Nonfinancial Firms (nonfinancial + firm)

Distribution by Scientific Domains
Distribution within Business, Economics, Finance and Accounting


Selected Abstracts


THE EFFECTS OF UNCERTAINTY ON THE LEVERAGE OF NONFINANCIAL FIRMS

ECONOMIC INQUIRY, Issue 2 2009
CHRISTOPHER F. BAUM
This paper investigates the link between the optimal level of nonfinancial firms' short-term leverage and macroeconomic and idiosyncratic sources of uncertainty. We develop a structural model of a firm's value maximization problem that predicts a negative relationship between uncertainty and optimal levels of borrowing. This proposition is tested using a panel of nonfinancial U.S. firms drawn from the COMPUSTAT quarterly database covering the period 1993,2003. The estimates confirm that as either form of uncertainty increases, firms decrease their levels of short-term leverage. This effect is stronger for macroeconomic uncertainty than for idiosyncratic uncertainty. (JEL C23, D8, D92, G32) [source]


WHY MOST FIRMS CHOOSE LINEAR HEDGING STRATEGIES

THE JOURNAL OF FINANCIAL RESEARCH, Issue 2 2009
Dennis Frestad
Abstract I investigate the efficiency of alternative hedging strategies of nonfinancial firms facing hedgeable price risk, unhedgeable quantity risk, and financial contracting costs in low-profit events. The analysis suggests that variance-minimizing hedging strategies are very close in economic terms to optimal, value-maximizing hedging strategies for most firms. Furthermore, the marginal gains from shifting to nonlinear hedging strategies are often small enough to be neglected. These results illuminate some puzzling findings in survey studies of firms' hedging practices and suggest an alternative view on firms' selective hedging practices termed "cautious selective hedging." [source]


RELATIONSHIPS AND UNDERWRITER SPREADS IN THE EUROBOND FLOATING RATE NOTE MARKET

THE JOURNAL OF FINANCIAL RESEARCH, Issue 2 2006
Michael G. Kollo
Abstract We examine the role of issuer-underwriter relationships in determining underwriter spreads for Eurobond floating rate notes from 1992 to 2002. Financial and nonfinancial firms with long-term relationships pay a higher underwriter spread. Financial issuers that switch underwriters receive a discounted spread that is invariant to the underwriter's reputation and quality of the issue. However, the discount is not evident for nonfinancial firms. For both financial and nonfinancial firms, spreads are higher for noninvestment grade issues and, within investment grade, increase as quality declines. We also find higher spreads when underwriting is syndicated, and a strong negative time trend consistent with increasing competitive pressures. [source]


Asymmetric information and credit quality: Evidence from synthetic fixed-rate financing

THE JOURNAL OF FUTURES MARKETS, Issue 6 2006
Betty J. Simkins
In this article the usage of synthetic fixed-rate financing (SFRF) with interest rate swaps (i.e., borrowing short-term and using swaps to hedge interest rate risk, instead of selecting conventional fixed-rate financing) by Fortune 500 and S&P 500 nonfinancial firms is examined over the period 1991 through 1995. Credit ratings, debt issuance, and debt maturities of these firms are monitored through 1999. Strong evidence is found supporting the asymmetric information theory of swap usage as described by S. Titman (1992), even after controlling for industry, credit quality, size effects, and the simultaneity of the capital structure and the interest rate swap usage decision. Consistent with theoretical predictions, SFRF firms are more likely to undergo credit quality upgrades. When limiting the sample to firms where asymmetric information costs are potentially the greatest, the results are even stronger. These findings are important because they document that swaps serve a highly valuable service for firms subject to information asymmetries. 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:595,626, 2006 [source]


INVENTORIES AND FIXED INVESTMENT

AUSTRALIAN ECONOMIC PAPERS, Issue 4 2004
HONG BO
We model fixed investment incorporating the inventory decision of the firm. Using Dutch listed nonfinancial firms during 1985,2000, we find that the inventory stock is negatively associated with fixed investment. The results suggest that the inventory stock may be used by the firm as a buffer in response to unexpectedly high demand. In addition, the firm may hold the inventory stock as a contingency substitute for the financial source of fixed investment. [source]