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The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability
Type: Book
ISBN: 978-1-78756-837-2

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Abstract

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The Corporate, Real Estate, Household, Government and Non-Bank Financial Sectors Under Financial Stability
Type: Book
ISBN: 978-1-78756-837-2

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Article

Charles Amo-Yartey and Joshua Abor

– The paper aims to study the importance of financial market development and financial structure in explaining the financial policies of firms in emerging market countries.

Abstract

Purpose

The paper aims to study the importance of financial market development and financial structure in explaining the financial policies of firms in emerging market countries.

Design/methodology/approach

The paper uses a panel data of 32 countries and the system generalized method of moments approach.

Findings

The analysis shows that stock market development is associated with higher use of external finance relative to internal finance, while bond market development is associated with lower use of external finance relative to internal finance. The findings of this study also indicate that stock market development tends to shift the policies of firms towards less debt and more equity, and bond market development is associated with higher debt and less equity in emerging economies.

Originality/value

The value of this study is in respect of its contribution to the extant literature on corporate financial policies in emerging market economies.

Details

American Journal of Business, vol. 28 no. 2
Type: Research Article
ISSN: 1935-5181

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Article

Thao T.T. Le and Joseph T.L. Ooi

The purpose of this paper is to examine the relationship between the state of development in the capital market and the debt ratios of 579 property companies publicly…

Abstract

Purpose

The purpose of this paper is to examine the relationship between the state of development in the capital market and the debt ratios of 579 property companies publicly listed in 13 countries.

Design/methodology/approach

A total of two indices are first constructed to measure the maturity of the debt and equity capital market in each country from 1994 to 2007. Panel regressions are then carried out to examine the impact of capital market maturity on the financial gearing of property companies.

Findings

The authors observe that the maturity of the capital market is correlated with the stage of development of the respective economies. The panel regression results show that the maturity of the debt capital market has a significant and positive influence on the firms' capital structure. In contrast, developments in the equity capital market have an inverse impact on the debt ratios of property companies.

Practical implications

Overall, the development of the capital markets is good for capital intensive property companies who may face challenges to obtain external funding in transition economies with underdeveloped capital markets. As the capital markets of these economies mature, coupled with improvements in the legal and institutional framework, property companies will have more scope to raise capital to expand their operations.

Originality/value

The paper offers international evidence on, first, the capital structure practices of property companies in different regions, and second, how capital market development influences the firms' financing decisions.

Details

Journal of Property Investment & Finance, vol. 30 no. 6
Type: Research Article
ISSN: 1463-578X

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Book part

Dania Thomas

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this…

Abstract

The social protests on the streets of indebted sovereigns in crises across the Eurozone have made debt restructuring an imperative. Further delay in achieving this expeditiously and equitably significantly exacerbates the social costs of crises from which current and future generations will struggle to recover. This article examines the feasibility of the drastic and widespread debt restructuring needed to resolve the problem in the face of existing private law sanctions that protect individual creditor rights. It relies on an analysis of US policy in the transition to a securitized market and of key sovereign debt cases to reveal the historical contingency of private law protections. It concludes by showing that the effectiveness of private law protections have always been constrained by the overriding imperative to achieve debt sustainability with negotiated and consensual workouts. This can be achieved in the Eurozone with statutory constraints on enforcement action pending the settlement of debt workouts as suggested in a recent proposal.

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From Economy to Society? Perspectives on Transnational Risk Regulation
Type: Book
ISBN: 978-1-78190-739-9

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Book part

Ayami Kobayashi

The paper examines the relationship between subordinated debt yield spreads of Japanese banks and bank-specific risk in the Japanese bond market. Subordinated debt issued…

Abstract

The paper examines the relationship between subordinated debt yield spreads of Japanese banks and bank-specific risk in the Japanese bond market. Subordinated debt issued by banking organizations may enhance the market discipline of banking organizations. In order to give a theoretical explanation for this, the paper develops models that describe how yield spreads of subordinated debt may be related to bank-specific risks and systematic risks. Although the sample size of this study is not large enough to draw an undisputed conclusion, the models tested here find no clear evidence of a positive relationship between subordinated debt premiums and bank-specific risks in the Japanese market. These findings for the Japanese market suggest that in the current environment of the Japanese financial system, issuing subordinated debt is unlikely to improve the prudential supervision of banks with market forces as suggested in the newly proposed Basel Accords.

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The Japanese Finance: Corporate Finance and Capital Markets in ...
Type: Book
ISBN: 978-1-84950-246-7

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Abstract

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Dynamics of Financial Stress and Economic Performance
Type: Book
ISBN: 978-1-78754-783-4

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Article

Corey Garriott, Sophie Lefebvre, Guillaume Nolin, Francisco Rivadeneyra and Adrian Walton

This paper aims to present four blue-sky ideas for lowering the cost of the Government of Canada’s debt without increasing the debt’s risk profile.

Abstract

Purpose

This paper aims to present four blue-sky ideas for lowering the cost of the Government of Canada’s debt without increasing the debt’s risk profile.

Design/methodology/approach

The authors argue that each idea would improve the secondary-market liquidity of government debt, thereby increasing the demand for government bonds, and thus, lowering their cost at issuance.

Findings

The first two ideas would improve liquidity by enhancing the active management of the government’s debt through market operations used to support the liquidity of outstanding bonds. The second two ideas would simplify the set of securities issued by the government, concentrating issuance in a smaller set of bonds that would each be more highly traded.

Originality/value

The authors discuss the ideas and give an account of the political, legal and operational impediments.

Details

Journal of Financial Economic Policy, vol. 12 no. 4
Type: Research Article
ISSN: 1757-6385

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Article

Halil D. Kaya

The purpose of this study is to examine the impact of interest rates on the size and the maturity choice of a syndicated bank loan. In addition, it attempts to determine…

Abstract

Purpose

The purpose of this study is to examine the impact of interest rates on the size and the maturity choice of a syndicated bank loan. In addition, it attempts to determine the long‐run impact of a syndicated loan on the borrower's capital structure.

Design/methodology/approach

The paper uses a sample of 6,903 syndicated bank loans in the USA, covering the period 1984‐2004. First, all syndicated loans are categorized into two groups: loans in periods of increasing interest rates, and loans in periods of decreasing rates. Then, non‐parametric tests are performed to compare the characteristics of the two groups, including the proceeds from the loans, and robust regressions are used to examine the impact of the interest rates on the maturity choice. Finally, robust regressions are employed to examine the long‐run impact of the interest rates on the borrowers' leverage ratios.

Findings

On the whole, the results reject the market timing theory of capital structure for syndicated bank loans. Firms in the two groups borrow in similar amounts, and in the long run, the difference between the two groups' leverage ratios is statistically insignificant. On the other hand, firms tend to choose longer maturities when the interest rates are low compared to the rates two or three years ago.

Originality/value

To the best of the author's knowledge, this is the first study that links debt market conditions to the leverage ratios of firms that borrow in the syndicated bank loan market. In other words, this is the first study that tests the market timing theory of capital structure for syndicated bank loans.

Details

Managerial Finance, vol. 37 no. 8
Type: Research Article
ISSN: 0307-4358

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Article

Weerakoon Banda Yatiwelle Koralalage

The purpose of this paper is to examine the managerial views on the corporate financing practices of firms in the emerging market of Sri Lanka.

Abstract

Purpose

The purpose of this paper is to examine the managerial views on the corporate financing practices of firms in the emerging market of Sri Lanka.

Design/methodology/approach

A survey approach was employed using chief financial officers (CFOs) from the top non-financial firms listed on the Colombo Stock Exchange.

Findings

CFOs’ views on corporate financing practices are not fully consistent with the theory: financial hierarchy appears to be more important and firms are less leveraged. Most Sri Lankan CFOs perceive some policy factors as important and theoretically support: volatility of earnings and cash flows, tax advantages of interest deductibility, transaction costs, timing of interest rates, low foreign interest rates and debt equity targets. These factors are high priority in emerging markets but either not important at all or less important in developed markets. Matching debt maturity with the life of assets is equally important in both markets. Most CFOs adhere their financing to the local debt market, while a few firms use foreign debt. CFOs are concerned about earnings per share (EPS) dilution, providing a natural hedge in foreign debt issues, credit ratings, under/overvaluation of stocks and corporate control, whereas they are significantly important in developed markets. Age and education mostly explain the differences.

Research limitations/implications

The study is restricted to large companies in a relatively smaller market. Hence, sample size is relatively small, even though it shows a higher response rate.

Practical implications

The study offers insights for corporate financing decision-makers that could impact on firm value through a shift in emphasis toward capital structure theories.

Originality/value

The paper focuses on corporate financing practices in Sri Lanka in search of emerging market features that could mitigate the gap in the emerging market literature through survey evidence.

Details

Qualitative Research in Financial Markets, vol. 8 no. 4
Type: Research Article
ISSN: 1755-4179

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