggestive reasons of debt specialization in group affiliated firms.

This study highlights the issue of group affiliation and its significance on firm’s debt structure. It has implications for determination of the optimal financing strategy. In the context of emerging economies, group affiliated firms can create market imperfections as a protection shield. In case of emerging markets, it is recommended to strengthen regulatory mechanism to avoid such market imperfections.

Prior studies have explored the phenomenon of debt specialization for rated and unrated firms. However, firm group affiliation is widely studied in the context of capital structure. This is a pioneer study to establish and analyze a link between firm group affiliation and debt specialization.

This paper addresses the following questions: Why do some firms employ multiple debt types? What explains debt heterogeneity? Is the choice of the source of debt a function of corporate governance?

The author's paper is empirical and uses multiple regression analysis.

Firms under weak corporate governance have a higher propensity to use multiple debt types and have a dispersed debt structure. Contrastingly, firms that are well-managed tend to concentrate debt and borrow predominantly from a few creditors. The author also found that while bank debt is negatively associated with debt concentration, market debt is positively associated with debt concentration.

Firms under weak corporate governance have a higher propensity to use multiple debt types and have a dispersed debt structure. Well-managed firms tend to concentrate debt and borrow predominantly from a few creditors. Bank debt is negatively associated with debt concentration and market debt is positively associated with debt concentration.

Policymakers and practitioners need to account not only for changes in the firm’s total debt level but also for changes within the firm’s debt composition. Understanding a manager’s choice of debt structure can incentivize creditors to effectively monitor and use debt concentration as a form of commitment device that transfers some control rights from the manager to creditors.

While a vast body of corporate finance literature examines the conflict between shareholders and management, there is little empirical work on the conflict between creditors and management. In this paper, the author examines how managerial entrenchment affects debt structure. The results provide a comprehensive picture of how corporate governance influences debt choice(s).

This paper investigates the capital structure of a large sample of U.S. private firms from 2004 to 2013. There is a considerable heterogeneity in private firm capital structure not only in terms of the level of leverage but also with regard to the issuance of specific debt instruments. Leverage, debt type usage, and debt specialization are dynamic and strongly related to observable firm characteristics largely in support of contract theory. Unobservable firm and industry characteristics are strong determinants of leverage levels and debt specialization. Macro credit conditions are not related to private firm leverage but are strong determinants of the degree to which firms diversify their debt capital structures.

This paper aims to examine jointly the CEO inside debt and firm debt to further investigate the compensation incentives on risky decision-making and the resulting financial policy decisions concerning the debt structure of the firm.

Using S&P 1500 data from CRSP, Compustat, Execucomp and Capital IQ between 2006 and 2011, statistical analysis and regression models are used to determine potential correlations between the variable of interest, inside debt and debt control variables, including specialization.

Firms with high inside debt specialize in commercial loans and drawn credit lines. Larger firms diversify their debt holdings among commercial instruments and senior bonds. As firm size increases with inside debt, the effects are counteracted. Larger firms with high CEO inside debt have lower interest rates on these debt instruments and shorter maturities, suggesting a more conservative financing policy with regards to debt.

Debt diversification is partially affected by compensation in the form of inside debt. Future studies of debt diversification should include CEO compensation controls.

For struggling companies or for those that want to return to a conservative financial policy, they can influence the CEO to make this decision by deferring his compensation to retirement.

This paper considers debt policy through the lens of a key decision maker, the CEO, and uses compensation as an incentive to determine what choices are made concerning debt.

The governing role of bank-appointed directors (BADs) on the boards of non-financial firms has a potential to reduce information asymmetry between the firm and non-bank lenders. This should increase the confidence of other creditors in firm activities, thus performing the certification role. Therefore, the purpose of this paper is to empirically examine the certification role of BADs.

The authors test their hypotheses by using a panel of Indian non-financial firms. Our approach involves examining whether there is a significant difference in the number of different debt sources, the dispersion of debt among different debt sources, and leverage for BAD and Non_BAD Firms. The authors use univariate analysis and multivariate regression models to test the difference.

The authors find that firms with BADs on their board have (1) access to a higher number of different debt sources, (2) debt distributed evenly among different sources and (3) a higher debt ratio. Overall, our study provides supporting evidence for the certification role that BADs play on the boards of non-financial firms.

The authors contribute to the literature in two aspects. First, to the best of our knowledge, this is the only study that examines the effect of the governing role of banks on the lending decisions of non-bank lenders. Second, our study is associated with the growing body of the governance literature in the emerging markets context by examining the interaction of financial policies and governance in an institutional framework, which is very different from that of the developed world.

This study aims to examine whether audit partner public-client specialization and busyness impact the cost of debt.

This paper uses data from companies in Thailand for the 1998–2016 period. To measure the cost of debt, this study uses the realized interest cost, measured as the total interest expense for the one year ahead divided by the average value of total debt outstanding during that year.

The results show a positive association between the cost of debt and two measures of public-client specialization and busyness, which are the number of public clients audited by an individual audit partner in each year and the proportion of the number of public clients divided by the number of total clients in an individual audit partner’s portfolio.

In the literature, there is a lack of research on whether a higher number of public clients in an audit partner’s portfolio leads to better or worse perceived audit quality. This study extends prior literature by examining whether creditors’ perception of audit quality depends on the audit partner specialization or busyness and specifically, on the number of public clients of the auditor. The findings indicate that public-client busyness of a particular audit partner, rather than the audit partner public-client specialization, matters in the cost of debt.

The purpose of this paper is to examine the impact of institutional holdings and corporate debts on audit quality, proxied by auditor industry specialization.

The tests use regression analysis for a sample of 396 company-years from 2003 to 2008 and control for factors known to affect auditor industry specialization.

The results show a positive association between institutional ownership and auditor industry specialization. These results are consistent across most measures of auditor industry specialization and different thresholds of audit firm market share. In addition, a positive link is reported between corporate debt and industry specialization by auditors. This result, however, holds under the composite proxy in terms of total assets only.

The major limitation is the unavailability of data on audit fees and sales (revenues) to measure auditor market share.

Institutional investors and debtholders have preference for auditors who can enhance the credibility of financial reporting and improve the quality of financial information and the results document that the choice of specialist auditors can potentially influence this objective.

The paper provides information to academics, regulators, companies, and auditors concerning the impact of institutional investors and creditors on the choice of industry specialists. Also, it shows the importance of industry specialization on audit quality.

This paper aims to examine whether firms retaining industry-specialist auditors receive better price and non-price terms for bank loans.

Based on a sample of companies retaining big N auditors during the 2000-2010 period, this paper constructed six proxies for auditor industry expertise and tested three major loan terms: loan spreads, number of general and financial covenants and requirements for collateral.

It was found that companies retaining industry-specialist auditors receive lower interest rates and fewer covenants. Banks are also less likely to demand secured collateral. These findings are supported by several sensitivity tests.

The findings suggest that auditor industry expertise provides incremental value to creditors and that bank loan cost is one economic benefit for companies hiring specialist auditors.

To the best of the authors’ knowledge, this study is the first to investigate the impact of auditor industry expertise on the cost of private debts.

This paper aims to investigate whether real estate investment trust (REIT) initial public offerings (IPOs) are exposed to abnormal initial-day performance. Previous studies have predominantly focused on REITs listed in the USA and Australia, only a few studies have utilised a multi-country approach and only one study has used a multi-region approach. This paper adds to the literature by, for a global sample, analysing variables proven important in explaining REIT IPO performance but never used in a global sample before by extending the investigation of initial-day return patterns for new REIT types and by offering the first insights from emerging REIT markets.

Initial-day raw and abnormal returns were calculated for a sample of 445 IPOs in 26 countries over the period from 1996 to 2014. The returns were partitioned according to a select set of themes and multiple regression analysis was used to isolate the relationship between the explanatory factors and underpricing.

For the sample as a whole, the mean initial-day raw return is 3.94 per cent and the mean market-adjusted initial-day return is 4.01 per cent. Even though the initial-day return for a REIT IPO typically is positive, negative mean returns are observed for a few countries and during certain years. Investors should note that for European markets, new property type exhibited a robust positive association with abnormal return, and underwriter reputation exhibited a robust negative relationship with abnormal return.

This paper fulfils the need to test important concepts on global REIT IPO markets.

Recent studies on the use of private, non-bank, debt have given conflicting results. Instead of a fixed order of preference between various choices of debt as suggested by previous studies, this study postulates that there is a life cycle of debt choice, and as firms move through the cycle, their preferences change. For stable, mature firms, when given a choice, non-bank private debt would fall in between the two extremes of bank debt and public debt. We provide empirical as well as anecdotal evidence from the trade press to support this view. We jointly model the decision to choose a debt source as well as the amount of debt on data from a current database to focus on the “intentional” change in debt levels, rather than those due to unintentional changes. We find that there are significant interdependencies between the decision to borrow from a particular source, as well as the amount of loan, and that taxes, as well as lender reputation, degree of renegotiability and financial flexibility required by the borrower, are key factors that influence the choice of private debt source.