Conditional Conservatism and Debt versus Equity Financing

Extant research suggests that conditional conservatism reduces information asymmetry between a firm and its shareholders as well as its debtholders. However, there is little evidence on whether conditional conservatism reduces information asymmetry differentially for shareholders and debtholders. We use the setting of a firm's choice between equity versus debt when it seeks a significant amount of external financing to examine this research question. We find that when firms raise a significant amount of external financing, the use of equity (versus debt) increases with the level of conservatism. We also find that the reduction in cost of equity associated with conservatism is greater for equity issuers than for debt issuers, but find no such difference when we examine cost of debt. In addition, we find that the positive effect of conservatism on the choice of equity issuance (versus debt issuance) is accentuated when the information asymmetry between the firm and its shareholders is more severe. Overall, our results suggest that conservatism reduces information asymmetry more between firms and shareholders than between firms and debtholders.     

自发自还背景下我国地方政府债券信用风险研究

在地方政府债券自发自还的背景下，研究我国地方政府市政债券信用风险，对于相关监管部门确定省、市层级合理适度的市政债券发行额度和规模，对于市政债券的发行者以及投资者准确评估市政债券信用风险，确保市政债券安全有效地发行具有重要意义。文章通过引入奈特不确定性因素期权定价理论的相关思想，构建了市政债券信用风险模型。研究结果表明在考虑奈特不确定性背景下，当债务规模占可担保财政收入80%以下时，理论违约概率趋近于零，当债务规模达到可担保财政收入80%以上之后，理论违约概率对债务规模的敏感性突然放大。据此文章得出结论：在考虑奈特不确定性因素的背景下，违约率与奈特不确定性因子存在正相关关系；市政债券规模需严格控制。     

Growth opportunities,collateral and debt structure: the case of the Japanese machine manufacturing firms

We explore the determinants of debt structure by analyzing the Japanese machine manufacturing firms’ data from 1990 through 1996. We find that firms with abundant growth opportunities and scarce collateral are likely to borrow from banks rather than to issue bonds. This is robust even if we consider the simultaneous decision of the debt composition and leverage or managerial incentive. We also find that firms with abundant growth opportunities or collateral tend to depend on equity rather than on debt. Though banks reduce the agency costs of debt for growing firms, equity costs less than bank loans for them.     

Stackelberg横向兼并博弈的分析

文章通过增加"蛇吞象"式兼并分析,扩展了Steffen-Kai-Wieland模型,研究结果表明:无论"大鱼吃小鱼","蛇吞象","强强联合",还是"弱者联合"的兼并,四种兼并对参与企业都是有利可图的.但这些兼并都会提高市场集中度,导致消费者福利下降.     

财政分权，省级官员特征与地方政府债务规模——基于2010-2014年省级政府数据的实证分析

政府债务规模和风险是一级政府关注的重点问题。从财政分权和省级官员特征两个维度,本文考察了地方政府债务规模的影响因素,并在此基础上进一步研究财政分权程度和省级官员特征对地方政府债务规模的交互影响作用。通过2010-2014年30个省级政府的实证数据进行混合OLS回归,研究发现财政分权程度越高,地方政府债务规模越小。省级官员的年龄过大或过小都会使地方政府债务规模的减小,同时具有企业工作背景的省长和省委书记也会抑制地方政府债务规模的扩张,并且财政分权和省级官员特征对地方政府债务规模的影响是相互促进的。据此提出建议,合理控制地方政府债务膨胀。     

Accounting Restatements and External Financing Choices*

There is little research on how accounting information quality affects a firm’s external financing choices. In this paper, we use the occurrence of accounting restatements as a proxy for the reduced credibility of accounting information and investigate how restatements affect a firm’s external financing choices. We find that for firms that obtain external financing after restatements, they rely more on debt financing, especially private debt financing, and less on equity financing. The increase in debt financing is more pronounced for firms with more severe information problems and less pronounced for firms with prompt CEO or CFO turnover and auditor dismissal. Our evidence indicates that accounting information quality affects capital providers’ resource allocation and that debt holders help alleviate information problems after accounting restatements.     

Corporate Investment Incentives and Accounting‐Based Debt Covenants*

This paper studies the conditions under which accounting‐based debt covenants increase firm value in a setting that incorporates the conflicting incentives of shareholders, bondholders, and managers. We construct a model in which debt is needed to discipline managerial investment decisions despite endogenous compensation contracts. We show that accounting covenants increase value when (1) debt serves as a credible commitment to penalize poor investment decisions; (2) the firm faces other (exogenous) sources of uncertainty that can make debt risky despite good investment decisions; and (3) accounting information serves as a contractible proxy for firm's economic performance. In these circumstances, accounting covenants ensure that shareholders do not offer compensation schemes that would encourage bondholder wealth expropriation when the debt becomes risky. A covenant specifying a required level of accounting performance provides additional bondholder power when performance is low. An accounting‐based dividend covenant allows a disbursement to maintain investment incentives when performance is high without allowing dividend‐based expropriation. The optimal covenants depend on the reliability of accounting information, and the interaction between accounting performance and the different incentive conflicts provides new insight into the empirical literature on accounting‐based covenants.     

管理人员的综合测评方法研究

随着国债规模的扩大和国债政策市场化、长期化趋势的确立 ,优化国债融资成本的迫切性日益突出。针对我国国债市场的非市场化结构特征 ,我们提出以市场化为核心的优化国债市场结构和筹资成本的思路 ,并通过理论与实证分析相结合的方法探讨优化国债融资成本的较佳途径     

Why do Japanese regional banks issue subordinated debts?

This paper empirically investigates the determinants of subordinated debt issuance by Japanese regional banks during the period of 2000–2007 using a probit model. The empirical results suggest the following. (i) Throughout the period, Japanese regional banks with a lower capital ratio tended to have a higher incentive to issue subordinated debts due possibly to their counting as Tier 2 capital under the Basel Accord. (ii) During the period of banking instability (2000–2003), subordinated debt investors tended to use financial variables such as the non-performing loan ratio, ROA, and ROE to screen good banks. (iii) During the period after the banking system regained stability (2004–2007), investors tended to pay less attention to the above variables due chiefly to the mitigated default risk of these banks.     

Financing Technological Innovation: Evidence from Patent-Intensive Firms

ABSTRACT

Equityholders of firms with high debt loads have an incentive to underinvest, a distortion that can be most costly for firms with attractive growth options. Using a novel patent-based measure of a firm's growth options, we find that firms issue more equity and shy away from debt financing when they have larger investment opportunities sets. The results are more pronounced among firms in patent-intensive industries. The findings suggest the existence of conflicts of interest between debtholders and equityholders. Our results are consistent with the use of conservative debt policies by technology-intensive firms to mitigate the debt overhang associated with their future growth options.     

CEO experience and corporate financing decisions: Evidence from a natural experiment in China

Using the unique setting in China's economic transition and market reform, we investigate whether CEOs' experience regarding an economic boom affect corporate financing decisions. Economic booming, as a result of China's reform and open policy since 1978, affects individual risk preferences and decision behavior for those who grew up during the reform process. We find that Reform-and-Opening CEOs, who experience the reform and open-up era early in life, implement more aggressive capital structure policies and maintain higher leverage compared to Planned Economy CEOs. Furthermore, we determine that Reform-and-Opening CEOs tend to conduct debt issuance more frequently to cover financing needs as they can better deal with the liquidity risk of debt financing and confront the pressures arising from frequent monitoring by the debt markets. Using the stagewise regression, we find a cumulative effect of early growth experience. We also use the common trend test and placebo tests to deal with the concern that Reform-and-Opening CEOs pursue significantly more aggressive financial policies relevant to the systematic differences. Additional tests rule out the possibility that our results are driven by industry competition, state ownership, and educational ideology.     

中国地方政府是否可以发债？

This paper shows that just banning local governments from issuing debts has not eliminated the local government debt in many Chinese provinces. The paper then advocates that local governments should be allowed to issue bonds, but subject to some stringent fiscal rules.These fiscal rules should include a balanced-budget rule and a debt limit rule, similar to those already in place among the US states. Furthermore, such rules can only be made effective if they are accompanied by parallel institutional building efforts such as transparent budget process and budget institutions, independent credit rating agencies, proper accounting and auditing process, and other inter-governmental agencies aimed at alleviating information asymmetry of local government finances. Our domestic currency ratings indicate that all Chinese provinces possess basic creditworthiness that will enable them to issue domestic currency bonds.     

可转换债券发行时机实证研究

本文采用实证研究方法,对我国可转换债券的时机选择问题进行了研究。研究结果表明:a.我国企业发行可转换债券,偏好权益市场收益率较高的月度;b.企业发行可转换债券的时机选择与企业长期债券收益率(或成本)的变化之间不存在必然的联系;c.企业发行可转换债券时,普遍不存在严重的代理冲突问题。     

Infrastructure Bond Markets Development in Asia: Challenges and Solutions

To sustain economic growth momentum, Asia needs to continue investing heavily in infrastructure such as roads, ports, and power plants. Financing the region’s huge demand for infrastructure investments is an essential issue for policy-makers across the region. Against the backdrop of expanding fiscal burdens of Asian governments and more stringent capital requirements on bank lending, local currency bonds can serve as an alternative for infrastructure financing in Asia. In this paper, we use empirical analysis to identify the major determinants of infrastructure bond market development. Evidence indicates that an economy’s size is positively related to infrastructure bond market development. Furthermore, we find that Project Bond Initiative, a European Union initiative, contributed significantly to infrastructure development in Europe. The implication for Asian policy-makers is that deepening regional integration of Asian bond markets would help Asian economies to reach an efficient economic scale to foster infrastructure bond market and policy measures in the forms of credit enhancement would facilitate issuance of infrastructure bonds.     

The pressure of economic growth and the issuance of Urban Investment Bonds: Based on panel data from 2005 to 2011 in China

This paper explores the motivations behind the issuance of Urban Investment Bonds (UIBs) to stimulate local economies in China after the 2008 global financial crisis. Based on panel data from 2005 to 2011, we find that pressure to achieve economic growth has a positive effect on the issuance of UIBs, while fiscal pressure has the opposite effect on UIB issuance. We also find that the tenure of municipal party secretary, the revenue of land-use right transfer and fiscal pressure will change the impact of economic growth pressure on UIB issuance. These results are consistent with a pattern in which China's local government officials are influenced by the central government's assessment of local economic growth performance and have promotion-related incentives to maintain and develop the local economy.     

Debt and taxes: Fiscal strain and US city budgets during the Great Depression

Although municipal budgets fared well on average during the Great Depression, many suffered greatly. In newspapers and trade publications, observers blamed distress in real estate markets as well as the rise in tax delinquency and real debt obligations. This paper uses a sample of large US cities to estimate how those factors influenced municipal revenue and expenditures during the Depression. Results show that city finances were stable when facing the housing market distress that plagued many urban areas in the 1930s. The principal elements of fiscal strain were actually rising delinquency, which was associated with diminished revenue and operating expenditures, and growing real debt obligations, which were associated with reduced capital outlays. Thus local budgets were driven more by the behavior of taxpayers and obligations to city creditors than by the downturn in real estate markets. These findings illuminate municipal governments’ responses to the fiscal strain wrought by the Depression.     

The Use of Debt Covenants Worldwide: Institutional Determinants and Implications on Financial Reporting

This study investigates how the use of debt covenants around the world varies with legal institutions. On the basis of syndicated loans in 36 countries, we find that debt covenants are more prevalent in countries with stronger law enforcement and weaker creditor rights, suggesting that law enforcement facilitates, and creditor rights substitute for, the use of covenants. We also find that the substitution effect between covenant use and creditor rights exists mainly in countries with strong law enforcement, and the effect of legal institutions on covenants is primarily driven by covenants that preserve seniority and capital. In addition, timely loss recognition increases with the use of debt covenants and strong creditor rights attenuate this relation. Overall, our study is the first to provide comprehensive evidence on how the use of debt covenants responds to legal institutions and how it bridges the previously documented link between legal institutions and accounting conservatism.     

Government Debt Denomination Policies Before and After the EMU Advent

Through a cost-minimizing approach, this paper derives joint indicators to assess the efficiency of the mix of sovereign debt currencies between the countries belonging to the European Monetary Union (EMU). This theoretical insight enables us to explain why and how the introduction of the euro and the adoption of a common monetary policy may have led to significant changes in debt structure among EMU members, notably in favor of further euro-denominated debt. The interplay of intrinsic and strategic variables yields stylized facts that are consistent with country-specific empirical evidence. Following the sovereign debt crisis, we further emphasize the value-added of a coordinated debt issuance policy among EMU countries.     

The choice of financing with public debt versus private debt: New evidence from Japan after critical binding regulations were removed

The complete removal of binding regulatory constraints on bond issuance till 1993 provides an opportunity ripe enough to test hypotheses on the choice of financing with public debt and bank debt, comparing with the partial deregulation of Japanese financial markets in the late 1980s. Regardless of further deregulation, there is a U-turning to bank debt in Japan's corporate financing as the 1990s’ recession prolonging. In particular, we find high quality Japanese firms leave banks to the bond market, while low quality firms U-turn to bank debt. We also provide new evidence that Japanese banks tend to lend loans to wealthy firms. Because of a shift from equity-linked bond to straight bond during 1993–1997, our study provides a complement to evidence on financing choices of equity-linked public debt versus bank debt with the late 1980s’ bull stock market.     

Fiscal and monetary policy in a monetary union: Credible inflation targets or monetized debt?

Fiscal and Monetary Policy in a Monetary Union: Credible Inflation Targets or Monetized Debt? —The paper examines the interrelationship between fiscal and monetary policy in a two-country monetary union. The worst scenario occurs when an independent central bank sets the nominal interest rate and responds to rising government debt/GDP ratios by monetization. The result is high inflation, high debt/GDP ratios and a large public sector. Government debt and inflation are contained if the governments bear sole responsibility for solvency, but the public sector remains excessively large. The best scenario occurs if the central bank removes the incentive for the governments to engineer surprise inflation by credible inflation targeting.