We investigate implications for the cost of capital in a model with agency conflicts between inside and outside shareholders, where the severity of agency costs depends on a parameter representing investor protection. Using firm-level data for Italy and Germany we find significant differences in...

This paper estimates costs of external finance, applying indirect inference to a dynamic structural model where the corporation endogenously chooses investment, distributions, lever ageand default. The corporation faces double taxation, costly state verification indebt markets, and...

Practitioners and teachers in finance usually treat the most important issues in project appraisal and cash flow valuation is at least light. One is the construction of cash flows; in the other hand is the cost of capital that is intrinsically related to the valuation of the cash flows. The...

When creating a firm or when we intend to value an ongoing concern it is very important to have reliable and consistent financial statements in order to make the proper decisions not only for the starting of a new firm but for the following up and monitoring that firm or simply an ongoing...

In a growing economy the cash flows from investment projects can be expected to be rising over time. In this paper we explore the interactions of growth and uncertainty of cash flows with variable capital intensity in the decision to invest. We derive simple replacements for the usual...

Usually a great deal of effort is devoted in typical financial textbooks to the mechanics of the calculations of time value of money equivalencies: payments, future values, present values, etc. This is necessary. However little or no effort is devoted to how to arrive at the figures required to...

We document that investment banker directorships are mutually beneficial to the investment bank and the firm. Investment bankers serve on boards of larger, higher growth firms. These firms benefit from lower gross spreads and smaller underpricing when issuing equity, and raise more external...

We investigate the joint effect of production capacity choices and capital structure decisions on corporate debt default - related yield spreads. We find that the main driver of credit spreads is the incentive of self-interested shareholders to cash out assets in an economic decline and to...

The paper investigates the impact on credit risk of capital structure choices driven by firm's investments and financing decisions. We propose a realistic dynamic structural model featuring endogenous investment, capital structure and default. We calibrate the model on accounting and market...

Credit constrained firms prefer types of capital that generate significant pledgeable output and are liquid, since they loosen current and future credit constraints. Because pledgeability and liquidity are low for long-term firm-specific capital, a negative temporary aggregate productivity shock...