EXTERNAL FINANCING,LIQUIDITY, AND CAPITAL EXPENDITURES

Using a large panel of industrial Compustat firms from 1971 to 1988, we find long-term external financing to be positively related to the period's capital expenditures on growth opportunities, but negatively related to beginning-of-the-period financial slack, broadly defined. These findings support the view that firms tend to match long-term sources of financing with long-lived assets, and short-term debt with short-lived assets. Our results also reinforce the belief that firms prefer internal to external financing. We find no evidence that firms favor financing capital expenditures with short-term debt, either permanently or temporarily.     

EXECUTIVE COMPENSATION STRUCTURE AND CORPORATE GOVERNANCE CHOICES

Using data that reflect the significant growth in incentive compensation during the last decade, we extend research in this area by specifying a more complete model that addresses both corporate governance and risk‐sharing factors that theory suggests should influence compensation policy. We find that the extent of incentive compensation is systematically related to other features of corporate governance, as well as to factors affecting managerial risk aversion. The results support the following conclusions: (a) the presence of outside directors and blockholders facilitates the use of incentive compensation, (b) incentive compensation is inversely related to use of leverage, and (c) the incentive pay component of compensation is lower for CEOs near or at retirement age and is decreasing in the percentage of firm stock already owned by the CEO. JEL classification: G34     

为小微企业“造血生肌”

如果可以用“骨架”来形容大中型企业在经济体系中的作用,那么小微企业就是当之无愧的经济“肌肉”。     

CONTINGENT CAPITAL: INTEGRATING CORPORATE FINANCING AND RISK MANAGEMENT DECISIONS

Financial executives of companies that face a sharp increase in business or financial risks have two basic ways of protecting the solvency and strategic viability of their organizations: they can transfer those risks using insurance or derivatives; or they can raise additional capital, typically by issuing equity, to cushion the firm against the higher expected volatility. But CFOs now also have a third means of managing risk, known as "contingent capital," that effectively combines capital raising and risk management.
A contingent capital facility gives a company the right to raise capital after the realization of a loss arising from one or more specified risks, thus ensuring access to capital in potentially difficult times. For example, Swiss Re recently granted Michelin a five-year right to issue ten-year subordinated debt at a fixed spread over LIBOR, though only under conditions in which the tire maker expects its own earnings to be down. To the extent that it eliminates the need to keep more capital on the balance sheet, the use of such contingent capital has the potential to increase shareholder value by reducing a company's overall cost of capital. This article provides an introduction to some recent innovations in contingent capital, along with discussion of their role in integrating corporate finance and risk management.     

SECURITIES OFFERINGS AND CAPITAL STRUCTURE THEORY

This paper analyzes a large sample of public security offerings to determine the motivation to issue debt or common equity. The results provide new evidence that the existence of asymmetric information plays a key role in firms' choice of security. Bankruptcy risk appears to affect the issue decision, but other traditional capital structure considerations do not. Variations in the determinants of security choice over time suggest a dynamic aspect to capital structure decisions not recognized in previous studies.     

运用资本市场对接投融资需求

资本市场对民间资本而言并不是一个陌生的地方。投资股票、基金、期货……处处活跃的都是民间资金的身影。但这远不是民间资本参与资本市场的全部。     

HOW DO CFOs MAKE CAPITAL BUDGETING AND CAPITAL STRUCTURE DECISIONS?

This paper summarizes the findings of the authors' recent survey of 392 CFOs about the current practice of corporate finance, with main focus on the areas of capital budgeting and capital structure. The findings of the survey are predictable in some respects but surprising in others. For example, although the discounted cash flow method taught in our business schools is much more widely used as a project evaluation method than it was ten or 20 years ago, the popularity of the payback method continues despite shortcomings that have been pointed out for years. In setting capital structure policy, CFOs appear to place less emphasis on formal leverage targets that reflect the trade‐off between the costs and benefits of debt than on “informal” criteria such as credit ratings and financial flexibility. And despite the efforts of academics to demonstrate that EPS dilution per se should be irrelevant to stock valuation, avoiding dilution of EPS was the most cited reason for companies reluctance to issue equity. But despite such apparent contradictions between theory and practice, finance theory does seem to be gaining ground. For example, large companies were much more likely than their smaller counterparts to use DCF and NPV techniques, while small firms still tended to rely heavily on the payback criterion. And a majority of the CFOs of the large companies said they had “strict” or “somewhat strict” target debt ratios, whereas only a third of small firms claimed to have such targets. What does the future hold? On the one hand, the authors suggest that we are likely to see greater corporate acceptance of certain aspects of financial theory, including the use of real options techniques for evaluating corporate investments. But we are also likely to see further modifications and refinements of the theory, particularly with respect to smaller companies that have limited access to capital markets.     

SIMULTANEOUS DEBT AND EQUITY ISSUES AND CAPITAL STRUCTURE TARGETS

Numerous empirical studies find evidence that managers behave as if they pursue target debt ratios. A possible alternative to the use of conventional, separate issuances of debt and equity to effect desired adjustments toward a target ratio is the simultaneous issuance of such securities. We extend prior research on such issues by exploring their use in the pursuit of capital structure targets. We find that the issuance of securities in general and the use of simultaneous issues of debt and equity in particular are at least partially influenced by where a firm's capital structure is relative to the average position in its industry. Further, shareholders' reactions to the announced plan to issue and to the issuance of securities are influenced, in part, by whether the issue moves the firm toward or away from the average capital structure in the industry. We also find evidence that the infrequent use of simultaneous issues relative to unaccompanied debt and equity issues is explained by their comparative flotation costs.