Determinants of Credit Spreads in Commercial Mortgages

This article examines the cross-sectional and time-series determinants of commercial mortgage credit spreads as well as the terms of the mortgages. Consistent with theory, our empirical evidence indicates that mortgages on property types that tend to be riskier and have greater investment flexibility exhibit higher spreads. The relationship between the loan-to-value (LTV) ratio and spreads is relatively weak, which is probably due to the endogeneity of the LTV choice. However, the average LTV ratio per lender has a strong positive relation with credit spreads, which is consistent with the idea that lenders specialize in mortgages with either high or low levels of risk, and that high LTV mortgages require substantially higher spreads. Finally, we observe that spreads widen and mortgage terms become stricter after periods of poor performance of the real estate markets and after periods of greater default rates of outstanding real estate loans.     

Investor Protection and Governance in the Valuation of Emerging Markets Investments

The combination of ineffective corporate governance at the company level and an uncertain legal and regulatory environment can significantly reduce the prices investors are willing to pay when investing in companies in emerging markets. The authors report the findings of their recent survey that asks investment professionals to compare the value of a hypothetical Australian company with that of its identical counterparts located in five emerging markets: Malaysia, Mexico, Saudi Arabia, South Africa, and Iran. The responding investors said they would value the emerging markets investments at discounts from the value of the Australian company that ranged from a low of 13.5% for its Malaysian counterpart to 51.2% for the Iranian company. Moreover, they indicated they would require costs of equity for these investments that were consistent with even larger valuation discounts. The investors' responses to the survey also suggest that corporate governance is especially important in countries with weaker investor protection. Well‐governed companies located in these countries enjoy significant value premiums that can partly offset the negative effect of the poor institutional environments, which suggests there may be a significant payoff for investors that succeed in improving the governance of the companies they invest in.     

Pricing strategy and financial policy

Recent empirical evidence indicates that capital structure changesaffect pricing strategies. In most cases, prices increase followingthe implementation of a leveraged buyout of a major firm inan industry, with the more leveraged firm in the industry charginghigher prices on average. Notable exceptions exist, however,when the leverage increasing firm's rival is relatively unlevered.The first observation is consistent with a model where firmscompete for market share on the basis of price. The second observationcan be explained within the context of a Stackelberg model wherethe relatively unlevered rival acts as the Stackelberg priceleader.     

Revealing the screening: organisational factors influencing the recruitment of immigrant professionals

Little attention has been paid to factors that influence employers in their recruitment behaviour, especially as it affects immigrants. In order to address this gap in the literature, a case study of regional Australian employers is used to examine how organisation-based factors influence the employer screening and recruitment of immigrant professionals. The findings indicate that employers are not primarily driven by a human capital lens during the recruitment process. Rather they seem to be influenced by the place and specificity of the process. Some of the key factors which can either favourably or unfavourably influence employers include the organisational size, type, resource availability, ethnic diversity of clients, level of role criticalness, industry-based culture and management style.