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Showing papers on "Leverage (finance) published in 2020"


Journal ArticleDOI
TL;DR: In this article, the need to leverage digital technology to develop and implement new business models forces firms to reevaluate e cient business models, and the need for reevaluation of existing business models.

135 citations


Journal ArticleDOI
01 Sep 2020
TL;DR: In this paper, the authors identified eight priority points for intervention (leverage points) and five overarching strategic actions and priority interventions (levers), which appear to be key to societal transformation, including: (1) Visions of a good life, (2) Total consumption and waste, (3) Latent values of responsibility, (4) Inequalities, (5) Justice and inclusion in conservation, (6) Externalities from trade and other telecouplings, (7) Responsible technology, innovation and investment, and (8) Education and knowledge
Abstract: Humanity is on a deeply unsustainable trajectory We are exceeding planetary boundaries and unlikely to meet many international sustainable development goals and global environmental targets Until recently, there was no broadly accepted framework of interventions that could ignite the transformations needed to achieve these desired targets and goals As a component of the IPBES Global Assessment, we conducted an iterative expert deliberation process with an extensive review of scenarios and pathways to sustainability, including the broader literature on indirect drivers, social change and sustainability transformation We asked, what are the most important elements of pathways to sustainability? Applying a social?ecological systems lens, we identified eight priority points for intervention (leverage points) and five overarching strategic actions and priority interventions (levers), which appear to be key to societal transformation The eight leverage points are: (1) Visions of a good life, (2) Total consumption and waste, (3) Latent values of responsibility, (4) Inequalities, (5) Justice and inclusion in conservation, (6) Externalities from trade and other telecouplings, (7) Responsible technology, innovation and investment, and (8) Education and knowledge generation and sharing The five intertwined levers can be applied across the eight leverage points and more broadly These include: (A) Incentives and capacity building, (B) Coordination across sectors and jurisdictions, (C) Pre-emptive action, (D) Adaptive decision-making and (E) Environmental law and implementation The levers and leverage points are all non-substitutable, and each enables others, likely leading to synergistic benefits Transformative change towards sustainable pathways requires more than a simple scaling-up of sustainability initiatives?it entails addressing these levers and leverage points to change the fabric of legal, political, economic and other social systems These levers and leverage points build upon those approved within the Global Assessment's Summary for Policymakers, with the aim of enabling leaders in government, business, civil society and academia to spark transformative changes towards a more just and sustainable world A free Plain Language Summary can be found within the Supporting Information of this article

115 citations


Posted Content
TL;DR: This paper found that firms with high financial flexibility experienced a stock price drop lower by 26% or 9.7 percentage points than those with low financial flexibility, while firms with greater financial flexibility were better able to fund themselves in the presence of a revenue shortfall and to benefit less from the news concerning policy responses to the crisis.
Abstract: The COVID-19 shock creates a sudden temporary sharp shortfall in revenue for firms. We expect firms with greater financial flexibility to be better able to fund themselves in the presence of a revenue shortfall and to benefit less from the news concerning policy responses to the crisis on March 24. We show that firms with less financial flexibility experience worse stock returns until March 23 and benefit more from the news on March 24. Specifically, we find that firms with high financial flexibility experience a stock price drop lower by 26% or 9.7 percentage points than those with low financial flexibility. Similar results hold for CDS spreads. Had firms not made payouts over the last three years, the stock price drop for a firm with an average payout over assets ratio would have been lower by less than 2 percentage points. If firms in the top quartile of payouts over assets for the last three years did not have payouts over that period, they could, on average, have repaid all their long-term debt and their stock price drop would have been lower by 5.1 percentage points. Existing measures of financial constraints are not helpful in explaining the reaction of firms to the shock.

109 citations


Journal ArticleDOI
TL;DR: In this paper, the authors analyzed the Troubled Assets Relief Program (TARP) and found that TARP significantly reduced contributions to systemic risk, particularly for larger and safer banks, and those in better local economies.

76 citations


Journal ArticleDOI
TL;DR: For a two-week period in mid-March 2020, government bond markets experienced uncharacteristic turbulence, sometimes selling off sharply in risk-off episodes when they would normally attract safe haven flows as discussed by the authors.
Abstract: For a two-week period in mid-March 2020, government bond markets experienced uncharacteristic turbulence, sometimes selling off sharply in risk-off episodes when they would normally attract safe haven flows. Evidence in the US Treasury market points to forced selling of treasury securities by investors who had attempted to exploit small yield differences through the use of leverage. Even though government bonds are safe assets, large holdings by leveraged investors may detract from orderly market functioning and may necessitate interventions by the central bank.

75 citations


Journal ArticleDOI
TL;DR: The authors examined the short run evolution of firms' capital structures following the start of the global financial crisis and its immediate aftermath, comparing the experience of already levered SMEs, large non-listed firms, and listed companies.

72 citations


Journal ArticleDOI
TL;DR: In this article, a simple short-run post-Keynesian model is proposed in which the key aspects of shadow banking, namely securitization and the production of structured finance instruments, are explicitly formalized.
Abstract: In this paper, we propose a simple short-run post-Keynesian model in which the key aspects of shadow banking, namely securitization and the production of structured finance instruments, are explicitly formalized. At the best of our knowledge, this is the first attempt to broaden purely real-side post-Keynesian models and their traditional focus on shareholder-value orientation, the financialization of non-financial firms, and the profit-led vs wage-led dichotomy. We rather put emphasis on the role of financial institutions and rentier-friendly environment in determining the predominance of specific growth and distribution regimes. First, we illustrate the macroeconomic rationale of shadow banking practices. We show how, before the 2007-8 crisis, securitization and shadow banking allowed for an increase in profitability for the whole financial sector, while apparently keeping leverage under control. Second, we define a variety of shadow-banking-led regimes in terms of economic activity, productive capital accumulation, and income distribution. We show that both an ‘exhilarationist’ and a ‘stagnationist’ regime may prevail, nevertheless characterized by a probable increase in income inequality between rentiers and wage earners.

68 citations


Journal ArticleDOI
TL;DR: In this paper, the authors investigated the impact of profitability, size, leverage and the civil law system on the integrated reporting quality in the financial industry, and found that IR quality is significantly and positively influenced by profitability and size, financial leverage.
Abstract: This study aims to investigate the financial and country-level determinants of integrated reporting quality in the financial industry. Specifically, this study analyses the impact of profitability, size, leverage and civil law system on the integrated reporting quality.,Hypotheses were tested using a regression model on a sample of 87 financial institutions. An integrated reporting (IR)-quality scoreboard was used to measure report quality.,The results show that IR quality is significantly and positively influenced by profitability, size, financial leverage and the civil law system.,The results have particularly important implications for large, profitable financial institutions that make greater use of financial leverage and that are localized in non-civil law countries. Managers should increase transparency by expanding the content and quality of the information contained in the integrated reports.,This study contributes to the literature by revealing several financial factors that influence IR quality. To the best of the authors’ knowledge, this is the first study to investigate IR quality in the context of the financial industry.

67 citations


ReportDOI
TL;DR: In this article, the authors study equilibrium dynamics of macroeconomic quantities and prices, and how they are affected by government intervention in corporate credit markets, and analyze an alternative intervention that targets aid to firms at risk of bankruptcy.
Abstract: The covid-19 crisis has led to a sharp deterioration in firm and bank balance sheets. The government has responded with a massive intervention in corporate credit markets. We study equilibrium dynamics of macroeconomic quantities and prices, and how they are affected by government policy. The interventions prevent a much deeper crisis by reducing corporate bankruptcies by about half and short-circuiting the doom loop between corporate and financial sector fragility. The additional fiscal cost is zero since program spending replaces what would otherwise have been spent on intermediary bailouts. The model predicts rising interest rates on government debt and slow debt pay-down. We analyze an alternative intervention that targets aid to firms at risk of bankruptcy. While this policy prevents more bankruptcies and has lower fiscal cost, it only enjoys marginally higher welfare. Finally, we study longer-run consequences for firm leverage and intermediary health when pandemics become the new normal.

59 citations


Journal ArticleDOI
TL;DR: In this article, the authors analyzed the dynamics of earnings forecasts and discount rates implicit in valuations during the COVID-19 crisis and found that the implicit discount rate in the stock market has been progressively reduced by 16% during the crisis.
Abstract: We analyze the dynamics of earnings forecasts and discount rates implicit in valuations during the COVID-19 crisis Forecasts over 2020 earnings have been progressively reduced by 16% Longer-run forecasts have reacted much less We estimate an implicit discount rate going from 10% in mid-February to 13% at the end of March and reverting to its initial level in mid-May Over this period, the unlevered asset risk premium is unchanged, as the risk-free rate drop is compensated by the effect of increased leverage Hence, analysts’ forecast revisions explain all of the decrease in equity values between January 2020 and mid-May 2020

54 citations


Journal ArticleDOI
TL;DR: The causal models find no significant effects on drug or alcohol-related mortality, but do find significant reductions in non-drug suicides, which would likely prevent a combined total of more than 700 suicides each year.

Journal ArticleDOI
TL;DR: The authors examined how housing market distress affects job search and found that job seekers in areas with depressed housing markets apply for fewer jobs that require relocation, and with their search constrained geographically, job seekers broaden their search for lower-level positions nearby.

Journal ArticleDOI
TL;DR: In this paper, a commercial bank in Asia uses big data analytic as a tool to explore the internal B2B data to improve supply chain finance and the efficiency of marketing tactics and campaigns.

Journal ArticleDOI
TL;DR: In this paper, the presence of a lead independent independent board member on the corporate board is positively associated with investment efficiency, and the role of the lead independent board board member is associated with future firm performance.

Journal ArticleDOI
TL;DR: In this paper, the authors estimate a structural model of household liquidity management in the presence of long-term mortgages, where households face counter-cyclical idiosyncratic labor income uncertainty and borrowing constraints, which aect optimal choices of leverage, precautionary saving in liquid assets and illiquid home equity.
Abstract: We estimate a structural model of household liquidity management in the presence of long-term mortgages. Households face counter-cyclical idiosyncratic labor income uncertainty and borrowing constraints, which aect optimal choices of leverage, precautionary saving in liquid assets and illiquid home equity, debt repayment, mortgage renancing, and default. Taking the observed historical path of house prices, aggregate

Journal ArticleDOI
TL;DR: In this article, the authors compare the performance of three real estate strategies: core, value-added and opportunistic, and conclude that the value added funds have strongly underperformed and the returns from opportunistic funds have weakly outperformed the returns available from core.
Abstract: Real estate strategies broadly fall into three categories: core, value-added and opportunistic. This empirical examination of net returns from these three strategies indicates that, on a risk-adjusted basis, the value-added funds have strongly underperformed and the returns from opportunistic funds have weakly underperformed the returns available from core funds. In so concluding, this article departs from standard asset-pricing models in two important respects: the total risk is used and the cost of borrowing increases as leverage increases. While the first departure has no substantive effect, the second departure lowers the estimate of the underperformance of noncore funds.

Journal ArticleDOI
TL;DR: This paper found that customer satisfaction affects different dimensions of firm financial performance, and a managerially important but overlooked aspect is its effect on a firm's financial performance (e.g., revenue and profit).
Abstract: Although scholars have established that customer satisfaction affects different dimensions of firm financial performance, a managerially important but overlooked aspect is its effect on a firm’s fu...

Journal ArticleDOI
TL;DR: In this paper, the authors investigate how the recent global financial crisis impacted SMEs' capital structure decisions and their determinants, showing that credit supply shocks negatively impacted Italian SMEs’ leverage.
Abstract: Based on a unique dataset of Italian small- and medium-sized enterprises (SMEs) over the 2006–2016 period, we investigate how the recent global financial crisis impacted SMEs’ capital structure decisions and their determinants. Our results show that credit supply shocks negatively impacted Italian SMEs’ leverage. During and after the crisis, Italian SMEs significantly decreased their leverage, particularly their short-term debt exposure, relative to the pre-crisis period. As a result, the short-term debt channel is more sensitive to credit conditions than the long-term debt channel. Interestingly, we also show that trade credit does not compensate for the reduction in bank credit. Finally, our findings reveal that riskier and more profitable firms reduced their leverage more during the crisis than during the pre-crisis period. Implications for firms and policymakers are discussed.

Journal ArticleDOI
TL;DR: In this paper, the authors analyzed a sample of 6 million firm-year observations of large corporations and small and medium sized enterprises (SMEs) spanning 6 European countries from 2005 to 2015, to determine the impact of leverage and different sources of funding on default risk.

Journal ArticleDOI
TL;DR: In this paper, the authors explore how large and small banks make funding decisions when systemwide bailouts are possible, and they show that bank size, purely on strategic grounds, is a key determinant of banks' leverage choices, even when bailout policies treat large banks symmetrically.

Journal ArticleDOI
TL;DR: In this article, the authors considered the innovation intensity and leverage in pre- and post-2008 financial crisis periods, and using firm-level quarterly data from listed firms in the UK during 20 0 0 -2014, they find that leveraged firms can achieve greater valua- tion and mitigate any valuation uncertainty in the post-crisis period if they are knowledge- or high-technology intensive.
Abstract: In times of crisis, innovation and entrepreneurship can be considered as a path out of val- uation uncertainty of firms. All types of innovation output, however, may not have a sim- ilar impact across different firm size and sectors during bad times. Specifically, financially less-constrained (high leverage) innovative firms could be valued higher or experience less uncertainty in their performance. By considering the innovation intensity and leverage in pre- and post-2008 financial crisis periods, and using firm-level quarterly data from listed firms in the UK during 20 0 0–2014, we find that leveraged firms can achieve greater valua- tion and mitigate any valuation uncertainty in the post-crisis period if they are knowledge- or high-technology intensive. In terms of size effect, although leverage distorts market val- uation of large UK firms, the impact is positive for SMEs that are innovation intensive. Finally, in terms of sectoral effect, firms within manufacturing and services with leverage have benefitted from R&D and patenting activities during the post-crisis period, but not in the pre-crisis period. This also gets revealed when we classify all firms into high-tech and low-tech sectors, implying that firms in the high-tech sectors with debt dependence have benefitted favorably in terms of higher valuation and lower uncertainty in the post-crisis period, not firms in the low-technology sectors, reflecting further the role of technological intensity in firm valuation.

Journal ArticleDOI
01 Aug 2020-Heliyon
TL;DR: The results indicate that the capital structure debt to equity variable has anegative and significant relationship with financial performance while the asset turnover ratio and firm performance showed a negative and statistically insignificant relationship.

Journal ArticleDOI
TL;DR: The authors found a strong positive relation between identifiable intangible assets and leverage, showing that identifiable assets support debt financing as much as tangible assets do, in particular in firms that lack abundant tangible assets.
Abstract: A substantial and increasing proportion of corporate assets consists of intangible assets. Despite their growing importance, internally-generated intangible assets are largely absent from balance sheets and other corporate reports. Consequently, the empirical capital structure research has struggled to evaluate the effects of intangible assets on financial leverage. High valuation risk and poor collateralizability of some intangible assets — e.g. goodwill, may discourage debt financing. In contrast, identifiable intangible assets may support debt because they are separately identifiable, valuable, and potentially collateralizable, and are instrumental in generating cash flows. Utilizing a recent accounting rule change that allows us to observe granular market-based valuations of intangible assets, we find a strong positive relation between identifiable intangible assets and leverage. Overall, identifiable intangible assets support debt financing as much as tangible assets do, in particular in firms that lack abundant tangible assets.

Journal ArticleDOI
TL;DR: This paper proposed an empirical methodology for constructing country-specific financial cycles that relaxes the similar-duration assumption and is based on the common fluctuation of several variables, using credit and asset prices as inputs to their methodology.

Journal ArticleDOI
TL;DR: The authors found that banks charge higher interest rates and adjust other contractual features of their loans when lending to firms facing more stringent environmental regulations, indicating that lenders' concerns about the increase in environmental liabilities resulting from regulations is driving the results.

Posted Content
TL;DR: In this paper, the authors show that unexpected changes in the trajectory of COVID-19 infections predict US stock returns, in real time, and find that COVID19related losses in market value at the firm level rise with capital intensity and leverage, and are deeper in industries more conducive to disease transmission.
Abstract: We show that unexpected changes in the trajectory of COVID-19 infections predict US stock returns, in real time. Parameter estimates indicate that an unanticipated doubling (halving) of projected infections forecasts next-day decreases (increases) in aggregate US market value of 4 to 11 percent, indicating that equity markets may begin to rebound even as infections continue to rise, if the trajectory of the disease becomes less severe than initially anticipated. Using the same variation in unanticipated projected cases, we find that COVID-19-related losses in market value at the firm level rise with capital intensity and leverage, and are deeper in industries more conducive to disease transmission. These relationships provide important insight into current record job losses. Measuring US states' drops in market value as the employment weighted average declines of the industries they produce, we find that states with milder drops in market value exhibit larger initial jobless claims per worker. This initially counter-intuitive result suggests that investors value the relative ease with which labor versus capital costs can be shed as revenues decline.

Journal ArticleDOI
TL;DR: In this paper, the authors estimate the pass-through of minimum wage increases into the prices of US grocery and drug stores using high-frequency scanner data and leverage a large number of state-level increase.
Abstract: This paper estimates the pass-through of minimum wage increases into the prices of US grocery and drug stores. We use high-frequency scanner data and leverage a large number of state-level increase...

Journal ArticleDOI
TL;DR: In this article, the authors report the results of a systematic evidence review and synthesis on policy effectiveness for private household investment in energy retrofit, across both demand-side and supply-side aspects.
Abstract: Home energy retrofit is distinctive as a low carbon policy option because it often requires collaboration between private households and public policy in the deeply personal environment of the home. While there is a strong case for public investment in retrofit there is also a strong case for private investment, and as a result there is often a joint public-private contribution to its costs. This paper reports the results of a systematic evidence review and synthesis on policy effectiveness for private household investment in energy retrofit. The review considered how public policy can be used to effectively and efficiently leverage private household investment, across both demand-side and supply-side aspects. On the demand-side, the results show policy interventions leverage a wide range of private funding, from well below public funds, to several multiples of them. At the same time, calculating leverage is not straightforward, but involves various additionality, positive spill-over and market effects. In terms of different policy tools, subsidised loans offer the highest private to public leverage ratios, but are less attractive to households – and are less widely used – than one-off payment grants and tax incentives. The review highlights inadequate policy attention on the role of the supply-side in retrofit policy making, with missed opportunities for improved retrofit performance and sales. The paper also considers the effectiveness of the overall policy mix, in terms of stability, flexibility and simplicity. Finally, understanding policy effectiveness in complex systems such as household retrofitting requires a broad and realist approach to evidence review.

Journal ArticleDOI
23 Jul 2020
TL;DR: In this article, the influence of profitability variables (Return On Assets), Leverage (Debt To Asset Ratio), and Liquidity (Current Ratio) on financial distress on retail companies listed on the Indonesian Stock Exchange for the period 2014-2018.
Abstract: The study aims to find out the influence of profitability variables (Return On Assets), Leverage (Debt To Asset Ratio) and liquidity (Current Ratio) on Financial Distress on retail companies listed on the 2014-2018 period Indonesian Stock Exchange The population of this study is the entire company contained on the Indonesian Stock Exchange listed retail company of the period 2014-2018 The research sample consists of 21 companies used by purposive sampling methods and taken that meet with criteria from predetermined research samples The data analysis method used is panel data regression analysis (Random Effect) with a significance level of 5 percent Based on the results of the research that has been conducted led to that, simultaneously Profitability, Leverage and Liquidity variables have an effect on Financial Distress Partially variable Profitability has a significant positive effect on Financial Distress, Leverage variables have a significant positive effect on Financial Distress, and negatively significant negatively influential Liquidity variables on Financial Distress The magnitude of the influence of Profitability, Leverage, and Liquidity on Financial Distress amounted to 9887 percent, while the rest amounted to 113 percent was affected by other variables outside of research

Journal ArticleDOI
TL;DR: In this paper, the use of unsecured debt, which contains standardized covenants that place limits on total leverage and use of secured debt, is associated with lower leverage outcomes and the firm value is sensitive to leverage levels.
Abstract: Using equity REIT data, we show empirically that the use of unsecured debt, which contains standardized covenants that place limits on total leverage and the use of secured debt, is associated with lower leverage outcomes. We then show that firm value is sensitive to leverage levels, where lower leverage is associated with higher firm value. In the presence of weak managerial governance, our results suggest that unsecured debt covenants function as a managerial commitment device that preserves the firm's debt capacity to enhance financial flexibility. This article is protected by copyright. All rights reserved