Investment Frictions and Leverage Dynamics

2006 ◽  
Author(s):  
Sergey Tsyplakov
Keyword(s):  
Leverage Dynamics

Time-to-Build and Leverage Dynamics

2012 ◽  
Author(s):  
Joshua R. Pierce ◽  
Sergey Tsyplakov ◽  
Jiebo Wang
Keyword(s):  
Time To Build ◽  
Leverage Dynamics

Tradeoff Theory and Leverage Dynamics of High-Frequency Debt Issuers*

2020 ◽  
Author(s):  
B Espen Eckbo ◽  
Michael Kisser
Keyword(s):  
High Frequency ◽  
Low Frequency ◽  
Debt Financing ◽  
Trade Off ◽  
Speed Of Adjustment ◽  
Industrial Companies ◽  
Long Run ◽  
Speed Up ◽  
Target Leverage ◽  
Leverage Dynamics

Abstract We test whether high-frequency net-debt issuers (HFIs)—public industrial companies with relatively low issuance costs and high debt-financing benefits—manage leverage toward long-run targets. Our answer is they do not: (1) the leverage–profitability correlation is negative even in quarters with leverage rebalancing; (2) the speed-of-adjustment to target leverage deviations is no higher for HFIs than for low-frequency net-debt issuers; and (3) under-leveraged HFIs do not speed up rebalancing activity in significant investment periods. Thus, even in the subset of firms most likely to follow dynamic trade-off theory, the theory does not appear to hold.

Integration duration of post-merger and leverage dynamics of mergers: theory and evidence

2019 ◽  
Vol 31 (2) ◽  
pp. 208-231
Author(s):  
Yao Cheng
Keyword(s):  
Capital Structure ◽  
Dynamic Model ◽  
Content Type ◽  
Acquiring Firms ◽  
Integration Period ◽  
Target Firms ◽  
Method Of Payment ◽  
Post Merger Integration ◽  
Merger Integration ◽  
Leverage Dynamics

Purpose The purpose of this paper is to examine the effects of the post-merger integration duration on acquiring firms’ leverage behavior before and after a merger, using a dynamic model in which full merger benefits cannot be consumed at the instant of a merger, but rather after a pre-specified post-merger integration period. Design/methodology/approach This paper presents a dynamic model and empirical tests that describe the impact of the post-merger integration period on the capital structure dynamics of the acquiring and target firms before a merger and during the post-merger integration period. By incorporating costs associated with the post-merger integration period, the model can provide new implications for the leverage behavior around the merger. Findings The model generates new implications related to acquiring firms’ leverage dynamics along with method of payment choice. Specifically, the model indicates that the post-merger integration duration is negatively associated with the market leverage of newly-merged firms at the time of merger completion and during the integration period. Further, acquirer managers are more likely to use equity to finance a merger when the integration duration is likely to be lengthy. Originality/value This is the first model in the literature that assumes that both the acquiring and the target firms can change their capital structure overtime, which allows us to analyze both the financing structure and the merger timing. Previous empirical studies also ignore the integration period in the analysis of the method of payment choice and leverage behavior around mergers. In the tests reported in this paper, the authors control for the factors mentioned above and demonstrate that the expected integration duration is not subsumed by those variables implying that it has its own power in explaining the choice of leverage and merger financing method.

scholarly journals Abnormal Returns, Corporate Financial Policies and the Dynamics of Leverage: Empirical Evidence from Non-Financial Sector of Pakistan

2020 ◽  
Vol 6 (1) ◽  
pp. 153-166
Author(s):  
Kashif Hamid ◽  
Zahid Hussain ◽  
Muhammad Mudasar Ghafoor
Keyword(s):  
Financial Performance ◽  
Random Effect ◽  
Abnormal Returns ◽  
Market Value ◽  
Financial Sector ◽  
Financial Policies ◽  
Leverage Ratio ◽  
Market Values ◽  
The Impact ◽  
Leverage Dynamics

The aim of this study is to evaluate impact of corporate financial policies and the dynamics of leverage on financial performance of non-financial sector in Pakistan. In this study we used the data from Fertilizer, Chemical and Cement sector for the period 2008-2017. Abnormal return has been taken as dependent variable and Change in cash to lagged market values, Change in EBIT to lagged market values, Change in dividend to lagged market value, Net Financing to lagged market value, Lagged cash values to lagged market values, Lagged cash values to lagged market values crossed by change in cash to lagged market value, Change in total assets net of cash to lagged market values, Change in interest to lagged market values, Operating leverage, Financial leverage, Total leverage, Leverage ratio, Leverage ratio to change in cash crossed by lagged market values  and  WACC are taken as explanatory variables. OLS, Fixed effect and Random effect models has been used to express the impact of these variables on return. Hence it is concluded that leverage dynamics are significant contributors in designing the corporate financial policies. Corporate financial policies have significant impact on the financial performance of the non-financial sector of Pakistan.

scholarly journals Leverage Dynamics without Commitment

2020 ◽  
Author(s):  
PETER M. DEMARZO ◽  
ZHIGUO HE
Keyword(s):  
Leverage Dynamics

Leverage dynamics and credit quality

2019 ◽  
Vol 183 ◽  
pp. 183-212 ◽  
Author(s):  
Guillermo Ordoñez ◽  
David Perez-Reyna ◽  
Motohiro Yogo
Keyword(s):  
Credit Quality ◽  
Leverage Dynamics

Leverage and Financial Instability

2012 ◽  
pp. 25-40
Author(s):  
A. Smirnov
Keyword(s):  
Interest Rate ◽  
Wide Spectrum ◽  
Logistic Equation ◽  
Default Probability ◽  
Financial Instability ◽  
Asset Securitization ◽  
Long Run ◽  
Financial Bubble ◽  
The Interest Rate ◽  
Leverage Dynamics

In the paper some prominent features of a modern financial system are studied using the model of leverage dynamics. Asset securitization is considered as a major factor increasing aggregate debt and hence systems uncertainty and instability. A simple macrofinancial model includes a logistic equation of leverage dynamics that reveals origins of a financial bubble, thus corresponding closely to the Minsky financial instability hypothesis. Using ROA, ROE, and the interest rate as parameters, the model provides wide spectrum of leverage and default probability trajectories for the short and long run.

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