Showing papers on "Leverage (finance) 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.

Long-Term Constraints on India’s Industrial Growth, 1951–1968 1

Abstract: The First Five-Year Plan of India, everyone agrees, was more a collection of projects than a well-formulated programme of action spanning a reasonably long time-horizon. By contrast, an explicit long-term model was provided for the Second Five-Year Plan (1956–61) of India. This model, which had a striking similarity to the model which had been formulated in 1928 by the Soviet economist G. A. Feldman, laid primary emphasis on the accelerated development of capital-goods industries as a means of raising the marginal rate of saving of the economy and of accelerating the rate of growth of national income.2 According to Professor P. C. Mahalanobis, the chief architect of this model, the aims were to ‘lay sound foundations’ for a continuing increase in the level of national income and the level of living to get rid of the fear of unemployment (if possible, in ten years), and to bring about increasing opportunities and the lessening of great disparities of income and wealth.3 While self-reliance was to be promoted by the development of capital-goods industries, the objective of redistribution of economic power towards the poorer income groups was to be pursued, inter alia, by the state assuming the major share of responsibility for investment in the capital-goods industries. Small-scale and cottage industries were to be developed with the twin objectives of providing more consumer goods and more employment. It was widely believed that the control of the new investment in capital-goods industries combined with the apparatus of direct and indirect controls (pricing, fiscal and monetary policies) would provide the state with enough leverage to determine the allocation of national income between consumption and saving and of total investment between ‘essential’ and ‘non-essential’ industries, the criterion of essentiality being a positive contribution towards ensuring self-reliant growth in the not-too-distant future.

Growth Performances of Nonlife Insurance Companies: 1955-1966

Abstract: The growth of a nonlife insurance company may be viewed as a combination of underwriting and investment results, dividend policies, and external financing. The purpose of this paper is to study the 1955-1966 growth performances of a random sample of 149 stock and mutual nonlife insurers in relation to these elements with the analysis centering upon differences in growth among four size categories of insurers. The 19551966 financial histories of the twenty most rapid growing insurers in the study are also evaluated. The study results indicate that 1955-1966 external financing was significantly more extensive among stock than among mutual nonlife insurers, and that underwriting and investment results and dividend policies for the period varied widely among both groups of insurers. The majority of the firms in the study with the twenty highest average rates of 1955-1966 asset growth were stock insurers having less than ten million dollars in 1954 assets. Their rapid growth resulted primarily from extensive external financing during the period. The organization of the insurance executive's activity usually centers around goals assuming the maximization of earnings per share, sales, assets, or some other bench mark of corporate vitality. The failure to increase at least one of these values often results in the sounding of an alarm (at times accompanied by security price reactions and adjustments in the management ranks). Such preoccupations may be justified when investor expectations are considered. If the stockholder wishes to maximize the present value of his outlay, the firm must act in a dynamic fashion to maximize the present value of the earnings per share by exploiting every leverage opportunity. Sacrifices are likely to result if efforts in this direction fail to be optimized. The maximization of sales or assets need not result in a maximization of return but may enhance the prestige of the Stephen W. Forbes, Ph.D., is Assistant Professor of Finance in the University of Illinois. This paper was submiteed in March, 1969. firm, another rationale for growth. In an economy where size represents an important index of success or failure, an insurance company may concentrate its efforts upon a combination of mergers, acquisitions, and internal growth in order to obtain industry recognition. Growth is also important because size may provide an opportunity for industry leadership in pricing and other matters. It may also enable an insurer to obtain quality management, exercise economies of scale, and engage in product research and innovation. The management of a large insurer is also likely to feel more secure to the extent that financial stability increases with greater actuarial certainty and the ability to diversify resources. The purpose of this paper is to study the growth performances of a sample of 149 nonlife insurers during 1955-1966 in light of external financing, dividend policies, and other factors.1 Emphasis is 1 Eighty-two stock and sixty-seven mutual insurers randomly selected from the 1957 edition of Best's Fire and Casualty Insurance Reports.

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.