Credit Rating And The Impact On Capital Structure

Author : Christian Kronwald
Publisher : GRIN Verlag
Page : 36 pages
File Size : 45,7 Mb
Release : 2010-03-25
Category : Business & Economics
ISBN : 9783640575572

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Credit Rating and the Impact on Capital Structure by Christian Kronwald Pdf

Seminar paper from the year 2009 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,3, University of Hohenheim (Lehrstuhl für Bankwirtschaft und Finanzdienstleistungen), language: English, abstract: The question about capital structure is one of the most important issues which the management of a company faces in implementing their daily business. Therefore, the question of which factors affect capital structure decisions attracts high attention in the past and recent literature on capital structure. There are many papers providing valuable insights into capital structure choices, starting with the paper of Modigliani and Miller (1958). The MM-Theorem is generally considered a purely theoretical result since it ignores important factors in the capital structure decision like bank-ruptcy costs, taxes, agency costs and information asymmetry. Based on this paper many other theories which consider factors neglected by Modigliani and Miller have been evolved. Two major theories are the Tradeoff- and the Pecking-Order-Theory. The former loosens assumptions stated in the MM-Theorem by including bankruptcy costs and taxes while the latter introduces information asymmetry into the capital structure discussion. Chapter 2.1 will give a brief overview of these theories. For complexity reasons these models cannot capture all relevant factors affecting the capital structure policy of a company. However, all these theories disregard one cru-cial factor which plays an important role on capital markets all over the world. The significance of Credit Ratings is gradually increasing, and it is doing so in many re-spects. This paper focuses on the Credit Rating-Capital Structure-Hypotheses (CRCS) developed by Darren J. Kisgen as a modern approach to the capital structure discussion. The hypothesis argues that credit ratings have an impact on capital struc-ture decisions due to discrete costs (benefits) associated with a rating change. Firstly, reasons why credit ratings are material for capital structure decisions will be out-lined. Then, situations in which credit rating effects play a role will be examined. For this issue it is very important to show how it can be measured whether a firm is con-cerned about a rating change or not. Afterwards the CR-CS will be empirically tested. The traditional theories don’t explain the results obtained in these tests. Therefore credit rating effects will be combined with factors discussed in the Tradeoff- and Pecking-Order-Theory. In subsequent empirical tests credit rating factors will be integrated into previous capital structure test to show that the results of the CR-CS tests remain statistically significant...

Author : H. Kent Baker,Gerald S. Martin
Publisher : John Wiley & Sons
Page : 504 pages
File Size : 51,5 Mb
Release : 2011-03-31
Category : Business & Economics
ISBN : 9781118022948

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Capital Structure and Corporate Financing Decisions by H. Kent Baker,Gerald S. Martin Pdf

A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.

Author : Yamini Agarwal
Publisher : John Wiley & Sons
Page : 208 pages
File Size : 40,7 Mb
Release : 2013-03-29
Category : Business & Economics
ISBN : 9781118203163

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Capital Structure Decisions by Yamini Agarwal Pdf

Inside the risk management and corporate governance issues behind capital structure decisions Practical ways of determining capital structures have always been mysterious and riddled with risks and uncertainties. Dynamic paradigm shifts and the multi-dimensional operations of firms further complicate the situation. Financial leaders are under constant pressure to outdo their competitors, but how to do so is not always clear. Capital Structure Decisions offers an introduction to corporate finance, and provides valuable insights into the decision-making processes that face the CEOs and CFOs of organizations in dynamic multi-objective environments. Exploring the various models and techniques used to understand the capital structure of an organization, as well as the products and means available for financing these structures, the book covers how to develop a goal programming model to enable organization leaders to make better capital structure decisions. Incorporating international case studies to explain various financial models and to illustrate ways that capital structure choices determine their success, Capital Structure Decisions looks at existing models and the development of a new goal-programming model for capital structures that is capable of handling multiple objectives, with an emphasis throughout on mitigating risk. Helps financial leaders understand corporate finance and the decision-making processes involved in understanding and developing capital structure Includes case studies from around the world that explain key financial models Emphasizes ways to minimize risk when it comes to working with capital structures There are a number of criteria that financial leaders need to consider before making any major capital investment decision. Capital Structure Decisions analyzes the various risk management and corporate governance issues to be considered by any diligent CEO/CFO before approving a project.

Author : Christopher Parsons,Sheridan Titman
Publisher : Now Publishers Inc
Page : 107 pages
File Size : 53,9 Mb
Release : 2009
Category : Business & Economics
ISBN : 9781601982025

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Empirical Capital Structure by Christopher Parsons,Sheridan Titman Pdf

Empirical Capital Structure reviews the empirical capital structure literature from both the cross-sectional determinants of capital structure as well as time-series changes.

Author : C. E. V. Borio
Publisher : Unknown
Page : 94 pages
File Size : 54,6 Mb
Release : 1990
Category : Corporate debt
ISBN : STANFORD:36105034377734

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Leverage and Financing of Non-financial Companies by C. E. V. Borio Pdf

Author : Thorsten Beck,Asl? Demirgüç-Kunt,Ross Levine
Publisher : World Bank Publications
Page : 67 pages
File Size : 42,9 Mb
Release : 1999
Category : Banca central
ISBN : 8210379456XXX

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A New Database on Financial Development and Structure by Thorsten Beck,Asl? Demirgüç-Kunt,Ross Levine Pdf

This new database of indicators of financial development and structure across countries and over time unites a range of indicators that measure the size, activity, and efficiency of financial intermediaries and markets.

Author : Thorsten Beck,Asl? Demirgüç-Kunt,Vojislav Maksimovic
Publisher : World Bank Publications
Page : 60 pages
File Size : 52,9 Mb
Release : 2002
Category : Business enterprises
ISBN : 8210379456XXX

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Financing Patterns Around the World by Thorsten Beck,Asl? Demirgüç-Kunt,Vojislav Maksimovic Pdf

Using a firm-level survey database covering 48 countries, Beck, Demirgüç-Kunt, and Maksimovic investigate whether differences in financial and legal development affect the way firms finance their investments. The results indicate that external financing of investments is not a function of institutions, although the form of external finance is. The authors identify two explanations for this. First, legal and financial institutions affect different types of external finance in offsetting ways. Second, firm size is an important determinant of whether firms can have access to different types of external finance. Larger firms with financing needs are more likely to use external finance compared with small firms. The results also indicate that these firms are more likely to use external finance in more developed financial systems, particularly debt and equity finance. The authors also find evidence consistent with the pecking order theory in financially developed countries, particularly for large firms. This paper--a product of Finance, Development Research Group--is part of a larger effort in the group to understand firms' access to financial services.

Author : Anonim
Publisher : Lulu.com
Page : 294 pages
File Size : 54,7 Mb
Release : 2004
Category : Bank capital
ISBN : 9789291316694

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International Convergence of Capital Measurement and Capital Standards by Anonim Pdf

Author : Giovanni Majnoni,Richard M. Levich,Carmen Reinhart
Publisher : Springer Science & Business Media
Page : 400 pages
File Size : 46,5 Mb
Release : 2002-08-31
Category : Business & Economics
ISBN : 1402070160

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Ratings, Rating Agencies and the Global Financial System by Giovanni Majnoni,Richard M. Levich,Carmen Reinhart Pdf

The business of credit ratings began in the United States in the early 1900s. Over time, credit ratings have gradually taken on an expanding role, both in the United States and abroad and in official financial market regulation as well as in private capital market decisions. However, in 1999 the Bank for International Settlements (through its Committee on Banking Supervision) proposed rule changes that would provide an explicit role for credit ratings in determining a bank's required regulatory risk capital. Once implemented, this BIS proposal (often referred to as Basel 2) would vastly elevate the importance of credit ratings by linking the required measure of bank capital to the credit rating of the bank's obligors. With these regulatory changes under active discussion, research into the role for ratings and rating agencies in the global financial system is particularly apropos. Ratings, Rating Agencies and the Global Financial System brings together the research of economists at New York University and the University of Maryland, along with those from the private sector, government bodies, and other universities. The first section of the volume focuses on the historical origins of the credit rating business and its present day industrial organization structure. The second section presents several empirical studies crafted largely around individual firm-level or bank-level data. These studies examine (a) the relationship between ratings and the default and recovery experience of corporate borrowers, (b) the comparability of credit ratings made by domestic and foreign rating agencies, and (c) the usefulness of financial market indicators for rating banks, among other topics. In the third section, the record of sovereign credit ratings in predicting financial crises and the reaction of financial markets to changes in credit ratings is examined. The final section of the volume emphasizes policy issues now facing regulators and credit rating agencies.

Author : Gianluca Mattarocci
Publisher : Academic Press
Page : 200 pages
File Size : 49,8 Mb
Release : 2013-10-22
Category : Business & Economics
ISBN : 9780124047365

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The Independence of Credit Rating Agencies by Gianluca Mattarocci Pdf

The Independence of Credit Rating Agencies focuses on the institutional and regulatory dynamics of these agencies, asking whether their business models give them enough independence to make viable judgments without risking their own profitability. Few have closely examined the analytical methods of credit rating agencies, even though their decisions can move markets, open or close the doors to capital, and bring down governments. The 2008 financial crisis highlighted their importance and their shortcomings, especially when they misjudged the structured financial products that precipitated the collapse of Bear Stearns and other companies. This book examines the roles played by rating agencies during the financial crisis, illuminating the differences between U.S. and European rating markets, and also considers subjects such as the history of rating agencies and the roles played by smaller agencies to present a well-rounded portrait. Reports on one of the key causes of the 2008 financial crisis: agencies that failed to understand how to analyze financial products Describes inherent business model and pricing conflicts that compromise the independence of credit rating agencies Reveals how rating agencies large and small, regulatory bodies, and vested interests interact in setting fees and policies

Author : Pascal Gantenbein,Simone Westerfeld,Beatrix Wullschleger
Publisher : Cambridge Scholars Publishing
Page : 245 pages
File Size : 51,8 Mb
Release : 2014-11-10
Category : Business & Economics
ISBN : 9781443870986

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Proceedings of the Second International Conference on Credit Analysis and Risk Management by Pascal Gantenbein,Simone Westerfeld,Beatrix Wullschleger Pdf

Credit risk plays a crucial role in most financial transactions in one form or another and therefore contributes to various different layers of economic activity. Three key elements in the analysis of credit risk can be distinguished, namely: (1) the lender-borrower relationship, which is at the core of the entire discussion on credit risk; (2) the pricing of credit risk in financial markets; and (3) the relevance of financial stability and regulation related to the occurrence of credit risk. This book captures these areas in a comprehensive way by highlighting some of the current issues and related questions.

Author : Justin Pettit
Publisher : John Wiley & Sons
Page : 338 pages
File Size : 47,7 Mb
Release : 2011-07-12
Category : Business & Economics
ISBN : 9781118160626

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Strategic Corporate Finance by Justin Pettit Pdf

Essential guidance for the corporate finance professional — advisor, Board Director, CFO, Treasurer, business development executive, or M&A expert—to ask the right questions and make the critical decisions. Strategic Corporate Finance is a practical guide to the key issues, their context, and their solutions. From performance measurement and capital planning to risk management and capital structure, Strategic Corporate Finance, translates principles of corporate finance theory into practical methods for implementing them. Filled with in-depth insights, expert advice, and detailed case studies, Strategic Corporate Finance will prepare you for the issues involved in raising, allocating and managing capital, and its associated risks. Justin Pettit (New York, NY) draws on his 15 years of senior advisory experience as an investment banker and management consultant. He advises corporate boards and executives on matters of capital structure, financial policy, valuation, and strategy. He also lectures on topics in advanced corporate finance to graduate and undergraduate students at universities in the New York area.

Author : Benjamin M. Friedman
Publisher : University of Chicago Press
Page : 404 pages
File Size : 40,9 Mb
Release : 2009-05-15
Category : Business & Economics
ISBN : 9780226264233

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Corporate Capital Structures in the United States by Benjamin M. Friedman Pdf

The research reported in this volume represents the second stage of a wide-ranging National Bureau of Economic Research effort to investigate "The Changing Role of Debt and Equity in Financing U.S. Capital Formation." The first group of studies sponsored under this project, which have been published individually and summarized in a 1982 volume bearing the same title (Friedman 1982), addressed several key issues relevant to corporate sector behavior along with such other aspects of the evolving financial underpinnings of U.S. capital formation as household saving incentives, international capital flows, and government debt management. In the project's second series of studies, presented at the National Bureau of Economic Research conference in January 1983 and published here for the first time along with commentaries from that conference, the central focus is the financial side of capital formation undertaken by the U.S. corporate business sector. At the same time, because corporations' securities must be held, a parallel focus is on the behavior of the markets that price these claims.

Author : Francesco Sangiorgi
Publisher : Unknown
Page : 116 pages
File Size : 47,6 Mb
Release : 2017
Category : Credit bureaus
ISBN : 1680833812

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The Economics of Credit Rating Agencies by Francesco Sangiorgi Pdf

We explore through both an economics and regulatory lens the frictions associated with credit rating agencies in the aftermath of the financial crisis. While ratings and other public signals are an efficient response to scale economies in information production, these also can discourage independent due diligence and be a source of systemic risk. Though Dodd-Frank pulls back on the regulatory use of ratings, it also promotes greater regulation of the rating agencies. We highlight the diverse underlying views towards these competing approaches to reducing systemic risk. Our monograph also discusses the subtle contrasts between credit rating agencies and other types of due diligence providers, such as auditors, analysts and proxy-voting advisors. We discuss the frictions associated with paying for information in the context of credit ratings; while the issuer-pay model has been identified as a major issue because of potential conflict of interests, we argue that it has several advantages over the investor-pay model in promoting market transparency. We develop a formal reputation model to explore the underlying nature of rating inflation and how the reputational trade-off is affected by various aspects of the rating process such as regulatory constraints, the fee structure, asymmetric information between issuers and investors and the extent of competition among rating agencies. The monograph also uses our illustrative framework to highlight tension between rating accuracy and economic efficiency when ratings influence project value in the presence of feedback effects. We discuss how selective disclosure of ratings by the issuer distorts the distribution of observed ratings. Selection also provides an alternative explanation for why solicited (purchased) ratings exceed unsolicited (complimentary) ratings and helps interpret the greater SEC support for unsolicited ratings in recent years as illustrating the theory of the second best. We explore the impact of greater competition on welfare, building upon a variety of frameworks. Our analysis points to several ways in which ratings matter as well as techniques for documenting such effects.

Author : Ronald W. Masulis
Publisher : Unknown
Page : 168 pages
File Size : 40,6 Mb
Release : 1988
Category : Business & Economics
ISBN : UOM:49015000772732

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The Debt/equity Choice by Ronald W. Masulis Pdf