ESTIMATING THE TAX BENEFITS OF DEBT

The standard approach to valuing interest tax shields assumes that full tax benefits are realized on every dollar of interest deduction in every scenario. The approach presented in this paper takes account of the possibility that interest tax shields cannot be used in some scenarios, in part because of variations in the firm's profitability. Because of the dynamic nature of the tax code (e.g., tax-loss carrybacks and carryforwards), it is necessary to consider past and future taxable income when estimating today's effective marginal tax rate. The paper uses a series of numerical examples to show that (1) the incremental value of an extra dollar of interest deduction is equal to the marginal tax rate appropriate for that dollar ; and (2) a firm's effective marginal tax rate (and therefore the marginal benefit of incremental interest deductions) can actually decline as the firm takes on additional debt.
Based on marginal benefit functions for thousands of firms from 1980–1999, the author concludes that the tax benefits of debt averaged approximately 10% of firm value during the 1980s, while declining to around 8% in the 1990s. By taking maximum advantage of the interest tax shield, the average firm could have increased its value by approximately 15% over the 1980s and 1990s, suggesting that the consequences of being underlevered are significant. Surprisingly, many of the companies that appear best able to service debt (i.e., those with the lowest apparent costs of debt) use the least amount of debt, on average. Treasurers and CFOs should critically reevaluate their companies' debt policies and consider the benefits of additional leverage, even if taking on more debt causes their credit ratings to slip a notch.     

债务融资工具“在路上”

应降低企业融资综合成本,鼓励地方政府财政给予配套资金,主要用于中小企业的贴息补助。对参与集合发债的担保机构担保额给予适当风险补偿,支持担保增信机构为中小企业债务融资服务。中国银行间市场交易商协会于2013年12月18日启动建立了非金融企业债务融资工具主承销商分层机制相关工作,将试点开展承销类会员（地方性银行类）参与B类主承销业务市场评价工作。在此之前,拥有银行间债券主承销资格的银行主要为国有大行和股份行,地方l生银行仅有北京银行、上海银行和南京银行在列。     

浅析商业银行非金融企业债务融资工具承销业务风险管控路径

非金融企业债务融资工具指具有法人资格非金融企业在银行间债券市场发行,约定一定期限内还本付息有价证券。在负债业务竞争加剧、资金成本不断上升的环境中,非金融企业债务融资工具业务不受存贷比、信贷政策限制,不占用资本金、风险拨备、法定准备金资源,不依赖利差收入,扩大承销费用等中间业务收入,衍生吸收存款、带动理财产品销售,满足客户低成本融资需求,为银行改善信贷结构、转型混业经营、拓宽盈利渠道。商业银行在开展业务时,应有效提升业务风险识别、分析、管控能力。     

BETAS AND DEBT MANAGEMENT WITHIN THE UK TAX ENVIRONMENT

Tax complexities relating to corporate tax losses, induced by debt finance, and to the differential tax treatment of equity and sterling debt, are introduced into corporate valuation. The after personal tax value of the geared firm can be less than that of the equivalent ungeared firm. Also, debt-induced tax losses can create negative betas. These fiscal effects are incorporated into degearing formulae under active and passive debt management policies.     

MANAGERIAL INCENTIVES AND THE USE OF FOREIGN‐EXCHANGE DERIVATIVES BY BANKS

We examine the effect of managerial compensation and ownership on the use of foreign‐exchange derivatives by U.S. bank holding companies. We focus on derivatives used for purposes other than trading to investigate derivative use in a hedging framework. We use instrumental variables probit and sample‐selection models to estimate the effects of endogenous and exogenous factors on the probability and extent of foreign‐exchange derivatives used. We find that the use of derivatives is inversely related to option awards but positively related to managerial ownership. Finally, our results suggest that ownership by large institutional shareholders provides incentive for managers to hedge.     

THE MARKET'S PRICING OF DEBT IPOs

Based on the authors' recent study published in the Journal of Financial Economics , this article summarizes new evidence on the first-day and aftermarket price performance of a firm's first public offer of bonds after its equity IPO. Unlike equity IPOs, such bond IPOs are not underpriced on average. However, bonds that are more equity-like (junk bonds) are underpriced at the initial offer whereas high-grade debt is actually overpriced. This finding supports the view that riskier debt issues have a larger equity component and, as a consequence, a higher degree of information asymmetry.
The authors' study also showed that less prestigious underwriters are associated with more underpriced offers, and that the issuer's stock market listing plays an important role in determining the first-day price performance of bond IPOs. The degree of underpricing is lower for bonds issued by firms whose equity is listed on NYSE/AMEX than for bonds issued by firms listed on Nasdaq. Finally, the aftermarket performance for the full sample and various subsamples is consistent with bond market efficiency in the sense that, once prices adjust after the first day of trading, there are no clearly exploitable opportunities for excess returns.     

UNDERSTANDING THE DESIGN OF CONVERTIBLE DEBT

There are now two dominant theories of convertible debt held by academic economists. One theory which has been called the "risk-shifting" hypothesis–effectively views convertibles as an alternative to straight debt. The second–known as the "sig-nalling" (or "backdoor-equity") theory-treats convertibles as an alternative to ordinary equity. This article attempts to unify (or at least to illustrate the relationship between) these two theories by focusing on the design of the securities.
In structuring a convertible, managers and their investment bankers must make a variety of decisions. Besides the coupon rate, face value, issue size, and maturity, managers must also decide the conversion ratio (the number of shares promised per bond) and the amount of call protection afforded investors. Several of these design features have the effect of making a convertible more like a straight debt or a straight equity issue. The hypothesis underlying the authors' recent research is that the issuers of debt-like convertibles are attempting to address a somewhat different financing challenge than the issuers of convertibles that behave more like equity. Their findings suggest that the primary aim of "debt-like" convertible issues is to address investors' uncertainty and concerns about risk, whereas the main goal of "equity-like" convertibles is to minimize the "information costs" associated with raising new equity.     

INCENTIVES AND THE RESOLUTION OF BANK DISTRESS

Unlike prudential regulations that are put in place prospectivelyto develop banks, procedures for dealing with banks in distressare generally determined on an ad hoc basis. Often the lackof clarity in the policy framework creates incentives for bankmanagers, shareholders, depositors, and regulators that undercutprompt resolution of financial distress. The result is ofteninaction, the accumulation of bad debts, and ultimately theassumption of losses by the state. This article argues thatgovernment intervention to relieve financial distress shouldbe institutionalized in a set of regulations that forces theauthorities to comply with reporting and decisionmaking processes.Only in this way can inherent disincentives for dealing withdistress be curtailed.      

THE LONG-RUN PERFORMANCE OF CONVERTIBLE DEBT ISSUERS

We examine the long-run operating and stock price performance of 828 convertible debt issuers. Relative to matched, nonissuing firms, convertible debt issuers have small improvements in operating performance before the offer and significant declines in operating performance from pre- to post-issue. We examine the relation between several factors and operating performance. We find that for some pre- to post-issue periods, operating performance changes are positively related to firm leverage and the callability of the bond, and negatively related to performance run-up before the offer and investment in new assets. We also find some evidence that firms that issued equity in the three years before their convertible debt issue have larger declines in performance after the offer. Relative to matched, nonissuing firms, convertible debt issuers have superior stock price performance before the offer and significantly poor performance after the issue.