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Debt Maturity Risk And Asymmetric Information
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Book Synopsis Debt Maturity, Risk, and Asymmetric Information by : Marco Espinosa-Vega
Download or read book Debt Maturity, Risk, and Asymmetric Information written by Marco Espinosa-Vega and published by INTERNATIONAL MONETARY FUND. This book was released on 2005-10-01 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity.
Book Synopsis Debt Maturity, Risk, and Asymmetric Information by :
Download or read book Debt Maturity, Risk, and Asymmetric Information written by and published by . This book was released on 2004 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We test the implications of Flannery's (1986) and Diamond's (1991) models concerning the effects of risk and asymmetric information in determining debt maturity, and we examine the overall importance of informational asymmetries in debt maturity choices. We employ data on over 6,000 commercial loans from 53 large U.S. banks. Our results for low-risk firms are consistent with the predictions of both theoretical models, but our findings for high-risk firms conflict with the predictions of Diamond's model and with much of the empirical literature. Our findings also suggest a strong quantitative role for asymmetric information in explaining debt maturity"--Abstract.
Book Synopsis Debt Maturity and Asymmetric Information by : Vidhan K. Goyal
Download or read book Debt Maturity and Asymmetric Information written by Vidhan K. Goyal and published by . This book was released on 2014 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asymmetric information models suggest that a borrower's choice of debt maturity depends on its private information about its default probabilities, i.e., borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this implication by tracing the evolution of debt issuers' default risk following debt issuances. We find that short-term debt issuance leads to a decline in borrowers' asset volatility and an increase in their distance-to-default. The opposite is true for long-term debt issues. The results suggest that borrowers' private information about their default risk is an important determinant of their debt maturity choices.
Book Synopsis Credit Information Quality and Corporate Debt Maturity by : Marco Sorge
Download or read book Credit Information Quality and Corporate Debt Maturity written by Marco Sorge and published by World Bank Publications. This book was released on 2007 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new theoretical and empirical evidence suggesting that the quality of credit information may be a key element in explaining the maturity structure of corporate debt around the world. In markets with poor credit information and hence a high degree of uncertainty about borrower quality, the authors find suboptimal equilibria in which short-term contracts are preferred either as a hedge against uncertainty to limit losses in bad states (in the symmetric information case) or as a screening device to learn about borrower credit quality in the course of a repeated lending relationship (in the asymmetric information case). The results of the model are supported by the econometric analysis of panel data from both industrial and developing economies. The authors find that countries with better quality of credit information (for example, as a result of improvements in credit reporting systems or accounting standards) are characterized by a higher share of long-term debt as a proportion of total corporate debt ceteris paribus. The findings suggest that promoting institutions and policies to improve the quality of credit information is an important prerequisite for increasing access of firms to long-term finance.
Book Synopsis Sovereign Debt Maturity Structure Under Asymmetric Information by : Diego J. Perez
Download or read book Sovereign Debt Maturity Structure Under Asymmetric Information written by Diego J. Perez and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Maturity Structure of Debt by : Fabio Schiantarelli
Download or read book The Maturity Structure of Debt written by Fabio Schiantarelli and published by World Bank Publications. This book was released on 1997 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Debt Maturity, a Survey by : S. Abraham Ravid
Download or read book Debt Maturity, a Survey written by S. Abraham Ravid and published by . This book was released on 1996 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Is Debt Maturity Determined by Asymmetric Information About Short-Term or Long-Term Earnings? by : Petra Danisevska
Download or read book Is Debt Maturity Determined by Asymmetric Information About Short-Term or Long-Term Earnings? written by Petra Danisevska and published by . This book was released on 2002 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the effect of asymmetric information between managers and lenders on debt maturity structure of firms. The measures of short and long-term asymmetric information are derived from the dispersion of analysts' earnings forecasts. Short-term information asymmetry positively affects debt maturity. We find no relation between long-term asymmetric information and debt maturity. Goswami, Noe and Rebello (1995) suggest that optimal debt maturity structure depends on the term structure of asymmetric information. Our results provide no support for this model. Next, we focus on short-term asymmetric information. The findings imply that firms with both good news and high short-term asymmetric information rely significantly more on short-term debt. Further, a higher proportion of collateral in informational problematic firms leads to higher debt maturity. The maturity matching is strongly supported.
Book Synopsis Asset Maturity, Debt Covenants, and Debt Maturity Choice by : Gautam Goswami
Download or read book Asset Maturity, Debt Covenants, and Debt Maturity Choice written by Gautam Goswami and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The existing research on debt-maturity under asymmetric information has focused on the impact of differential information regarding asset quality on the debt maturity decision. This research has generally indicated the optimality of short-term debt financing as a vehicle of mitigating the adverse selection problem. In this paper, we consider the impact of information asymmetry regarding the maturity structure of cash flows on the debt maturity decision. We demonstrate that, in this context, long-term debt is generally the form of debt financing most effective in alleviating the adverse selection problem. We also show that costs of adverse selection may induce some mismatching of debt maturity and asset maturity in the presence of significant transaction costs.
Book Synopsis Debt Financing Under Asymmetric Information by : Gautam Goswami
Download or read book Debt Financing Under Asymmetric Information written by Gautam Goswami and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we analyze the optimal design of debt- maturity, coupon payments, and dividend payout restrictions under asymmetric information. In our model, if the asymmetry of information is concentrated around long-term cash flows, firms finance with coupon-bearing long-term debt that partially restricts dividend payments. If the asymmetry of information is concentrated around near-term cash flows and there exists a significant possibility that they will be unable to refinance short-term debt, firms finance with coupon-bearing long-term debt that does not restrict dividend payments. Finally, if the asymmetry of information is uniformly distributed across dates, firms finance with short-term debt. Thus, it is the distribution of informational asymmetry across dates rather than the degree of information asymmetry per se that determines firms' debt-financing policies.
Book Synopsis Ownership and Asymmetric Information Problems in the Corporate Loan Market by : Lewis Gaul
Download or read book Ownership and Asymmetric Information Problems in the Corporate Loan Market written by Lewis Gaul and published by CreateSpace. This book was released on 2015-01-01 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In credit markets, asymmetric information problems arise when borrowers have private information about their creditworthiness that is not observable by lenders. If these informational asymmetries do not negatively affect lenders' profitability, then they are irrelevant to lenders.
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Book Synopsis Measuring Corporate Default Risk by : Darrell Duffie
Download or read book Measuring Corporate Default Risk written by Darrell Duffie and published by OUP Oxford. This book was released on 2011-06-23 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, based on the author's Clarendon Lectures in Finance, examines the empirical behaviour of corporate default risk. A new and unified statistical methodology for default prediction, based on stochastic intensity modeling, is explained and implemented with data on U.S. public corporations since 1980. Special attention is given to the measurement of correlation of default risk across firms. The underlying work was developed in a series of collaborations over roughly the past decade with Sanjiv Das, Andreas Eckner, Guillaume Horel, Nikunj Kapadia, Leandro Saita, and Ke Wang. Where possible, the content based on methodology has been separated from the substantive empirical findings, in order to provide access to the latter for those less focused on the mathematical foundations. A key finding is that corporate defaults are more clustered in time than would be suggested by their exposure to observable common or correlated risk factors. The methodology allows for hidden sources of default correlation, which are particularly important to include when estimating the likelihood that a portfolio of corporate loans will suffer large default losses. The data also reveal that a substantial amount of power for predicting the default of a corporation can be obtained from the firm's "distance to default," a volatility-adjusted measure of leverage that is the basis of the theoretical models of corporate debt pricing of Black, Scholes, and Merton. The findings are particularly relevant in the aftermath of the financial crisis, which revealed a lack of attention to the proper modelling of correlation of default risk across firms.
Book Synopsis Asymmetric Information, Corporate Finance, and Investment by : R. Glenn Hubbard
Download or read book Asymmetric Information, Corporate Finance, and Investment written by R. Glenn Hubbard and published by University of Chicago Press. This book was released on 2009-05-15 with total page 354 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this volume, specialists from traditionally separate areas in economics and finance investigate issues at the conjunction of their fields. They argue that financial decisions of the firm can affect real economic activity—and this is true for enough firms and consumers to have significant aggregate economic effects. They demonstrate that important differences—asymmetries—in access to information between "borrowers" and "lenders" ("insiders" and "outsiders") in financial transactions affect investment decisions of firms and the organization of financial markets. The original research emphasizes the role of information problems in explaining empirically important links between internal finance and investment, as well as their role in accounting for observed variations in mechanisms for corporate control.
Book Synopsis Corporate Policies In A World With Information Asymmetry by : Ramesh K S Rao
Download or read book Corporate Policies In A World With Information Asymmetry written by Ramesh K S Rao and published by World Scientific. This book was released on 2015-08-24 with total page 174 pages. Available in PDF, EPUB and Kindle. Book excerpt: A corporate manager typically oversees several ongoing projects and has the opportunity to invest in new projects that add wealth to the stockholders. Such new projects include expanding the corporation's existing business, entering into a new line of business, acquiring another business, and so on. If the firm does not have sufficient internal capital (cash) to finance the initial investment, the manager must enter into a transaction with outside investors to raise additional funds.In this situation, the manager of a public corporation faces two key decisions:Modern corporate finance theory, originating with the seminal work of Merton Miller and Franco Modigliani, has demonstrated that these decisions depend on the information that the manager and investors have about the firm's future cash flows.In this book, the authors examine these decisions by assuming that the manager has private information about the firm's future cash flows. They provide a unified framework that yields new theoretical insights and explains many empirical anomalies documented in the literature.
Book Synopsis The Oxford Handbook of Banking by : Allen N. Berger
Download or read book The Oxford Handbook of Banking written by Allen N. Berger and published by Oxford University Press. This book was released on 2019-10-31 with total page 1328 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Oxford Handbook of Banking, Third Edition provides an overview and analysis of developments and research in this rapidly evolving field. Aimed at graduate students of economics, banking, and finance; academics; practitioners; regulators; and policy makers, it strikes a balance between abstract theory, empirical analysis, and practitioner and policy-related material. Split into five distinct parts The Oxford Handbook of Banking is a one-stop source of relevant research in banking. It examines the theory of banking, bank operations and performance, regulatory and policy perspectives, macroeconomic perspectives in banking, and international differences in banking structures and environments. Taking a global perspective it examines banking systems in the United States, China, Japan, Australia and New Zealand, Africa, the European Union, transition countries of Europe, and Latin America. Thematic issues covered include financial innovation and technological change; consumer and mortgage lending; Islamic banking; and how banks influence real economic activity. Fully revised and now including brand new chapters on a range of geographical regions, bank bailouts and bail-ins, and behavioral economics amongst many other topics, this third edition of The Oxford Handbook of Banking provides readers with insights to seminal and contemporary research in banking and an opportunity to learn about the diversity of financial systems around the world.
Book Synopsis Bank Lending in the Knowledge Economy by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Lending in the Knowledge Economy written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2017-11-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.
