TOWARD A MORE COMPLETE MODEL OF OPTIMAL CAPITAL STRUCTURE

Most corporate finance practitioners understand the trade-off involved in making effective use of debt capacity while safeguarding the firm's ability to execute its business strategy without disruption. But quantifying that trade-off to arrive at an optimal level of debt can be a complicated and challenging task. This paper develops a simulation model of capital structure that starts by generating multiple estimates of market rates (LIBOR, currency rates) and corresponding company operating cash flows. To arrive at an optimal capital structure, the model then incorporates the shareholder value effects of alternative financing decisions by directly measuring the costs of financial distress, including the costs of missed investment opportunities and higher working capital requirements.
The model generates both a target credit rating and a lower fallback rating that permits a higher level of debt to maintain investments and dividends when operating cash flows are weak. As the model shows, companies with volatile cash flows and significant investment opportunities can add substantial shareholder value by establishing a fallback credit rating that is one or two notches below the target rating. The model also optimizes the mix of fixed versus floating debt, the maturity structure, and the currency composition. Another distinctive feature of the model is its ability to estimate the expected cost of alternative liability structures that can provide the liquidity insurance necessary to sustain the firm through periods of severe stress. This cost turns out to be quite small relative to the total market capitalization of the average firm.     

Earnings Surprise "Materiality" as Measured by Stock Returns

Ranked earnings surprise portfolios formed from First Call files for 1992–97 are used to assess the annual earnings surprise magnitude for an individual firm sufficient to expect a "significant market reaction." We find that, for an individual firm, the maximum probability of a gain from trading on prior knowledge of any surprise magnitude is .622. The lack of probable trading gains is due to the S–shaped surprise/return relation and the large variance of returns for a given magnitude of surprise. In turn, we find that the S–shape is related empirically to the dispersion of analyst forecasts. Thus, factors underlying dispersion differences are related to the importance or "materiality" of earnings surprise as measured by stock returns and explain at least part of the S–shaped surprise/return relation.     

IT管理误区:不只足简单削减成本

世界各地的经济体都在经历经济滑坡,企业正在寻求削减开支、改善收支状况的良方.虽然信息技术(IT)在企业的成本基数中所占的比例通常较小,但企业高管们仍不可避免地会将他们的注意力转向IT预算,对其进行大幅削减.     

Marketing’s contribution to the strategy dialogue revisited

Conclusions The purpose of this commentary is to offer a different perspective on marketing’s contributions to the strategy dialogue and strategic management from that provided by Day. In this regard, the comment intends to supplement and complement his valuable insights. In closing, it is instructive to consider what is meant by strategy and consider the thoughts of Andrews (1983): It is part of the comprehensive concept of strategy that leaders of a company must be dedicated to the durable core of a company’s character ... while encouraging innovations that will bring about or respond to the changes taking place in its surroundings (p. 9). Another look at the very concept of strategy might provide marketing and strategic management scholars with the foundation upon which to build a substantive dialogue.     

THE RELATIONSHIP BETWEEN BEFORE- AND AFTER-TAX YIELDS ON FINANCIAL ASSETS

In this research, the traditional approximation that after-tax yields equal before-tax yields times one minus the tax rate is shown in general to be incorrect. The traditional relationship holds only for one-year assets and perpetuities when a single tax rate applies to both ordinary income and capital gains. For all other multiperiod assets, the correct relationship is much more complex and is a function of the statutory tax rates on ordinary income and capital gains, the holding period, the dividend growth rate for common stocks, and any premium or discount on bonds. The direction of bond price changes is related inversely to the direction of the tax rate changes, but the direction of common stock price changes is related ambiguously to the direction of tax rate changes.     

Predicting African military coups

Since independence the states of Black Africa have witnessed well over 40 successful military coups d'état—events which have commonly been interpreted as occurring in an essentially random and unpredictable manner. Surveying both current and past attempts at explanation and prediction the paper argues that more successful forecasts depend on a recognition that coups are not an homogeneous category and that motives for intervention exhibit clear temporal variations.