Economic freedom, the cost of public borrowing, and state bond ratings

2013 ◽  
Vol 5 (1) ◽  
pp. 72-85 ◽  
Author(s):  
Peter T. Calcagno ◽  
Justin D. Benefield
Keyword(s):  
Economic Freedom ◽  
Bond Ratings ◽  
The Cost

scholarly journals A Panel Data Study of the Effects of Economic Freedom, Regulatory Quality, and Taxation on the Growth Rate of Per Capita Real GDP

2012 ◽  
Vol 30 (1) ◽  
pp. 103-122
Author(s):  
Richard J. Cebula ◽  
Maggie Foley
Keyword(s):  
Growth Rate ◽  
Fixed Effects ◽  
Economic Freedom ◽  
Government Regulation ◽  
The Third ◽  
Real Gdp ◽  
Regulatory Quality ◽  
Gdp Growth Rate ◽  
Per Capita ◽  
The Cost

Abstract This study empirically investigates three hypotheses. The first is that higher levels of economic freedom in an economy promote a higher growth rate of economic activity and hence yield a higher growth rate of per capita real GDP in that economy. The second hypothesis is that higher quality government regulation leads to a more efficient economic system, in large part by interfering less with market functioning and in part by not adding unnecessarily to the cost of conducting business in the marketplace, and thereby leads to a higher per capita real GDP growth rate. The third hypothesis is that the higher the taxation level/burden relative to GDP in an economy, the lower the growth rate of private sector spending and hence the lower the growth rate of per capita real GDP in that economy. Using a panel dataset for OECD nations over the 2003 through 2006 period, fixed effects PLS estimations find compelling evidence in support of all three of these hypotheses.

scholarly journals Economic Freedom And Investment Efficiency In The MENA Region

2017 ◽  
Vol 33 (4) ◽  
pp. 841
Author(s):  
Asma’a Al-Amarneh
Keyword(s):  
Regression Models ◽  
Economic Freedom ◽  
Investment Efficiency ◽  
Market Returns ◽  
Mena Region ◽  
Volatility Risk ◽  
Market Return ◽  
The Government ◽  
Using Data ◽  
The Cost

The purpose of this study is to investigate the effect of economic freedom level on investment efficiency; predicted by market return and volatility; using data covering the period from 1996 tell 2015 for the MENA region countries. Simple regression models and multivariate regression models were applied to test our hypothesis. The results show that the economic freedom level has a little impact on market return, and the capital market performance get better as the government regulations get highly efficient and the financial system is accessible and effi­ciently functioning. In the same time, the evidence points out that economic freedom decrease market returns’ volatility (risk), indicating that; if government’s regulation in banking and financial systems doesn’t assure transparency and honesty, then financial markets efficiency will be hindered, the cost of financing will increase and the completion will be limited. Keeping in mind that the two fundamental aspects of investment are risk and return; it is obvious that economic freedom enhances the risk-return investment efficiency in the MENA region.

The relationship between local government economic freedom and bond ratings

2017 ◽  
Vol 9 (4) ◽  
pp. 435-449
Author(s):  
John Dove
Keyword(s):  
Local Government ◽  
Design Methodology ◽  
Economic Freedom ◽  
Local Level ◽  
Cross Sectional ◽  
Bond Ratings ◽  
Municipal Governments ◽  
Content Type ◽  
The Impact ◽  
The Relationship

Purpose With a newly developed measure of economic freedom across US local government jurisdictions, this paper aims to estimate the relationship between economic freedom and bond ratings. Design/methodology/approach The author uses a battery of cross-sectional econometric models to identify the impact that economic freedom might have on bond ratings using a sample of US municipal governments. Findings Overall, the results indicate that relatively more economic freedom within a local jurisdiction is associated with higher bond ratings and thus lower borrowing costs. However, similar to Roychoundhury and Lawson (2010), no specific subcomponent seems to affect bond ratings. Originality/value To the author’s knowledge this is the first scholarly work to address this topic at the local level.

ECONOMIC FREEDOM AND STATE BOND RATINGS

2014 ◽  
Vol 33 (4) ◽  
pp. 668-677 ◽  
Author(s):  
Ariel R. Belasen ◽  
Rik W. Hafer ◽  
Shrikant P. Jategaonkar
Keyword(s):  
Economic Freedom ◽  
Bond Ratings

scholarly journals Levered-Beta and Cost of Capital Sensitivities: An Experimental Investigation in Capital Structure

2021 ◽  
Vol 14 (4) ◽  
pp. 152
Author(s):  
Kudret Topyan
Keyword(s):  
Capital Structure ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Debt Ratio ◽  
Bond Ratings ◽  
Optimal Capital Structure ◽  
Rating Method ◽  
Optimal Capital ◽  
The Cost ◽  
The Impact

Using US firms with over $5b market cap, this paper tests the impact of levered beta on the firm’s market value and optimal capital structure. Using the synthetic rating method in a recursive model, the paper shows the current and optimal weighted average cost of capital sensitivities as the firm’s market risk measured by beta changes. The paper shows that the change in the value of beta due to alternative leverage levels or other risk factors will alter the cost of capital insignificantly and has no impact on the optimal capital structure due to those firms’ extra-strong bond ratings. As a side-benefit of the synthetic rating method, one may also observe the market-level variables’ impacts on the cost of capital computations and the optimal debt ratio. The paper uses Disney Corporation to show how the synthetic rating methodology helps to disclose the sensitivities of hypothetical alternative leverages.

The European Union and Economic Freedom

2011 ◽  
Vol 11 (3) ◽  
pp. 1850232 ◽  
Author(s):  
Joshua C. Hall ◽  
Robert A. Lawson ◽  
Rachael Wogsland
Keyword(s):  
European Union ◽  
Economic Freedom ◽  
Economic Convergence ◽  
The European Union ◽  
Bond Ratings ◽  
The Impact ◽  
Political Unions

This paper integrates two growing strains of literature. The first strain looks at the effect of economic and political unions on outcomes such as bond ratings and economic convergence. The second strain looks at the determinants of economic freedom across countries. Building from these two literatures, we investigate the impact of joining the European Union on a country’s economic freedom. Using a panel of countries from 1970 to 2007, we find evidence that joining the European Union increases a country’s economic freedom. Empirically, however, the impact of joining the union on economic freedom is small.

Economic Freedom and State Bond Ratings

2013 ◽  
Author(s):  
Ariel R. Belasen ◽  
Rik W. Hafer ◽  
Shrikant Jategaonkar
Keyword(s):  
Economic Freedom ◽  
Bond Ratings

scholarly journals The impact of positive operating cash on bonds’ pricing international evidence

2015 ◽  
Vol 12 (4) ◽  
pp. 708-717 ◽  
Author(s):  
Harit Satt
Keyword(s):  
Cash Flow ◽  
Cost Of Debt ◽  
Probit Regression ◽  
Cash Balance ◽  
Bond Ratings ◽  
International Evidence ◽  
Cash Flow Statement ◽  
The Cost ◽  
The Impact ◽  
The Relationship

This paper aims to ascertain the relationship existing between the ratings of bonds and the ending cash balance of the operating section in the cash flow statement. In our study, which lasted for 18 years, 600 companies were selected from 26 countries to construct our sample. With purpose of detecting how the positive cash balance of the operating section in the cash flow statement characters the likelihood of rising the bonds ratings, we have applied a Probit regression analysis. Consequently, a robust proof stating that the bonds ratings are significantly impacted by the positive operating cash balance. That is to say, generating enough cash flow from the operating activities increases the company’s chances to have greater bonds ratings raises, meanwhile lowering the cost of debt given that higher bond ratings decreases the cost of company for raising funds (in the form of bonds). More confirmation to the creditors’ rights shields was added through our outcomes, in addition to its impact on the cost of debt.

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