The minimum variance hedge and the bankruptcy risk of the firm

In this paper, we analyze the influence of hedging with forward contracts on the firm's probability of bankruptcy (POB). The minimization of this probability can serve as a substitute for the maximization of shareholders' wealth. It is shown that the popular minimum variance hedge is generally neither necessary nor sufficient for the minimization of the firm's POB. Moreover, our model suggests a correction of the widespread view that a reduction in the variance of the future value of the firm is inevitably accompanied by a reduction in its default risk. We derive an analytical solution for the variance-minimizing hedge ratio of a firm exposed to both input and output price uncertainty that takes into account the issue of correlation. Based on this solution, we provide a graphical analysis to prove our claim that there is a fundamental difference between hedging policies focused on bankruptcy risk and those following conventional wisdom even if positive correlation constitutes a “natural” hedge.     

Trade-off Model of Debt Maturity Structure

In this paper, we suggest the trade-off model to explain the choice of debt maturity. This model is based on balancing between risk and reward of using shorter-term loans. Shorter-term loans have cost advantage over, but incur higher refinancing and interest rate risk than longer-term loans. Using the Compustat data, we show that the principal components of financial attributes are financial flexibility and financial strength. Therefore, only firms with greater financial flexibility and financial strength can use proportionately more short-term loans. We also document that financially strong firms take advantage of lower interest rates of short-term debt. They use proportionately more short-term loans when the term premium is high. The results of our study also provide evidence supporting the agency cost hypothesis, which is strongly supported by current literature.     

Default- and call-adjusted duration for corporate bonds

Call and default can potentially alter the timing and amounts of promised cashflows for callable, corporate bonds. While prior research has indicated the theoretical importance of adjusting Macaulay duration for the impacts of default and call, the question of their relative impact remains a matter of debate [The High Yield Debt Market, Dow Jones Irwin, New York, 1990, p. 18; J. Finan. 53 (1998) 2225]. We develop a theoretical analysis incorporating both default and call effects on duration and test its implications employing a previously unexplored data base of Canadian, investment grade, corporate bond indices containing an unusual provision making it possible to identify callable and noncallable indices.     

Capital, corporate income taxes, and catastrophe insurance

We provide estimates of the equity capital needed and the resulting tax costs incurred when supplying catastrophe insurance/reinsurance using a partial equilibrium model that incorporates a specific loss distribution for US catastrophe losses. After consideration of insurer investment in tax-exempt securities, tax loss carry-back/forward provisions, and personal taxes, our results imply that the tax costs of equity finance alone have a substantial effect on the cost of supplying catastrophe reinsurance. These results help explain a variety of industry developments that reduce tax costs. Also, when coupled with non-tax costs of capital, these results help explain the limited scope of catastrophe insurance/reinsurance.     

Debt and Equity Characteristics of Mandatorily Redeemable Preferred Stock

Abstract. This study examines whether mandatorily redeemable preferred stock (MRPS) is priced more like debt or equity by (1) investigating its debt and equity characteristics and (2) specifying conditions under which one characteristic would dominate the other. Based on a sample of 113 nonconvertible MRPS issued during 1970 to 1990, our results are consistent with the view that MRPS has both debt and equity characteristics. The debt (equity) feature is more pronounced among nonutility (utility) issues. Within the utility group, we find high (low) rated MRPS issues to be more debt (equity) like. Our results appear to support current MRPS disclosure rules.     

公司治理与IPO抑价——来自中国股票市场的经验证据

Jensen与Meckling(1976)认为,代理成本是投资者愿意支付的价格与公司内在价值之间的差异。投资者对公司代理成本的预期也会体现在IPO定价过程中,良好的公司治理结构有助于降低公司IPO抑价。本文以我国2002—2003年的133家IPO公司为研究样本,研究样本公司治理结构特征对IPO抑价的影响。结果发现,控制权结构特征以及关联交易性质对IPO抑价有显著的影响,而董事会独立性对IPO的抑价影响则不显著。本文的结果表明,良好的公司治理结构可以显著地降低IPO抑价,降低公司股权融资成本。     

中国地方政府债务权责划分:实践探索与改革建议

地方政府债务权责划分是一国分级财政体制的重要内容。实现中国地方政府债务的合法化已经成为解决当前地方政府债务问题的前提条件。地方政府债务的合法化不仅是债务融资权的界定问题,更是管理责任的归属问题。近年来中国某些地方已经开始自发地探索地方层面上的政府债务权责划分的方法。国家应尽快制定统一的法规,赋予地方政府合法举债权,但应严格控制债务规模、界定使用范围。应在财政部和省市县财政部门设立债务管理机构,明确地方政府的债务偿还及风险管理责任,加大债务监督力度。     

税务行政处罚的法理探析

法学意义上的税收是一种金钱给付关系。关于税收的法律关系性质有权利关系说和债务关系说两种观点,不同观点之下对于税务行政处罚的法理有不同的分析。事实上,国家和纳税人之间是一种公法意义上的债权债务关系,税务行政处罚是国家对纳税人不按时履行税收合约的一种惩罚。     

The Original Maturity of Corporate Bonds: The Influence of Credit Rating,Asset Maturity,Security, and Macroeconomic Conditions

We examine the determinants of the new issue maturity of corporate bonds. As credit rating decreases, new bond issues have longer maturities, but substantial variation in maturity within each rating class remains. We seek to explain the variation of new issue maturity within credit classes. We find that asset maturity, security covenants, and macroeconomic conditions influence the new issue maturity of bonds within rating categories.     

Management accounting and corporate governance: An institutional interpretation of the agency problem

Challenging the dominant economic agency theory of corporate governance with a new discourse drawn from institutional theory, the paper analyses how management accounting is implicated in corporate governance. The proposed institutional theory of agency links the micro-institutions of the organization that are informed by the practices of management accounting with external institutional players and stakeholders. The paper identifies emerging narratives in which the management accounting profession has recognised a distinctive, post-Enron set of sensibilities. Although techniques drawn from strategic management accounting can be adapted to embed better corporate governance practices, the institutional theory of agency identifies tensions between the heroic CEO narrative and the routinization of strategy implicit in strategic management accounting.