scholarly journals Debt Structure and Capital Structure: Based on Bank Debt Renegotiation

2010 ◽  
Author(s):  
Shintaro Tomita ◽  
Naoshi Ikeda ◽  
Yukitami Tsuji
Keyword(s):  
Capital Structure ◽  
Bank Debt ◽  
Debt Structure ◽  
Debt Renegotiation

scholarly journals Strategic Default, Debt Structure, and Stock Returns

2016 ◽  
Vol 51 (1) ◽  
pp. 197-229 ◽  
Author(s):  
Philip Valta
Keyword(s):  
Stock Returns ◽  
Large Fraction ◽  
Convertible Debt ◽  
Debt Structure ◽  
Publicly Traded ◽  
Debt Renegotiation ◽  
Strategic Default ◽  
Expected Stock Returns ◽  
Debt Holders ◽  
New Evidence

AbstractThis paper theoretically and empirically investigates how debt structure and strategic interaction among shareholders and debt holders in the event of default affect expected stock returns. The model predicts that expected stock returns are higher for firms that face high debt renegotiation difficulties and that have a large fraction of secured or convertible debt. Using a large sample of publicly traded U.S. firms for the period 1985–2012, the paper presents new evidence on the link between debt structure and stock returns that is supportive of the model’s predictions.

Corporate Capital Structure and Firm Value: International Evidence on the Special Roles of Bank Debt

2021 ◽  
Vol 1 (1-2) ◽  
pp. 1-41
Author(s):  
Allen N. Berger ◽  
Sadok El Ghoul ◽  
Omrane Guedhami ◽  
Jiarui Guo
Keyword(s):  
Capital Structure ◽  
Firm Value ◽  
Bank Debt ◽  
Corporate Capital ◽  
International Evidence ◽  
Corporate Capital Structure

Valuing firm’s financial flexibility under default risk and bankruptcy costs: a WACC based approach

2019 ◽  
Vol 15 (5) ◽  
pp. 688-699
Author(s):  
Carlo Mari ◽  
Marcella Marra
Keyword(s):  
Capital Structure ◽  
Default Risk ◽  
Weighted Average ◽  
Debt Management ◽  
Costs And Benefits ◽  
Debt Structure ◽  
Financial Flexibility ◽  
Content Type ◽  
Bankruptcy Costs ◽  
Debt Capacity

PurposeThe purpose of this paper is to present a model to value leveraged firms in the presence of default risk and bankruptcy costs under a flexible firm’s debt structure.Design/methodology/approachThe authors assume that the total debt of the firm is a combination of two debt components. The first component is an active debt component which is assumed to be proportional to the firm’s value. The second one is a passive predetermined risk-free debt component. The combination of the two debt categories makes the firm’s capital structure more realistic and allows us to include flexibility into the firm’s debt structure management. The firm’s valuation is performed using the discounted cash flow technique based on the weighted average cost of capital (WACC) method.FindingsThe model can be used to define active debt management strategies that can induce the firm to deviate from its capital structure target in order to preserve debt capacity for future funding needs. The firm’s valuation is performed by using the WACC method and a closed form valuation formula is provided. Such a formula can be used to value costs and benefits of financial flexibility.Research limitations/implicationsThe proposed approach provides a good compromise between mathematical complexity and model capability of interpreting the various economic and financial aspects involved in the firm’s debt structure puzzle.Practical implicationsThis model offers a realistic approach to practical applications where real financing decisions are characterized by a simultaneous use of these two debt categories. By comparing costs and benefits deriving from using unused debt capacity for future funding needs, the model provides a quantitative support to investigate if financial flexibility can add value to firms.Originality/valueTo the authors knowledge, the approach the authors propose is the first attempt to build a valuation scheme that accounts for firm’s financial flexibility under default risky debt and bankruptcy costs. Including financial flexibility, this model fills an important gap in the literature on this topic.

scholarly journals Statistical Analysis of Causality between Capital Structure and Firm Profitability: Evidence from Bosnia and Herzegovina

2015 ◽  
Vol 1 (1-2) ◽  
pp. 1-11
Author(s):  
Emina Resić ◽  
Jasmina Mangafić ◽  
Tunjo Perić
Keyword(s):  
Capital Structure ◽  
Bosnia And Herzegovina ◽  
Canonical Correlation ◽  
Debt Structure ◽  
Short Term ◽  
The Relationship ◽  
Structure Choice ◽  
Capital Structure Choice ◽  
The Capital Structure

Abstract This research is designed to examine the relationship between the capital structure and profitability of non-financial firms in Bosnia and Herzegovina during the ten years period, from 2003-2012. The goal is to prove the existence of the relationship between the firm’s capital structure choice and its profitability. The analysis is extended by including the debt structure and differentiating between the types of debt such as the long-term and the short-term ones. Canonical correlation and multiple regression analysis are used. The results of the multivariate canonical correlation analysis provide support to a hypothesis that the capital structure and profitability have statistically significant relationships. Furthermore, the findings provide support that firms develop different patterns of profitability depending on the capital structure choice. We found that an increasing proportion of short-term debt and long-term debt in the overall liability of the firm reduces its profitability.

A Study on Optimal Capital Structure of Vietnamese Real Estate Listed Firms

2018 ◽  
pp. 45-70
Author(s):  
Binh Thi Thanh Dao ◽  
Phuong Hoai Lai
Keyword(s):  
Real Estate ◽  
Capital Structure ◽  
Stock Returns ◽  
Secondary Data ◽  
Debt Structure ◽  
Theoretical Frameworks ◽  
Equity Prices ◽  
Listed Firms ◽  
Endogenous Default ◽  
Primary Focus

This paper focuses on those structural models with an endogenous default barrier where firms optimally choose a default boundary so as to maximize the equity value. The analysis commences to cover avowedly theoretical frameworks from pioneering works by Black-Scholes (1973) and Merton (1974) on zero-coupon debts to later extensions of those models for a more complex debt structure to include coupon perpetual bonds (Leland, 1994) and of arbitrage maturity or rolledover debts (Leland and Toft, 1996). Furthermore, this paper studies the empirical performance of capital structure models by testing the optimized gearing levels computed from those models with different assumptions. Parameters of these models are estimated from the firms’ equity prices. The novelty of this paper lies in the fact that it is not merely a summary of static theories on capital structure but it is the first of its kind to empirically study the capital structure choices of Vietnamese real estate firms, with primary focus on static models. This research follows secondary data analysis to investigate market information of stock returns and attempts to examine the potential dissimilarity in actual and proposed optimal gearing levels for the two years 2014 and 2016.

scholarly journals Measuring Determinants and Effects of Firms’ Financial Structure in a Deleverage Setting: Evidence From Italy

2018 ◽  
Vol 9 (2) ◽  
pp. 23 ◽  
Author(s):  
Mario Mustilli ◽  
Francesco Campanella ◽  
Eugenio D’Angelo
Keyword(s):  
Capital Structure ◽  
Regression Model ◽  
Cash Flow ◽  
Financial Structure ◽  
Bank Credit ◽  
Debt Ratio ◽  
Bank Debt ◽  
Ols Regression ◽  
Return On Equity ◽  
Financial Firms

Since 2011, after ten year of growth, Italian non-financial firms have heavily reduced their bank debt. Indeed, the ratio between bank credit to non-financial sector and the Italian GDP decreased from 92.5% to 83.5% in the last five years. This paper examines the determinants of this reduction using an OLS regression model performed on a sample of 12,974 Italian firms. In addition, we analyse the effect of this change in the capital structure on profitability and on debt-service. Results show that Growth, Size, Tangibility and Profitability are associated with leverage, consistently with the previous literature. Furthermore, we found that firm reduced their return on equity but improved their cash flow to debt ratio.

scholarly journals The Impact of Internationalization of the Boardroom on Capital Structure

2020 ◽  
Vol 13 (12) ◽  
pp. 307
Author(s):  
Ibrahim Yousef ◽  
Hanada Almoumani ◽  
Ihssan Samara
Keyword(s):  
Capital Structure ◽  
Information Exchange ◽  
Fixed Effects ◽  
Information Economics ◽  
Order Theory ◽  
Debt Structure ◽  
Board Diversity ◽  
Pecking Order Theory ◽  
Foreign Directors ◽  
The Impact

We develop a theoretical model based on several theories, mainly pecking order theory and theory of information economics, as well as on theoretical arguments provided by economic sociology and psychology to investigate for the first time the impact of the presence of a foreign board member on capital structure. The sample of study covers 3773 non-financial U.S. firms and includes 23,196 observations over the period from 2010 to 2018. We used pooled OLS, fixed effects, random effects, and the general method of moments (GMM) in order to analyze the impact of foreign directors on capital structure after controlling for a range of factors, including size, year, and industry effects. The results of this empirical analysis support the proposed hypothesis. Of particular note is the finding that the proportion of foreign directors on the board correlates negatively with debt structure. Furthermore, we demonstrate that our findings hold up in the face of all appropriate robustness checks. Our study contributes to the existing literature by including an international dimension of board diversity, specifically the influence of foreign directors on corporate capital structure. We argue that increasing international diversity in the boardroom improves both the quantity and quality of the information exchange between insiders and shareholders, thereby reducing adverse selection costs.

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