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Flexible prices and leverage
D'Acunto, Francesco; Liu, Ryan; Pflueger, Carolin; … - 2017
The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most exible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital...
Persistent link: https://www.econbiz.de/10011597779
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Low inflation : high default risk AND high equity valuations
Bhamra, Harjoat Singh; Dorion, Christian; Jeanneret, … - 2018
We develop an asset-pricing model with endogenous corporate policies that explains how inflation jointly impacts real asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal coupons and sticky profitability. Taken together, these two...
Persistent link: https://www.econbiz.de/10011941263
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Equilibrium theory of banks' capital structure
Gale, Douglas; Gottardi, Piero - 2017
balance the benefits of the provision of liquidity services by bank deposits with the costs of bankruptcy. The risk in the …
Persistent link: https://www.econbiz.de/10011688427
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Business tax policy under default risk
Comincioli, Nicola; Vergalli, Sergio; Panteghini, Paolo - 2019
In this article we use a stochastic model with one representative firm to study business tax policy under default risk. We will show that, for a given tax rate, the government has an incentive to reduce (increase) financial instability and default costs if its objective function is welfare (tax...
Persistent link: https://www.econbiz.de/10012024508
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A Q-theory of banks
Begenau, Juliane; Bigio, Saki; Majerovitz, Jeremy; … - 2021
We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its core. The estimated model matches four facts about banks' Tobin's Q that summarize bank leverage dynamics. (1) Book and market equity values diverge, especially during crises;...
Persistent link: https://www.econbiz.de/10012649212
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A pandemic business interruption insurance
Louaas, Alexis; Picard, Pierre - 2020
We analyze how pandemic business interruption coverage can be put in place by building on capitalization mechanisms. The pandemic risk cannot be mutualized since it affects simultaneously a large number of businesses, and furthermore, it has a systemic nature because it goes along with a severe...
Persistent link: https://www.econbiz.de/10012387545
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Debt shifting and transfer pricing in a volatile world
Comincioli, Nicola; Panteghini, Paolo; Vergalli, Sergio - 2020
In this article we introduce a stochastic model with a multinational company (MNC) that exploits tax avoidance practices. We focus on both transfer pricing (TP) and debt shifting (DS) activities and show how their optimal level is chosen by the shareholders. In addition, we perform an extensive...
Persistent link: https://www.econbiz.de/10012404654
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Analysing the determinants of credit risk for General Insurance firms in the UK
Caporale, Guglielmo Maria; Cerrato, Mario; Zhang, Xuan - 2016
This paper estimates a reduced-form model to assess the credit risk of General Insurance (GI) non-life firms in the UK … insurance firms. The implications of these findings for regulators of GI firms under the coming Solvency II are discussed. …
Persistent link: https://www.econbiz.de/10011497884
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The economics of insurance, its borders with finance and implications for systemic regulation
Thimann, Christian - 2015
Global financial regulators are currently reflecting on the nature of the insurance business. Specifically, they are … trying to classify insurance into "traditional" and "non-traditional" activities, and to distinguish them from "non-insurance … international finance is "what is insurance and where does insurance end?" This paper aims to elaborate on the economics of …
Persistent link: https://www.econbiz.de/10010479958
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Thin capitalization rules and multinational firm capital structure
Blouin, Jennifer L.; Huizinga, Harry; Laeven, Luc; … - 2014
This paper examines the impact of thin capitalization rules that limit the tax deductibility of interest on the capital structure of the foreign affiliates of US multinationals. We construct a new data set on thin capitalization rules in 54 countries for the period 1982-2004. Using confidential...
Persistent link: https://www.econbiz.de/10010256736