DESIGN AND VALUATION OF CORPORATE SECURITIES WITH STRATEGIC DEBT SERVICE AND ASYMMETRIC INFORMATION

1999 ◽  
Vol 02 (02) ◽  
pp. 201-219 ◽  
Author(s):  
YONGHUA PAN
Keyword(s):  
Asymmetric Information ◽  
Information Asymmetry ◽  
Risk Premium ◽  
High Growth ◽  
Cash Flows ◽  
Debt Service ◽  
Growth Potential ◽  
Unified Framework ◽  
Financing Decisions ◽  
Corporate Securities

This paper studies the effects of strategic debt service, asymmetric information and their interaction on the valuation of corporate securities and on corporate financing decisions. By introducing information asymmetry into a continuous-time setting, our model is able to integrate these two factors in a unified framework. Such a model allows for obtaining valuation results in a separating equilibrium. The basic results of this paper imply that the risk premium of debt could be partly contributed by information effect. This part of risk premium could be very significant for those good firms with a project which will produce much higher cash flows than what the market expects. We also find that a firm's financing decision depends on its primitives: firms are more apt to rely on equity if they have: (1) high growth potential, (2) riskier projects, (3) higher ratio of intangible assets to total assets and (4) lesser information asymmetry; firms would prefer debt, otherwise.

Discretionary Risk Disclosures

2003 ◽  
Vol 78 (2) ◽  
pp. 449-469 ◽  
Author(s):  
Bjorn N. Jorgensen ◽  
Michael T. Kirschenheiter
Keyword(s):  
Stock Returns ◽  
Risk Premium ◽  
Voluntary Disclosure ◽  
Cash Flows ◽  
Share Price ◽  
Risk Disclosure ◽  
Share Prices ◽  
Ex Post ◽  
Partial Disclosure ◽  
Future Cash Flows

We model managers' equilibrium strategies for voluntarily disclosing information about their firm's risk. We consider a multifirm setting in which the variance of each firm's future cash flow is uncertain. A manager can disclose, at a cost, this variance before offering the firm for sale in a competitive stock market with risk-averse investors. In our partial disclosure equilibrium, managers voluntarily disclose if their firm has a low variance of future cash flows, but withhold the information if their firm has highly variable future cash flows. We establish how the manager's discretionary risk disclosure affects the firm's share price, expected stock returns, and beta, within the framework of the Capital Asset Pricing Model. We show that whereas one manager's discretionary disclosure of his firm's risk does not affect other firms' share prices, it does affect the other firms' betas. Also, we demonstrate that a disclosing firm has lower risk premium and beta ex post than a nondisclosing firm. Finally, we show that ex ante, the expected risk premium and expected beta of each firm are higher under a mandatory risk disclosure regime than in the partial disclosure equilibrium that arises under a voluntary disclosure regime.

Explaining the Growth Potential of a Market Leader and Challenger: Evidence from Japan’s Telecommunications Services Industry

2021 ◽  
pp. 227853372198952
Author(s):  
Mostafa Saidur Rahim Khan ◽  
Naheed Rabbani
Keyword(s):  
High Growth ◽  
Growth Potential ◽  
Book Value ◽  
Good Investment ◽  
Growth Firms ◽  
Price Earnings Ratio ◽  
Equity Ratio ◽  
Market Leader ◽  
Services Industry ◽  
Telecommunications Services

This study examines the growth potential of the market leader and market challenger in Japan’s telecommunications services industry. We focus on Nippon Telegraph and Telephone Corporation (NTT) and KDDI, the market leader and challenger (respectively) in terms of sales revenue, total assets, and market share. Following finance literatures, we use higher values of price–earnings ratio (P/E) and market-to-book-value-of-equity ratio (MV/BV) as the indicators of growth potential. High growth firms have the potential to outperform the overall market over a significant period of time providing a good investment opportunity for retail and institutional investors. This study uses financial data of the NTT and KDDI from the period between 2001 and 2016 and applies several regression models to examine the growth potential of the market leader and market challenger in Japan’s telecommunications services industry. Using the P/E and MV/BV as indicators of growth potential, we show that the market challenger’s growth potential is significantly higher than that of the market leader, even after controlling for firm size, liquidity, profitability, leverage, cash flow, and age.

Cross-Border M&A Deals between CIS and Persian Gulf Countries

2015 ◽  
pp. 28-34
Author(s):  
A. Nagimova
Keyword(s):  
Persian Gulf ◽  
Joint Venture ◽  
High Growth ◽  
Growth Potential ◽  
Abu Dhabi ◽  
Investment Fund ◽  
Cross Border ◽  
Gulf Countries ◽  
Agriculture Industry ◽  
Good Potential

The article analyses cross-border mergers and acquisition deals (M&A-deals) between the CIS and Persian Gulf countries in the period from 1990 till the present day. The author defines distinctive features, number, value, status and transparency of such M&A-deals, estimates average deal value and volume of the largest M&A-deals. In addition, the author shows country, industry and type breakdown of M&A-deals. Then the author reviews the main cross-border M&A-deals by industries. In the financial sector the biggest M&A-deal is between the Ministry of finance of Abu-Dhabi and the Russian direct investment fund (RDIF), the two main players from the CIS side are RDIF and VTB. Then the author analyses M&A-deals in extractive sector, and defines the biggest project which is joint venture of LUKoil in Saudi Arabia. In the production sector Russian metallurgical companies are the main investors. In the transport and infrastructure sphere the biggest project is the building of international transit corridor between Uzbekistan, Turkmenistan, Iran and Oman. The main investor in port sector of CIS is DP World from UAE. The author defines the sectors with high growth potential of cross-border M&A-activity. These are energy, agriculture, construction and tourism. The most significant deals in these sectors are the acquisition of Russian Enel OGK-5 by Emirates investors, building of Abu Dhabi Plaza in Astana (Kazakhstan) with the highest tower in the whole Central Asia and Russian-Emirates partnership for the building of satellite city in Moscow region. As far as Persian Gulf countries are the largest foodstuff importers in the world the potential of M&A-deals in agriculture industry and prospects for CIS grain exporters are also high. In conclusion, the author resumes that the trend in the number of cross-border M&A-deals is positive and that a good potential for development of investment cooperation between countries exists.

Does Financial Reporting Conservatism Mitigate Underinvestment?

2017 ◽  
Vol 34 (2) ◽  
pp. 258-283 ◽  
Author(s):  
Hyun A. Hong ◽  
Yongtae Kim ◽  
Gerald J. Lobo
Keyword(s):  
Information Asymmetry ◽  
Cash Flow ◽  
Financial Reporting ◽  
Cash Flows ◽  
Agency Conflicts ◽  
Negative Relation ◽  
Investment Projects ◽  
External Capital ◽  
Cash Flow Volatility

This study examines the role of financial reporting conservatism in mitigating underinvestment problems. Recognizing that volatile cash flows increase the need to access external capital markets and that agency conflicts and information asymmetry make external capital costlier than internal capital, which leads managers to forgo valuable investment projects, Minton and Schrand document a negative relation between cash flow volatility and investment. We draw on Minton and Schrand’s framework to isolate underinvestment problems and hypothesize and document that conservatism mitigates the negative relation between cash flow volatility and investment and that this mitigative effect is more pronounced for firms with ex ante more severe agency conflicts. We also document that conservatism mitigates the sensitivity of investment to cash flow volatility by facilitating access to external capital.

scholarly journals Social Challenges of the Digital Economy: Russia in a Global Context

2021 ◽  
Vol 65 (9) ◽  
pp. 14-24
Author(s):  
E. Sadovaya
Keyword(s):  
Global Economy ◽  
Technological Development ◽  
High Growth ◽  
World Order ◽  
Digital Economy ◽  
Digital Transformation ◽  
Growth Potential ◽  
Raw Material ◽  
Soviet Period ◽  
Labor Resources

The subject of the research is the challenges of the digital economy for the employment sector in Russia. The need to reduce costs in the face of a deteriorating situation in the global economy is a factor in accelerating the digital transformation of employment in the country. The transformation is carried out through the automation of the main business processes, as well as through the development of platform employment formats. Specific features of the process of digital transformation of employment form the shape of the development of the Russian labor market in the post- Soviet period. Its main factor was the country’s entry into the global system of division of labor, which led to the formation of the modern structure of employment. The economy of Russia, recognized as raw material, turned out to be “commercial” in terms of employment, since it was this industry that created the bulk of jobs during that period. The commerce sector, which had high growth potential in the early 1990s in Russia, provided jobs for all those labor resources that were released from the industry. However, at the moment this source has been exhausted. Digitalization threatens the most labor-intensive sectors of the Russian economy. Commerce turns out to be the first industry to undergo automation and digitalization of jobs. At the same time, the most massive professions (accountants, bank employees, HR specialists, salesmen, cashiers, couriers, security guards, secretaries, packers, call center workers, drivers) are under the threat of “disappearance”, while new ones in demand by the market are more likely “unique” and they are mostly associated with robotization, digitalization and biotechnology. The unmet demand for these professions is a reflection of the complexities of training highly qualified interdisciplinary specialists and not a physical shortage of labor resources, and this is a serious challenge for the vocational education system. The study aims to gain a deeper understanding of the processes taking place in the social and labor sphere in Russia, to create a conceptual basis for the development of a socio-economic policy of the state that adequately responds to the challenges of the digitalization of the economy. Acknowledgements. The article was prepared within the project “Post-crisis world order: challenges and technologies, competition and cooperation” supported by the grant from Ministry of Science and Higher Education of the Russian Federation program for research projects in priority areas of scientific and technological development (Agreement № 075-15-2020-783).

scholarly journals Information Asymmetry in Supply Chain Coordination: State of the Art

2020 ◽  
pp. 38-43
Author(s):  
Mohammadali Vosooghidizaji ◽  
◽  
Atour Taghipour ◽  
Béatrice Canel-Depitre
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Literature Review ◽  
Supply Chains ◽  
Information Asymmetry ◽  
State Of The Art ◽  
Supply Chain Coordination ◽  
Coordination State ◽  
Strategic Information ◽  
Comprehensive Literature Review

Supply chains consist of several actors from supplier, manufacturer, distributer, wholesaler and retailers connected to each other by financial, material and informational flows. Optimal performance of supply chains requires set of actions that coordinate the members’ decisions [1], [2]. In many cases, members are trying to optimize their own objectives which can lead to asymmetric information by keeping some strategic information private. Although, this information asymmetry is a challenge affecting the coordination of supply chain, but it is achievable if proper set of coordinating mechanism executed. This paper presents a comprehensive literature review of supply chain coordination under asymmetric information and tries to analyze the trend in the context and address the evolution and gaps in existing literature.

Asymmetric Information and Corporate Risk Management by Using Foreign Currency Derivatives

2012 ◽  
Vol 15 (01) ◽  
pp. 1250004 ◽  
Author(s):  
Bingxuan Lin ◽  
Chen-Miao Lin
Keyword(s):  
Risk Management ◽  
Asymmetric Information ◽  
Information Asymmetry ◽  
Foreign Currency ◽  
Corporate Risk Management ◽  
Currency Derivatives ◽  
Medium Level ◽  
Low Levels ◽  
Corporate Risk ◽  
Very High

We examine how information asymmetry affects a firm's incentive to hedge versus speculate by using foreign currency derivatives. We find a quadratic relation between asymmetric information and a firm's risk management activities. In particular, we find that the firms facing medium level of information asymmetry are more likely to hedge, while firms with very high and low levels of asymmetric information tend to speculate. Moreover, we find that our results hold primary for firms operating in highly competitive industries.

scholarly journals The condition of forest stands on afforested agricultural land in the Orlické hory Mts

2017 ◽  
Vol 63 (No. 1) ◽  
pp. 1-8 ◽  
Author(s):  
Cukor Jan ◽  
Baláš Martin ◽  
Kupka Ivo ◽  
Tužinský Marek
Keyword(s):  
Agricultural Land ◽  
High Growth ◽  
Dry Mass ◽  
Growth Potential ◽  
Forest Stands ◽  
Tree Biomass ◽  
Humus Layer ◽  
The Status ◽  
Spruce Stands ◽  
High Growth Potential

The paper presents an evaluation of the growth of newly established forest stands on former agricultural land and furthermore describes the state of the upper part of the soils in these stands in comparison with neighbouring grassland in the Orlické hory Mountains. The new Norway spruce stands show an extremely high growth potential, usually significantly higher in comparison with areas forested for more generations/rotations. The formation of the surface humus layer also showed fast progress, the amount of dry mass of soil organic matter reaching values almost typical of permanently forested sites. The soils of newly afforested lands tend to resemble the status of forest soil – there was observed a process of acidification and nutrient depletion, probably connected with accumulation of the tree biomass.

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