CAPITAL STRUCTURES IN EMERGING STOCK MARKETS: THE CASE OF HUNGARY

This paper studies developments in the Hungarian capital markets during 1992–95 and investigates the determinants of the capital structures of companies listed on the Budapest Stock Exchange. Hungarian companies had very low leverage ratios. Empirical findings indicate that the negative relationship between leverage and proportion of tangible assets was primarily caused by the lack of long‐term debt financing. The relationship between leverage and the size of the company provides some indication of the importance of trade credits for the companies. The more profitable companies had less debt than less profitable ones. This is attributed to the firms’financial incentives aggravated by the segmentation of Hungarian credit markets and credit rationing within the financial environment. Manufacturing firms and firms with the state among their major shareholders enjoyed higher levels of debt financing relative to other companies.     

Blockholder Exit Threats and Financial Reporting Quality

Recent theoretical and empirical studies suggest that blockholders (shareholders with ownership ≥ 5 percent) exert governance through the threat of exit. Blockholders have strong incentives to gather private information and sell their shares when managers are perceived to underperform. To prevent blockholders from selling their shares and the firm from suffering a stock price decline, managers align their actions with the interests of shareholders. As a result of the greater manager‐shareholder alignment, managers' actions are more likely to be in shareholders' best interest, and consequently there is less need for managers to manipulate earnings. Consistent with these predictions from economic theory, we find evidence that as exit threat increases, firms have higher financial reporting quality. Theory also predicts that the impact of blockholders' exit threat on financial reporting quality (FRQ) should increase as the manager's wealth is tied more closely to the stock price, and this is what we find. Our study contributes to the research on the impact of shareholders on FRQ and to an emerging literature on the impact of blockholders in financial markets. Blockholders play an important role in managers' reporting outcomes through their actions as informed investors.     

Does “skin in the game” reduce risk taking? Leverage,liability and the long-run consequences of new deal banking reforms

This essay examines how the Banking Acts of the 1933 and 1935 and related New Deal legislation influenced risk taking in the financial sector of the U.S. economy. The analysis focuses on contingent liability of bank owners for losses incurred by their firms and how the elimination of this liability influenced leverage and lending by commercial banks. Using a new panel data set, we find contingent liability reduced risk taking. In states with contingent liability, banks used less leverage and converted each dollar of capital into fewer loans, and thus could survive larger loan losses (as a fraction of their portfolio) than banks in limited liability states. In states with limited liability, banks took on more leverage and risk, particularly in states that required banks with limited liability to join the Federal Deposit Insurance Corporation. In the long run, the New Deal replaced a regime of contingent liability with deposit insurance, stricter balance sheet regulation, and increased capital requirements, shifting the onus of risk management from bankers to state and federal regulators.     

企业负债经营的利弊分析

负债经营是现代企业发展的重要方式,但同时企业负债经营又是一把＂双刃剑＂。一方面,负债经营可以弥补资金短缺,有效降低企业平均资金成本,另一方面,过渡负债会给企业带来风险,引起股东和债权人之间的冲突。因此,合理有效地负债是企业负债经营的核心问题。企业必须合理运用资金,才能使企业永远在经济效益的轨道上运行。     

Leverage, performance and capital adequacy ratio in Taiwan's banking industry

We examine the relation between firms’ financial structures and their risky investment strategies in Taiwan's banking industry. Regressions cover two subperiods: before the first financial reform (1996–2000) and after the first financial reform (2001–2006), to address the impacts of the first financial reform on banking firms’ financial structures. Our first result demonstrates that the restrictions on CAR have indeed affected firms’ risky investment strategies, as market share and leverage are positively related. Second, the firm performance is significantly and positively related to firm size, leverage and financial cost. Finally, the regression results show that financial structures for banking firms are positively related to the states of business cycle (i.e., cyclical). The positive signs coincide with Proposition 4 in our analytical model.     

Saving,investment, growth and the cost of financial repression

This paper presents a quantitative estimate of the cost of financial repression in developing countries. Here, financial repression is interpreted as the technique of holding institutional interest rates (particularly deposit rates of interest) below their market equilibrium levels. For a sample of developing countries, saving is found to be affected positively by the real deposit rate of interest, as is real money demand, where money is defined broadly to include savings and time deposits. Under disequilibrium interest rate conditions, higher saving which raises real money demand increases pari passu the real supply of credit. Credit availability is an important determinant not only of new investment but also of capacity utilization of the entire capital stock. Hence, the growth rate is itself affected positively by the real deposit rate of interest through two channels – first, the volume of saving and investment and, second, capacity utilization of the entire capital stock, i.e. the measured incremental capital/output ratio. Estimates of saving and growth functions lead to the conclusion that the cost of financial repression appears to be around half a percetage point in economic growth foregone for every one percentage point by which the real deposit rate of interest is set below its market equilibrium rate.     

Contingent capital and bank risk‐taking among British banks before the First World War1

The recent financial turmoil highlights the incentive of highly leveraged financial institutions to take excessive risk, given the protection of limited liability. During the nineteenth and early twentieth century, many banks operated under liability rules which obligated shareholders to bear larger costs of bank insolvency in the form of contingent, or even unlimited, liability. This article examines the empirical relationship between the size of banks' contingent liability and their risk‐taking behaviour using data on British banks from 1878 to 1912. We find that banks with more contingent liability appear to have taken less risk. We also find evidence that the risk‐reducing effects of contingent liability were larger for banks with higher leverage, suggesting that contingent capital mitigated the moral hazard problem at banks.     

Capital Structure and Investment Financing of Small and Medium-Sized Enterprises in Vietnam

Insufficient sources of internal financing and inaccessibility of external financing are acknowledged as crucial constraints on new investment for small and medium-sized enterprises (SMEs). This study examines how capital structure is related to investment decision for SMEs in Vietnam. In particular, we investigate the effect of capital structure on the decision to seek new investment as well as the choice of its financing sources. The main results reveal that SMEs with high financial leverage tend to engage more in seeking new investment. Moreover, empirical results demonstrate that among SMEs seeking new investment, those with higher financial leverage are more likely to choose external financing rather than internal financing. These results confirm the dynamic feature of the pecking order theory in the context of SMEs’ capital structure in Vietnam.     

Investment Experience,Financial Literacy,and Investment‐Related Judgments

This research examines how investment experience and financial literacy impact investment‐related judgments. Financial literacy refers to a person's knowledge of fundamental financial concepts. I begin by documenting investors' demographic characteristics and financial literacy using a relatively large sample of participants (n > 2,000) recruited from Amazon's Mechanical Turk under different categories of investment experience, which I benchmark against national samples of financial capability skills in the United States. I then replicate a sample of three accounting research experiments, varying the type and depth of the underlying accounting issue. Across the three experiments, the data show two main results: First, investment experience strengthens the influence of financial accounting disclosures on participants' investment‐related judgments. Second, financial literacy further strengthens the influence of financial accounting disclosures on investors' (but not noninvestors') judgments. Collectively, these findings suggest that investment experience and financial literacy can help to identify individuals who are more likely to be able and willing to study financial reporting information with reasonable diligence as they form their investment‐related judgments.     

Explaining Interest Rate Spreads in Ghana*

Abstract: The question of the optimal spread between bank lending rates and rates that banks pay on deposits, which is fair to bankers, depositors and borrowers, has dogged economies for some time. In Ghana, there is widespread perception that the spread is too wide. Bankers, on the other hand justify the spread on the basis of economic variables that affect them. This paper contributes to the literature by identifying, in the case of Ghana, the short‐run response of the net interest margin of banks to changes in bank‐specific, industry‐specific and macroeconomic variables within the broad framework of Ho and Saunders (1981) . We find that increases in the following factors significantly increase net interest margin — bank market power (or concentration), bank size, staff costs, administrative costs, extent of bank risk aversion and the rate of inflation. On the other hand, increases in the following variables decrease net interest margin significantly — bank excess cash reserves, the central bank lending rate, management efficiency and the passage of time. To help reduce interest rate margins, we recommend that banks should not get too big, the central bank should consider lowering the capital adequacy ratio and banks should be required to pass on to borrowers the full extent of reductions or increases in the central bank lending rate. Continued efforts at keeping inflation at bay will also help.     

Sluggish Recovery from the Financial Crisis: Crowding-out Effect and Contagion

Abstract

The stimulus plans by the US Government after the financial crisis in 2008 may decrease private investment by means of a crowding-out effect. The US Federal Reserve utilized quantitative easing policies to maintain the interest rate as low as possible to minimize crowding-out. The 2008 financial crisis also affects other economies through contagion effects. This paper investigates the existence of the crowding-out effect and contagion effect after the crisis using Temin and Voth's models. The empirical results from vector autoregession show that there is a crowding-out effect in the US economy as well as a contagion effect of the crisis on the Korean and Japanese economies.     

Shareholder rights and share capital: the effect of the 1901 Russian Corporation Reform, 1890–1905

During the nineteenth and early twentieth centuries, western European countries introduced general incorporation and additional flexible enterprise forms, but the Russian Empire left its concession system of incorporation in place. The Empire's only major corporation reform, the 1901 law, strengthened minority shareholder rights and removed bankers from boards of directors for certain corporations. The reform offers a rare opportunity to examine the financial effects of improving corporations’ principal–agent relationships through regulation, because the reform did not affect all corporations equally. Corporations affected by the reform had smaller total share capital, fewer shares, and higher par values for shares as observed in 1905. The new regulations may have increased the cost of having shareholders and hence disciplined corporations’ founders to be more conservative in raising capital by issuing stock. Removing bankers from boards of directors may have removed an important source of firms’ founding capital, though corporations could easily evade this provision. The results also show that, although the commercial code treated all corporations equally, there were two major groups of Russian corporations that behaved differently, and, despite the fact that corporate charters could grant individual exceptions to the commercial code, a revision in the commercial code changed corporations’ behaviour.     

Individual investors and local bias in the UK, 1870–1935

This article examines the long‐run evolution of local bias by UK investors between the 1870s and the 1930s. It uses a large sample of nearly 30,000 shareholders based on 197 sets of share records, a large and representative database of the investor population across sectors and time. It investigates the structure and the evolution of local investment preference between shareholders and the companies in which they invested, as measured by the distance between where they lived and corporate headquarters. The study offers evidence of strong initial local investment preference, which declined over time for non‐Londoners, but remained strong for Londoners until the 1930s. Local investment preference of security holders was related to the size of the board of directors and, for wealthy investors, was related to the age of the firm. For large firms, local networks between investors and directors appear stronger when director shareholdings and voting rights were important. This study supports the analytical hypothesis of local informal trust networks between investors and directors as a means to overcome informational asymmetries and weak legal protection, and provides evidence that local preference was a means to curb insider opportunism and private benefits of control.     

不确定性风险对企业投资的影响机制分析——基于金融市场摩擦的间接渠道视角

现有研究表明,不确定性风险会通过直接渠道和间接渠道影响企业投资,但着重分析间接渠道的文献较少。文章以1994-2018年中国沪深A股上市公司的财务数据、股票交易数据和中国经济政策不确定性指数为样本,在控制住直接渠道的影响后,实证检验了不确定性风险如何通过金融市场摩擦机制间接影响微观企业的投资行为。研究发现：不确定性风险会通过金融市场摩擦机制来显著增加企业融资成本,降低企业融资数量;且金融市场摩擦机制间接降低企业投资的中介效应显著。在异质性企业的对比中,成本效应对所有企业的影响效果差异不大;而相对于低杠杆、国有化和大规模的企业,数量效应对高杠杆、民营和小规模等高风险企业的影响效果更大。这说明,成本效应和数量效应的影响是系统性的,但数量效应更具结构性特征。     

Chief Financial Officers as Inside Directors

Considerable prior research investigates whether the extent of insider presence on corporate boards is detrimental. However, the majority of past research treats all inside directors as a homogenous group. This study considers that issue in the context of chief financial officers (CFO) serving on their own company's board. Our research is important because individuals in different executive roles bring different skills and knowledge to board interactions, highlighting the potential for differential contributions. As prior research does not specifically distinguish CFOs from other board insiders, the potential benefits of knowledge sharing due to increased communication with other board members may have been masked. Specifically, the CFO is directly responsible for the quality of the financial reporting process and can therefore be associated with specific outcome measures. Our results show that the percentage of CFOs serving on their own boards is not large, likely due to the perspective (consistent with agency theory and reflected in independence guidelines) that company insiders on boards could promote their own best interest at the expense of shareholders. Contrary to this perception, we find that companies whose CFO has a seat on the board are associated with higher financial reporting quality (i.e., a lower likelihood of reporting a material weaknesses in internal controls or having a financial restatement, and better accruals quality). Yet, we also find potential drawbacks in that CFOs with a board seat tend to have higher excess compensation and lower likelihood of termination following poor performance, signaling greater entrenchment. While our results provide information to companies considering appointing the CFO to the board, both costs and benefits are demonstrated, and thus we conclude that each board should consider this decision based on its own circumstances and composition.     

Listing and financial constraints

We confirm, with a twist, that listing to a stock exchange can mitigate financial constraints of firms, using Japanese firm-level data of 20 years, 1995–2014, controlling for the main-bank relationship and majority owner influence. Compared to a similar unlisted firm, a listed firm has a lower marginal product of capital on average and more new borrowings during recessions. Theoretically, we argue that these are the key pieces of evidence that indicate less tight financial constraints for the listed firms than the unlisted firms. However, the listed firms do not borrow more on average over time. They rather maintain a lower leverage so that they can mitigate the borrowing constraints. We also find that the listed firms do not face lower interest rates.     

银行股东大会选任董事长法律效力浅析

股份有限公司(包括各类金融行业的公司)的董事长是怎么产生的呢?答案是由董事会以全体董事的过半数选举产生。其法律依据是《公司法》第110条:董事会设董事长一人,可以设副董事长。董事长和副董事长由董事会以全体董事的过半数选举产生。然而现实中的情况却要复杂得多,除了一部分董事会产生的董事长以外,还有不少股份有限公司的董事长是由股东大会选举或任命产生的。那么,股东大会能否选任董事长,这种途径产生的董事长到底有有没有效力呢?本文将在分析股东大会的性质和职能基础之上,结合我国《公司法》的有关规定及立法目的,同时考虑到公司在运营过程中的实际情况,逐步得出一些令人信服的结论,希望能对司法实践中处理此类问题提供一些有益的建议和帮助。     

信托业在金融促进经济发展中的作用探析

信托业作为"四大金融支柱"之一,应当在金融促进经济发展中发挥重要作用。在当前的经济金融形势以及政策环境下,信托公司可以为银行提供通道服务,放大信贷规模,满足企业融资需求;与地方政府合作,满足基础设施建设的融资需求;开发房地产信托产品,促进房地产业发展;开展股票质押融资信托业务,满足"大小非"融资需求;开展私人股权投资信托业务,满足企业股权融资需求。     

中小板医药企业创造价值的实证研究——基于2007～2009年EVA值的分析

EVA是企业税后净利润中扣除所有资本的使用成本之后的经济利润值,是企业经营者真正为股东创造的价值。我国中小板医药企业具有高收益、高成长性等特点,具备较高投资价值。本文通过计算中小医药企业的EVA值和REVA值,并与主板医药企业和中小板非医药企业进行比较,发现中小医药企业的EVA值REVA值有显著的优势,中小医药企业能为股东带来更多的价值收益,为投资决策者提出指导意见。并为企业管理者提出将创造价值引入经营理念使得股东获益最大化的建议。     

Competitive blind spots and the cyclicality of investment: Experimental evidence

We report laboratory experiments investigating the cyclicality of profit-enhancing investment in a competitive environment. In our setting, optimal investment is counter-cyclical when investment costs fall following market downturns. However, we do not observe counter-cyclical investment. Instead, we see much less strategic behavior than our rational investment model anticipates. Our participants exhibit what Porter (1980) terms a competitive blind spot, and heuristic investment models where individuals invest a fixed percentage of their liquidity, or a fixed percentage of anticipated market demand, better fit our data than does optimal investment. We also report a control treatment without cost changes and a treatment with asymmetric investment liquidity. Both of these extensions support our main result.