Topic
Capital adequacy ratio
About: Capital adequacy ratio is a research topic. Over the lifetime, 8094 publications have been published within this topic receiving 176779 citations.
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TL;DR: In this paper, the authors examine the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market and examine the process by which internal capital markets channel limited resources to different uses inside a company.
Abstract: This article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market Unlike a bank, headquarters has control rights that enable it to engage in "winner-picking"-the practice of actively shifting funds from one project to another By doing a good job in the winner-picking dimension, headquarters can create value even when it cannot help at all to relax overall firm-wide credit constraints The model implies that internal capital markets may sometimes function more efficiently when headquarters oversees a small and focused set of projects THIS ARTICLE ANALYZES THE process by which internal capital markets channel limited resources to different uses inside a company In so doing, it seeks to address two related sets of questions First, what is the fundamental economic rationale for creating an internal capital market? That is, under what circumstances can it make sense to combine several technologically distinct projects under one roof, and have them seek funding from corporate headquarters, as opposed to setting them up as stand-alone companies that each raise external financing on their own? Second, given this rationale, what is the optimal size and scope of an internal capital market? Should headquarters be involved in funding a large number of projects, or just a few? And should these projects be unrelated to one another, or in similar lines of business? The answers to both sets of questions flow from the insight that in a credit-constrained setting-where not all positive NPV projects can be financed headquarters can create value by actively reallocating scarce funds across projects For example, the cash flow generated by one division's activities may be taken and spent on investment in another division, where the returns are higher Or alternatively, one division's assets may be used as collateral to raise financing that is then diverted to the other division Simply put, individual projects must compete for the scarce funds, and headquarters' job is to pick the winners and losers in this competition
1,853 citations
TL;DR: In this paper, the authors defined the assets of the urban poor in terms of an "asset vulnerability framework" and showed that the poor are managers of complex asset portfolios, and illustrate how asset management affects household poverty and vulnerability.
1,742 citations
TL;DR: In this paper, the authors assess two broad and competing theories of government regulation: the helping hand approach, according to which governments regulate to correct market failures, and the grabbing-hand approach according to where government regulates to support political constituency.
1,665 citations
TL;DR: In this article, the authors developed a model of dynamic capital structure choice in the presence of recapitalization costs and provided the optimal dynamic recapitalisation policy as a function of firm-specific characteristics.
Abstract: This paper develops a model of dynamic capital structure choice in the presence of recapitalization costs. The theory provides the optimal dynamic recapitalization policy as a function of firm-specific characteristics. We find that even small recapitalization costs lead to wide swings in a firm's debt ratio over time. Rather than static leverage measures, we use the observed debt ratio range of a firm as an empirical measure of capital structure relevance. The results of empirical tests relating firms' debt ratio ranges to firm-specific features strongly support the theoretical model of relevant capital structure choice in a dynamic setting.
1,632 citations
TL;DR: In this article, the authors examined the relationship between the cost of equity capital and levels of annual report and timely disclosure and investor relations activities and concluded that aggregating across different disclosure types results in a loss of information.
Abstract: This paper examines the association between the cost of equity capital and levels of annual report and timely disclosure, and investor relations activities. We estimate the cost of equity capital using the classic dividend discount model. We find that the cost of equity capital decreases in the annual report disclosure level but increases in the level of timely disclosures. The latter result is contrary to theory but is consistent with managers’ claims that greater timely disclosures may increase the cost of equity capital, possibly through increased stock price volatility. We find no association between the cost of equity capital and the level of investor relations activities. We conclude that aggregating across different disclosure types results in a loss of information. Failing to include all disclosure types in regression analyses may lead to a correlated omitted variable bias and erroneous conclusions.
1,491 citations