Corporate Financing in the New Member States: Firm-Level Evidence for Convergence and Divergence Trends
TL;DR: In this paper, the authors presented results of an ongoing research project on corporate financing patterns in Central and Eastern Europe (CEE) since 1999, and analyzed the interactions between country institutional differences, firm ownership structures, other firm-specific characteristics and corporate financial patterns in both the EU-15 and NMS.
Abstract: The paper presents results of an ongoing research project on corporate financing patterns in Central and Eastern Europe (CEE) since 1999. It addresses three broad issues. Which are the specifics of corporate financing in CEE compared to countries in Western Europe? Which country institutional and company factors may explain the similarities and differences of capital structures in the EU-15 and New Member States (NMS)? Which are the major convergence and divergence trends in corporate financing patterns in an enlarged Europe? The study analyzes the interactions between country institutional differences, firm ownership structures, other firm-specific characteristics and corporate financial patterns in both the EU-15 and NMS. It summarizes the firm-level evidence and outlines several unresolved questions and major dimensions for further research.
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TL;DR: In this article, the role of leasing in the lending boom in Central and South Eastern Europe (CEE and SEE) was investigated by providing a full picture of the financing situation in Eastern Europe, where leasing plays a more important role than elsewhere.
Abstract: We investigate the role of leasing in the lending boom in Central and South Eastern Europe (CEE and SEE). We contribute by (1) providing a full picture of the financing situation in Eastern Europe, where leasing plays a more important role than elsewhere; (2) by investigating the finance-growth-nexus for ten Eastern European countries with a panel data approach over 1999-2006; (3) by extending the production function approach (credit, stock, bond) and the law-and-financeview for leasing. We find that leasing and credit positively contributed to economic growth. However, leasing and credit are complements and not substitutes as suggested partly by previous research in other regions. We conclude that leasing cannot be used to circumvent proper regulation by policy makers or market participants, and that alternative forms of finance need to be included for a full picture of the finance-growth link.
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Posted Content•
TL;DR: In this paper, the authors investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries and find that factors identified by previous studies as important in determining the cross-section of the capital structure in the U.S. affect firm leverage in other countries as well.
Abstract: We investigate the determinants of capital structure choice by analyzing the financing decisions of public firms in the major industrialized countries. At an aggregate level, firm leverage is fairly similar across the G-7 countries. We find that factors identified by previous studies as important in determining the cross- section of capital structure in the U.S. affect firm leverage in other countries as well. However, a deeper examination of the U.S. and foreign evidence suggests that the theoretical underpinnings of the observed correlations are still largely unresolved.
5,935 citations
Posted Content•
TL;DR: In this paper, a firm that must issue common stock to raise cash to undertake a valuable investment opportunity is considered, and an equilibrium model of the issue-invest decision is developed under these assumptions.
Abstract: This paper considers a firm that must issue common stock to raise cash to undertake a valuable investment opportunity. Management is assumed to know more about the firm's value than potential investors. Investors interpret the firm's actions rationally. An equilibrium model of the issue-invest decision is developed under these assumptions.The model shows that firms may refuse to issue stock, and therefore may pass up valuable investment opportunities.The model suggests explanations for several aspects of corporate financing behavior, including the tendency to rely on internal sources of funds, and to prefer debt to equity if external financing is required. Extensions and applications of the model are discussed.
3,652 citations
TL;DR: In this article, the authors show that current capital structure is strongly related to past market values and that the resulting effects on capital structure are very persistent, and suggest the theory that capital structure was the cumulative outcome of past attempts to time the equity market.
Abstract: It is well known that firms are more likely to issue equity when their market values are high, relative to book and past market values, and to repurchase equity when their market values are low. We document that the resulting effects on capital structure are very persistent. As a consequence, current capital structure is strongly related to past market values. The results suggest the theory that capital structure is the cumulative outcome of past attempts to time the equity market.
1,882 citations
Posted Content•
TL;DR: In this paper, the authors examine leverage levels and year-to-year changes for several hundred firms between 1984 and 1991 and find that leverage levels are positively related to CEO stock ownership and CEO stock option holdings, and negatively related toCEO tenure and board of directors size.
Abstract: We test the prediction that leverage is inversely associated with managerial entrenchment. We examine leverage levels and year-to-year changes for several hundred firms between 1984 and 1991. We find that leverage levels are positively related to CEO stock ownership and CEO stock option holdings, and negatively related to CEO tenure and board of directors size. While generally consistent with less entrenched CEOs pursuing more leverage, these results are subject to alternative interpretations. We therefore analyze year-to-year changes in leverage around exogenous shocks to corporate governance variables. We find that leverage increases after unsuccessful tender offers and â¬Sforcedâ¬? CEO replacements, and under certain conditions after the arrival of major stockholders. These relations have greater magnitude when the sample is restricted to low-leverage firms, even when 80% of firms are defined as low-leverage. The results are consistent with decreases in entrenchment leading to increases in leverage, and with the majority of firms having less debt than optimal.
1,451 citations
Book•
01 Jan 1987
TL;DR: The authors reviewed the theory of the firm and the large modern corporation Examining the process of entrepreneurial capitalism in which firms come into existence, then managerial capitalism and the changing motives of management in corporations, The Corporation is a thorough and thoughtful account Of interest to students and academics in the area
Abstract: This book reviews the theory of the firm and the large modern corporation Examining the process of entrepreneurial capitalism in which firms come into existence, then managerial capitalism and the changing motives of management in corporations - The Corporation is a thorough and thoughtful account Of interest to students and academics in the area
116 citations