We examine the association between real earnings management and the cost of new bond issues of U.S. corporations. We consider three types of real earnings management: sales manipulation, overproduction, and the abnormal reduction of discretionary expenditures. We find that overproduction impairs...

This study examines the effects of idiosyncratic risk of a family firm on its credit risk and tests the relationship between credit risk and accrual or real earnings management under the condition of idiosyncratic risk. Findings indicate that debt financing and equity financing activities...

Although progress has been made in strengthening the Swiss economy, systemic risks posed by large banks as well as revisions to the macroprudential framework are still in train. The authorities welcomed the too-big-to-fail (TBTF) legislation and intervention of the Swiss National Bank (SNB) on...

This paper presents Detailed Assessment of the United States’s observance of Basel Core Principles for Effective Banking Supervision. The U.S. financial system is large and highly diversified. At the end-2007, total U.S. financial assets amounted to almost four and a half times the size...

The design of the German banking supervision framework is structurally sound, with a robust legislative and operational framework that largely complies with the Basel Core Principles for effective banking supervision (BCP). Various improvements to the German supervisory framework have been...

This paper presents the report on observance of standards and codes (ROSC) for the financial sector prepared in connection with the financial sector assessment program (FSAP). The FSAP covers the Basel Core Principles for effective banking, the International Association of Insurance Supervisors...

This paper reviews the Mexican experience with the securitization of residential mortgages. It highlights the key legislative and institutional reforms leading to the development of primary and secondary mortgage markets and reports the main features and valuation practices of the RMBS markets....

Default probabilities (PDs) and correlations play a crucial role in the New Basel Capital Accord. In commercial credit risk models they are an important constituent. Yet, modeling and estimation of PDs and correlations is still under active discussion. We show how the Basel II one factor model...

This paper addresses whether credit rating downgrades feed back on the asset value of the downgraded companies, causing real losses. To investigate this issue we construct a structural credit risk model incorporating ratings and the feedback loss. To estimate the parameters of the model we...