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External Financing (external + financing)
Selected AbstractsFinancing Constraints, Ownership Control, and Cross-Border M&As: Evidence from Nine East Asian EconomiesCORPORATE GOVERNANCE, Issue 6 2009Yenn-Ru Chen ABSTRACT Manuscript Type: Empirical Research Question/Issue: This study distinguishes between the effects of financial constraint determinants on cross-border mergers and acquisitions (M&As) and domestic M&As for all takeover bids announced in nine East Asian economies from 1998 to 2005. Research Findings/Insights: The results of logistic regressions verify that the extent of stock market and governance developments improves corporate financing conditions and subsequently encourages cross-border M&As in East Asia. The results also indicate that, except for ownership control variables, the firm-specific factors of financing constraints reduce the occurrence of cross-border M&As relative to domestic M&As. Although family- and state-controlled firms have better access to external financing, they are reluctant to risk diluting their management control and thus prefer domestic M&As to cross-border deals. Theoretical/Academic Implications: This study enhances the empirical studies of the relation between financing constraints and corporate investments based on the market imperfection hypothesis of corporate finance theories. In addition, this study also addresses the interaction between the market imperfection hypothesis and agency theory in explaining the effects of special ownership control on cross-border M&As relative to domestic deals. Furthermore, by examining the research questions across nine East Asian economies, this study provides an understanding of how such a relation applies to firms in countries where information asymmetry is high. Practitioner/Policy Implications: The findings indicate the importance of corporate governance and verify the effects of unique organizational structures on major corporate decisions. Specifically, family-controlled firms are often free of the financing constraints inherent in investment decisions. Thus, it is necessary to consider such organizational uniqueness when explaining the financing behavior of cross-border M&As conducted by Asian firms. [source] Internal Capital Markets and Capital Structure: Bank Versus Internal DebtEUROPEAN FINANCIAL MANAGEMENT, Issue 3 2010Nico Dewaelheyns G32; G21 Abstract We argue that domestic business groups are able to actively optimise the internal/external debt mix across their subsidiaries. Novel to the literature, we use bi-level data (i.e. data from both individual subsidiary financial statements and consolidated group level financial statements) to model the bank and internal debt concentration of non-financial Belgian private business group affiliates. As a benchmark, we construct a size and industry matched sample of non-group affiliated (stand-alone) companies. We find support for a pecking order of internal debt over bank debt at the subsidiary level which leads to a substantially lower bank debt concentration for group affiliates as compared to stand-alone companies. The internal debt concentration of a subsidiary is mainly driven by the characteristics of the group's internal capital market. The larger its available resources, the more intra-group debt is used while bank debt financing at the subsidiary level decreases. However, as the group's overall debt level mounts, groups increasingly locate bank borrowing in subsidiaries with low costs of external financing (i.e. large subsidiaries with important collateral assets) to limit moral hazard and dissipative costs. Overall, our results are consistent with the existence of a complex group wide optimisation process of financing costs. [source] Going Public: An Empirical Investigation of U.S. Bound Israeli IPOsFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 3 2010Iftekhar Hasan Between 1985,2003, more than 120 Israeli companies went public in the U.S., bringing the accumulated number of U.S. bound, Israeli initial public offerings (IPOs) to a figure greater than all other foreign countries combined. In this study, we compare the short and long run performance of Israeli IPOs to that of similar international and U.S. IPOs. Holding all else equal, we find that Israeli IPOs are significantly less underpriced than their local and foreign counterparts. As we examine the characteristics of Israeli issuers, we find that they differ than those of other foreign and local issuers in some important dimensions that compensate investors for information asymmetry and risk. First, compared to their home market capitalization size, U.S. bound Israeli IPOs, are significantly larger than the IPOs conducted by their foreign counterparts. Second, Israeli issuers tend to perform better than other foreign and U.S. local IPOs during our entire period of observation. Third, to a large extent, the Israeli firms in our sample have products, licensing or franchising relationships or venture capital funds with strong roots in the U.S. prior to the IPO. And fourth, the relevant investor community of Israeli IPOs, at least at the early stages, is small and overwhelmingly American. Our findings are consistent with prior studies documenting that firms raising capital outside of their domicile country are typically a select group of high quality firms in need of external financing that cannot be sufficiently provided in their home market. [source] ON FINANCE AS A THEORY OF TFP, CROSS-INDUSTRY PRODUCTIVITY DIFFERENCES, AND ECONOMIC RENTS,INTERNATIONAL ECONOMIC REVIEW, Issue 2 2008Andrés Erosa We develop a theory of capital-market imperfections to study how the ability to enforce contracts affects resource allocation across entrepreneurs of different productivities, and across industries with different needs for external financing. The theory implies that countries with a poor ability to enforce contracts are characterized by the use of inefficient technologies, low aggregate TFP, large differences in labor productivity across industries, and large employment shares in industries with low productivity. These implications are supported by the empirical evidence. The theory also suggests that entrepreneurs have a vested interest in maintaining a status quo with low enforcement. [source] The Persistence and Pricing of the Cash Component of EarningsJOURNAL OF ACCOUNTING RESEARCH, Issue 3 2008PATRICIA M. DECHOW ABSTRACT Prior research shows that the cash component of earnings is more persistent than the accrual component. We decompose the cash component into: (1) the change in the cash balance, (2) issuances/distributions to debt, and (3) issuances/distributions to equity. We find that the higher persistence of the cash component is entirely due to the subcomponent related to equity. The other subcomponents have persistence levels almost identical to accruals. We investigate whether investors understand the implications of the differential persistence of the three subcomponents. Our results suggest that investors correctly price debt and equity issuances/distributions but misprice the change in the cash balance in a similar manner to accruals. Our tests enable us to empirically distinguish the "accrual" and "external financing" anomalies with results implying that the accrual anomaly subsumes the external financing anomaly. Our results also suggest that naive fixation on earnings is unlikely to be a complete explanation for the accrual anomaly. Our findings are more consistent with investors misunderstanding diminishing returns to new investments. [source] Is Japan Facing a Public Debt Crisis?ASIAN POLITICS AND POLICY, Issue 4 2010Debt Financing, the Development of the JGB Market This article explores the idiosyncratic institutional features of public debt financing in Japan that have enabled the government to finance increasing public debt at low costs. It examines the three key aspects that contributed to the Japanese government bond (JGB) market development: (1) the surplus financial balance of the household sector; (2) the strong tradition of public financing; and (3) home bias, that is, little dependence on external financing. It argues that Japan's financial institutions' capacity to absorb JGBs is reaching the limit and that the Japanese government needs to take bolder measures to reverse the flow of financial intermediation, from the public to the private sector. It also suggests that restoring people's trust in the government's competence and leadership is an essential element for successful fiscal consolidation. [source] Society for Latin American Studies 2004 Plenary Lecture The Return of Cuba to Latin America: The End of Cuban Exceptionalism?BULLETIN OF LATIN AMERICAN RESEARCH, Issue 4 2004Miguel Angel Centeno Comparing Cuban history and contemporary circumstances to those in the rest of the region, this article challenges the idea of Cuban exceptionalism. The last four decades have seen Cuba move away from typical Latin American patterns such as economic and geographical inequalities. The Revolution has not been able, however, to reverse a historical dependence on external financing nor has it resolved racial inequities. While the Revolution did establish an unusually effective political apparatus, it did not use this opportunity to nurture democracy. As the social welfare advances of the revolution erode, Cuba resembles the rest of the continent ever more and reflects the central problems facing the region. [source] | |||||||||||||