This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The...

We investigate equilibrium debt dynamics for a firm that cannot commit to a future debt policy and is subject to a fixed restructuring cost. We formally characterize equilibria when the firm is not required to repurchase outstanding debt prior to issuing additional debt. For realistic values of...

Im Juli 2022 hat die EZB angefangen, den Leitzins schrittweise zu erhöhen, um so die gestiegene Inflation wieder in den Zielkorridor zu führen. Ein Anstieg der Kapitalkosten für Staaten und Unternehmen war schon deutlich früher zu beobachten. Maßgeblich verursacht wurde dieser Anstieg...

Private firm financing, given the far-reaching importance of non-publicly traded companies for global output and employment, is still a relatively underexplored area. Since the seminal work of Petersen and Rajan (1994), only a small branch of research into private firms' cost of debt has been...

This study investigates the effect of sharia firms on the cost of debt in the Indonesian market. We use OLS regression to examine the relationship by applying 1870 data observations of nonfinancial companies registered on the Indonesia Sharia Stock Index (ISSI) during 2012-2018. We found that...

The research aimed to check whether investment fund managers maintain costs similarly from period to period. The research verified the hypothesis that managers maintain costs in the subsequent periods at a similar level. The study used a method based on contingency tables which are used to...

This study examines the relationship between politically connected independent commissioners and independent directors regarding the cost of debt. The sample is all companies listed on the Indonesia Stock Exchange for the 2010-2017 period, totaling 327 companies with a total data value of 1722...

Through the compulsory participation of junior investors in bearing losses of their failing bank, the bailin attempts to limit bail-outs' side-effects in terms of market discipline, too-big-to-fail, bank-sovereign nexus and risk-taking. This paper assesses the consequences of bail-in...

The present paper proposes an overview of the existing literature covering several aspects related to environmental, social, and governance (ESG) factors. Specifically, we consider studies describing and evaluating ESG methodologies and those studying the impact of ESG on credit risk, debt and...

We quantify how banks' funding costs affect their lending behavior directly, and indirectly by feeding back to their net worth. For identification, we exploit banks' heterogeneous liability structure and the existence of regulated deposits in France whose rates are set by the government. Using...

Does the introduction of corporate transparency and disclosure rules in emerging economies affect compliance, and therefore earnings quality and firm performance? We explore these questions for an important emerging economy, Russia, using a natural experiment, the 2002 introduction of Russian...

This paper investigates the effect of enterprise risk management (ERM) implementation on the cost of capital (cost of debt [Cd], cost of equity [Ce], and weighted average cost of capital [WACC]) for the oil and gas industry. The research is conducted using panel data analysis from 2008−2017...

We examine the role of female directors on firm cost of equity in the context of US-listed firms, and further explore the mediating impact of debt financing policy on such association. Using a dataset of 4619 non-financial firm-year observations covering the period of 2008-2019, we find that...

The problem of determining the cost of equity is crucial to the development of organizations. It is an essential means of calculating value creation. The financial literature has proposed several models for estimating the cost of equity, such as the capital asset pricing model (CAPM). However,...

The paper investigates the impact of capital structure and information asymmetry on the value of companies listed on the Warsaw Stock Exchange. The study was conducted using the ordinary least squares (OLS) method on a sample of 273 companies in 2017 and the GMM dynamic paneldata approach with...

We examine changes in the corporate tax rate across the U.S. and their implications on the pricing and quantity of loans. We find an asymmetric effect on the cost of credit: loan spreads decrease by approximately 5.9 basis points in response to a one percentage tax cut, but they are insensitive...

We examine the impact of institutional investor cross holding (IICH) on the cost of equity. The findings suggest that IICH firms have a lower cost of equity than non-IICH firms. We find that it is mainly IICH firms in the same industry that successfully reduce their cost of equity. Additional...

This paper examines the relationship between firm internationalization and cost of equity. We find that firms with a higher degree of international operations have a significantly lower cost of equity, which is more pronounced for firms in provinces with a weak institutional environment or firms...

Purpose: The nature of each component of executive compensation varies, resulting in variances in executive in- centives and investor pricing. To examine whether there is a differential relation between executive compensation components and cost of equity capital, this study decomposes the...

Beginning with classical theories on finance, such as the capital structure theory, the trade-off theory of capital structure, and the pecking order theory, the literature shows a negative correlation between tax avoidance and institutional ownership with respect to the business cost of debt....

Servicers are less likely to renegotiate delinquent loans in residential MBS pools that are more deeply tranched. A one standard deviation increase in tranching corresponds to a 14 percent decrease in loan modification relative to the mean. In highly tranched pools, servicers pursue fewer...

For a sample of 25,749 international firm-year observations, we evaluate the relationship between shareholders’ time orientation, firms’ corporate social responsibility, and cost of equity capital. We show that patient institutional investors monitor the CSR strategy of the firms they are...

This study presents an improvement of the King-Fullerton framework for calculating the marginal effective tax rate (METR) for active owners of closely held corporations in a dual income tax system with income splitting rules. The original King and Fullerton model was not modeled to incorporate...

Upon extracting and quantifying relevant hedge information from the narrative section of European banks annual reports, this paper examines the impact of such information on cost of capital [as measured by weighted average cost of capital (WACC), cost of equity (COE) and cost of debt (COD)]....

We study the impact of government-led incentive systems by examining a staggered reform in the Chinese state-owned enterprise (SOE) performance evaluation policy. To improve capital allocative efficiency, in 2010, regulators switched from using return on equity (ROE) to economic value added...

This paper quantifies the impact of capital misallocation on the loss in total factor productivity (TFP), arising from financial frictions. A two-period model is built to map the dispersion in the cross-sectional borrowing costs into the TFP loss. Equity cost of capital, which closely relates to...

We use unique features of the private credit market to examine whether currency risk is a priced systematic risk at the firm level and, therefore, whether and how it affects firms’ financing. We find that currency exposure has a large impact on loan spreads. Decomposing loan spreads, we find...

This paper investigates the cost of debt of parent and subsidiary firms on the US corporate bond market. Debt issued by subsidiary firms is economically relevant, as it represents 13% of the total US bond debt. I find that the bonds issued by non-financial subsidiary firms are related, both...

Central banks of various countries have actively proposed green financial tools for sustainable development, and Environmental, Social and Governance (ESG) rating is receiving more attention. The People’s Bank of China incorporated a green finance policy into the Macro-Prudential Assessment...

We find that organization capital is negatively related to the cost of bank loans. This finding is robust to additional analyses including those that address omitted variable bias and reverse causality. In addition, we find that organization capital reduces all-in-spread-undrawn. When we...