Showing papers on "Debt published in 1970"

Corporate Financial Theory Under Uncertainty

Abstract: I. Debt versus equity financing, 452: Investor portfolio choice, 454; Fundamental leverage theorem, 456; Leverage as an externality 456; Effect of no default risk: the "homemade leverage theorem," 457; Corporate management and the capital markets, 458; Corporate capital budgets as a "public good," 460. — II. The corporate investor: long-, margin-, and short-risk positions, 462. — Appendix: option financing, 467.

Choice between debt and equity contracts and asymmetrical information: some empirical evidence

Abstract: Islamic Banking and Finance discusses Islamic financial theory and practice, and focuses on the opportunities offered by Islamic finance as an alternative method of financial intermediation. Key features of profit-sharing (as opposed to debt-based) contracts are highlighted, and the ways in which they can facilitate improved efficiency and stability of a financial system are explored.

The effect of economic policy on the term structure of interest rates

Abstract: THE PRIMARY OBJECTIVE of this study is to quantify the effects of monetary, fiscal, and debt-management policies on the level and term structure of interest rates. The informational content of the expectations hypothesis is evaluated as a by-product of the analysis. The analysis involves the specification and estimation of an "unrestricted" general model for the determination of interest rates based on demand and supply equations for each maturity classification of debt. The study is limited to interest rates on three maturity classifications of U.S. government securities: 3-month bills, 3-5 year issues, and long-term bonds. Second, the restrictions on the relationships among rates implied by the expectations hypothesis are imposed on the model. The usefulness of the expectations hypothesis is thus evaluated in terms of contribution to goodness-offit and forecasting efficiency, and policy implications are compared to those of the unrestricted model. The unrestricted model used in analysis is based on a specification of the bond market rather than the money market. Changes in the money stock derive their significance from the associated increase in bank credit and in the supply of loanable funds; the role of the public's tastes for demand deposits, time deposits, and currency is solely to determine the extent to which bank credit can be created as a multiple of the reserve base. The model consists of thirteen equations, including three demand equations; three supply equations; a definition of bank earning assets; an equation (and a subsystem of seven equations) determining the reserves multiplier; two equations expressing relationships between the rates on government securities in the model and rates on two close-substitute assets; and finally, the three equilibrium conditions. The reduced-form equations implied by this model contain income, bank earning assets, the three maturity classifications of government debt, the discount rate, the ceiling rate on time deposits, and the rate of return on stockholders' equity. The restricted model focuses on the possibility that certain relationships exist among interest rates, specifically those implied by the expectations hypothesis. The most successful of the expectational models has been that of Modigliani-Sutch and it is used as the representative restricted model. Our conclusions are:

The First Anglo-Peruvian Debt and its Settlement, 1822–49

Abstract: On 31 January I849 the representative of the Peruvian government, General Osma, and the Committee of Spanish American Bondholders signed an agreement in London on the terms for settling debts to British investors which had been in default since October 1825. More than a year before, the Peruvian president had spoken of his administration's desire 'to bring this matter at once to a termination, and revive the credit which the Republic lost in Europe almost at the same time as it came into existence'.! Peruvian credit was, as hoped, restored by the act of good faith in 1849, and was further boosted by the government's growing income from the guano trade, which had been in operation for almost a decade. Having wiped the slate clean in 1849, Peru went on to expand its overseas debt commitments and become, in the space of a few years, the largest Latin American borrower on the London money market.2 The year 1849, therefore, marks a notable turning point in Peruvian financial history. A brief account of the way in which the old debts were settled has already been offered by J. V. Levin.3 This is not a very detailed examination of the question, and the explanation as to why the settlement in fact came about rests heavily on the assumption that the bondholders were accorded considerable support, in their efforts to secure recompense, by successive governments in London. British administrations, writes Levin of the I83os and early I84os, pressed the bondholders' claims in Lima with 'singleness of purpose'; in the late I840s, they were 'putting compelling pressure on

Carlos Pellegrini and the Financial Crisis of 1890

Abstract: HE COLLAPSE of the Argentine economy and the bankruptcy of the national government in 1890 climaxed a long period of borrowing. For several years Argentina had been forced to meet the service charge on its foreign debt (payable only in gold) by raising new gold loans abroad. When these loans suddenly ceased in 1889, it was only a matter of time before the central and provincial governments became insolvent. In the period between 1881 and 1885 private and public interests in Argentina borrowed approximately 150,000,000 pesos from abroad. More than two-thirds of this amount was owed by the central government. The total annual interest on the foreign debt surpassed 8,800,000 pesos gold.' In the next five years the national government borrowed more than 200,000,000 pesos without any appreciable rise in its own revenues or reduction of the existing debt. The problems involved in such operations were complicated by the constantly fluctuating gold premium on the Buenos Aires Exchange.2 Argentina was basically a rich country with a potential which warranted a program of heavy foreign investment for development.3 Almost all the loans which the government had contracted were necessary for the economic expansion of the country, but unfortunately they carried a fixed charge, payable immediately in gold. Most of the foreign capital went into railroad construction and various land improvements. The ultimate effect of these investments was a considerable increase in the exportable produce of the country; but it took a long time for these benefits to manifest themselves, and meanwhile the increase in the volume and value of exports failed to keep pace with the increase in the interest charges on the foreign debt.

The Foreign Capital Requirements and External Indebtedness of a Developing Country: A Case Study of Pakistan

Abstract: Pakistan, like any other developing country, is committed to achieving self-sustaining growth, when it will be possible for the economy to grow at a rate of 5 to 6 per cent per annum without receiving external capital on concessionary terms. The role of external capital is to enable the economy to grow fast by permitting a growth of investment which is more rapid than domestic saving will support. A fast rate of economic growth leads to a higher level of domestic saving, which in turn makes the growth process more self-supporting. However, foreign capital-financed growth is not an unmixed blessing. As growth is a long-term problem, long periods of borrowing and a high level of debt and debt service can hardly be avoided. While capital inflow is net addition to domestic resources, foreign borrowing continues for a longer period because domestic savings are still insufficient to pay both for domestic investment requirements and debt service on past loans. It follows that, given the terms on which foreign capital is obtained (i.e. the rates of interest and amortisation), the economy must be able to save an increasing proportion of additional income in order to achieve an early ‘independence’ from foreign indebtedness.

Fiscal Reforms and Public Investment in Africa

Abstract: Extending a model by Buffie et al. (2012), we explore the macroeconomic implications of public investment and fiscal reforms in an environment where the tax system is distortionary. We simulate the model for a permanent increase in the rate of public investment under alternative characterisations of the tax regime and where public investment and O&M provision may fall short of their fully efficient levels. The model is also used to examine stylised fiscal reforms including the replacement of a distortionary output tax with a uniform consumption tax and budgetary reforms that restore O&M expenditures to their efficient levels. These experiments clearly demonstrate the material consequences of the tax and public expenditure structures for growth and debt sustainability in African economies.

The Date of the Callias Decrees

Abstract: The purpose of IG I 2 91-92 referring to the Treasurers of the Other Gods was to pay back the public debt owed them, and the availability of such funds supports Beloch’s date of 418 B.C. rather than earlier.

A nova gobernanza económica na UE: avances e carencias

Abstract: The financial and economic crisis and later the debt sovereign crisis have had special effects in the European Monetary Union (EMU). Several countries belonging to the euro zone have been rescued and the euro has passed many troubles. To protect the euro and to tackle to the crisis the Member states of the EMU have followed a double approach. First fiscal consolida-tion, austerity. Second to improve economic governance. Concerning austerity Member states have reduced public expenses and in many cases have increased taxes. This policy have had a positive effect about budgetary discipline but a very negative effect about growth and employ-ment with the possibility to fall in a new recession in 2012 so three years later the recession of 2009. This situation is not the better to close the gap between the potential growth of the EU and its main competitors countries one of the structural problems of the EU. Concerning the econo-mic governance the article pass in review the existing before the crisis indicating some failures in its implementation. Later is analysed the new framework of economic governance involving the European supervision in three fields, the budgetary, the macroeconomic and the financial. To undertake it new instruments have been created some of them only affecting to the countries of the euro zone. This article shows some weakness of them. The new economic governance is a very important advance but can not resolve the main problems of the EU and more specifically those of the euro zone. There is not any advance in the fiscal union; is not created a rescue me-chanism providing with enough funds to deal with the problems may have some big countries li-ke Italy or Spain; the European Central Bank (ECB) is not transformed in the lender at last re-sort; the creation of a new instrument allowing the mutualisation of public debt in the countries of the euro zone is not considered. The solution for the euro zone is to transfer sovereignty to a Fi-nancial Ministry having between other functions the responsibility in the fiscal field and in the macroeconomic and budgetary supervision in all countries and even the issue joint eurobonds.

Leccións da crise. cara a un novo enfoque na análise do proceso de endebedamento empresarial

Abstract: One of the crucial aspects of the current crisis is the excessive leverage taken on board by the different agents working in the economy. This accumulation of debt is now all too evident and its pernicious effects are being analysed in a multitude of studies. During the expan- sive cycle, neither institutions nor academics warned of the unravelling scenario and its possible consequences. Hence, the recent crisis sh*ould lead us to speculate whether or not the financial leverage in system has been dealt with adequately, or even properly understood. This paper describes previous theoretical approaches to decision taking for capital structure and suggests a new focus which integrates all of them. The second part of the paper investigates the evolution of companies' banking debt in Spain for the period 2000 to 2009 and compares this evolution with that of other European countries (in particular Portugal, Italy, France and Germany). Keywords: Enterprises debt finance / Leverage / Capital structure / Institucional factors / Cul- tural factors / Sociological factors / Firm-especific factors / Debt crises in Europe.