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We revisit the relation between equity returns and financial leverage through the lens of a trade-off model with costly capital structure rebalancing. The model provides a “lookalike” Modigliani-Miller equation that predicts that expected equity returns depend on whether a firm's leverage is...
Persistent link: https://www.econbiz.de/10011899835
We document several facts about corporate debt maturity: (1) debt maturity is pro-cyclical; (2) higher-beta firms tend to have longer debt maturity; (3) shorter maturity amplifies the sensitivity of credit spreads to aggregate shocks. We build a dynamic capital structure model that explains...
Persistent link: https://www.econbiz.de/10012857300
We revisit the relation between equity returns and financial leverage through the lens of a dynamic trade-off model with costly capital structure rebalancing. The model predicts that expected equity returns depend on whether a firm's leverage is above or below its target leverage. We provide...
Persistent link: https://www.econbiz.de/10013375176
. In particular, we can numerically support the usual simplification in the absence of default risk. In case that firms are … company cost of capital does practically not depend on the debt ratio if the firm is not subject to default risk or if …
Persistent link: https://www.econbiz.de/10014325747
In this paper, we ask how firms’ optimal debt structure responds to a change in the bankruptcy regime. While existing work shows that this relationship is dependent on the ex-ante liquidation value of a firm, we demonstrate that the ownership of lenders they are connected to also matters. We...
Persistent link: https://www.econbiz.de/10013301190
This paper shows that the leverage ratio affects repo intermediation for banks and non-bank financial institutions. We …
Persistent link: https://www.econbiz.de/10012913473
, we find the interacted effect of the main bank and R&D investment which increases with firm value, only appears in medium …
Persistent link: https://www.econbiz.de/10012837275
financial risks have arisen. As a consequence, model risk has been a source of concern for financial regulators. This risk … empirical conclusion is that the PD uncertainty has not a relevant impact on the risk measurement …
Persistent link: https://www.econbiz.de/10012995064
ratio on commercial bank risk-taking over the period from 2002 to 2019 using a two-step GMM method. The finding reveals that …The study aims to investigate the effect of conventional capital ratio, risk-based capital ratio, and capital buffer … there is a positive relationship between traditional capital ratio and risk-taking for the full sample results, which is …
Persistent link: https://www.econbiz.de/10012649561
In this paper we aim to find out whether bank specialization and bank capitalization affect the relationship between … bank loan growth and bank capital ratio, both in expansions and in contractions. We hypothesize that the impact of bank …
Persistent link: https://www.econbiz.de/10012030770