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Product Market Competition and Convertible Debt Financing

Lei, Cheng; Lyandres, Evgeny; Veld, Chris; Xia, Ying - 2023

We study the relation between product market competition and convertible debt financing. Competitive threats motivate firms to use convertible debt because the possibility of future conversion enhances financial flexibility. Consistent with this intuition, we find that the intensity of...

Persistent link: https://www.econbiz.de/10014350266

Untangling the Capital-Structure Puzzle : Solving for the Optimal Debt/Equity Ratio

Choi, Hak - 2015

This paper clarifies the capital structure puzzle. The traditional theories have forgotten to monitor the money raised from equity issuing. When included, the contribution of this source of finance becomes apparent. Though its productivity is the same as any money, including debt, its cost is...

Persistent link: https://www.econbiz.de/10013027949

Firms’ Debt-Equity Decisions When the Static Tradeoff Theory and the Pecking Order Theory Disagree

de Jong, Abe - 2013

This paper tests the static tradeoff theory against the pecking order theory. We focus on an important difference in … prediction: the static tradeoff theory argues that a firm increases leverage until it reaches its target debt ratio, while the … find that the pecking order theory is a better descriptor of firms' issue decisions than the static tradeoff theory. In …

Persistent link: https://www.econbiz.de/10013095730

Investor-driven corporate finance: evidence from insurance markets

Kubitza, Christian - 2022 - This version: December 12, 2021

This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small...

Persistent link: https://www.econbiz.de/10012818411

Market-Clearing Effects of Corporate Financing Decisions on Stock Returns : An Equilibrium Analysis of Levered Firms when Equity Supply is Fixed

Dam, Lammertjan - 2015

We analyze how corporate financing decisions affect stock returns in a stochastic Ramsey model. Motivated by stylized facts, we incorporate two distinct features in the model. First, the supply of equity (the number of outstanding shares) is fixed. Second, firms pursue a target leverage ratio,...

Persistent link: https://www.econbiz.de/10013037712

Corporate Financing Choices after the 2007-2008 Financial Crisis

Pinto, João; Coutinho dos Santos, Mário - 2021

We study the factors that, arguably, affect the probability of a new borrower choosing between structured finance (SF), either project finance (PF) loans or asset securitization (AS) bonds, and straight debt finance (SDF) – corporate bonds (CB) – transactions using a large cross section of...

Persistent link: https://www.econbiz.de/10013314705

Information Asymmetry and Capital Structure Around the World

Gao, Wenlian - 2013

This paper examines the relation between information asymmetry, capital structure and the cost of capital across countries, particularly focusing on how the relation is influenced by the various aspects of institutional environment. Results show that firms with more informational asymmetries...

Persistent link: https://www.econbiz.de/10013090495

Employee stock options

Børsum, Øystein - 2010

An entrepreneur with information about firm quality seeks financing from an uninformed investor in order to pay a worker. I show that if the worker, too, knows the true quality of the firm, then certain long term wage agreements can credibly signal firm quality. Such wage agreements have a low...

Persistent link: https://www.econbiz.de/10008655549

Maturity shortening and market failure

Thierfelder, Felix - 2012

Motivated by the financial crisis of 2007-2009 several papers have provided explanations for why liquidity may dry up during market stress. This paper also looks at this issue but focuses on the question as to why the liquidity crunch was not uniform across maturities. As funding pressures were...

Persistent link: https://www.econbiz.de/10009509089

Two-Sided Asymmetric Information and Convertible Securities in Venture Financing

Chang, Shih-Chung - 2018

This paper presents a new explanation for the prevalence of convertible bond in venture capital finance. By modeling two-sided asymmetric information between entrepreneurs and venture capitalists, we prove that convertible bond can implement the optimal contract. The optimal conversion ratio...

Persistent link: https://www.econbiz.de/10012909340