Debt Financing, Firm Value, and the Cost of Capital

2008 ◽  
Author(s):  
Robert S. Harris ◽  
Susan J. Chaplinsky
Keyword(s):  
Firm Value ◽  
Cost Of Capital ◽  
Debt Financing ◽  
The Cost

Debt Financing, Firm Value, and the Cost of Capital

2006 ◽  
Author(s):  
Robert S. Harris ◽  
Susan J. Chaplinsky
Keyword(s):  
Firm Value ◽  
Cost Of Capital ◽  
Debt Financing ◽  
The Cost

The financial consequences of human capital disclosure as part of integrated reporting

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Antonio Salvi ◽  
Nicola Raimo ◽  
Felice Petruzzella ◽  
Filippo Vitolla
Keyword(s):  
Human Capital ◽  
Firm Value ◽  
Fixed Effects ◽  
Cost Of Capital ◽  
Positive Impact ◽  
Firm Risk ◽  
Integrated Reporting ◽  
Content Type ◽  
Financial Consequences ◽  
The Cost

PurposeThe purpose of this paper is to analyse the financial consequences of the level of human capital (HC) information disclosed by firms through integrated reports. Specifically, this work examines the effect of HC information on the cost of capital and firm value.Design/methodology/approachA manual content analysis is used to measure the level of HC information contained in integrated reports. A fixed-effects regression model is used to analyse 375 observations (a balanced panel of 125 firms for the period 2017–2019) and test the financial consequences of HC disclosure.FindingsThe empirical outcomes indicate that HC disclosure has a significant and negative effect on the cost of capital and a positive impact on firm value. Our results show that companies can reduce investors' perceived firm risk by improving HC disclosure, leading to a lower cost of capital. Moreover, our findings support the notion that increased levels of HC disclosure are linked to firms' improved access to external financial resources, consequently enhancing firm value.Originality/valueThis study is the first contribution to examine the financial consequences of HC disclosure and is one of the first to examine the level of HC information within integrated reports.

The relation between excess control and cost of capital

2014 ◽  
Vol 10 (1) ◽  
pp. 93-114 ◽  
Author(s):  
Yves Bozec ◽  
Claude Laurin ◽  
Iwan Meier
Keyword(s):  
Firm Value ◽  
Design Methodology ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Equity Capital ◽  
Content Type ◽  
The Common ◽  
Cash Flow Rights ◽  
The Cost ◽  
The Relationship

Purpose – The purpose of this study is to investigate the relationship between dominant shareholders, whose voting rights exceed cash flow rights (excess control), and firms’ cost of capital, including both equity capital and debt. Design/methodology/approach – This research is conducted in Canada over a four-year period from 2002 to 2005 and uses panel data of 155 S&P/TSX firms. The weighted average cost of capital is regressed on excess control using fixed-effect regressions in a two-stage least squares framework. Findings – The paper finds evidence that the cost of capital increases with excess control. The paper also confirms that for firms incorporated under the less protective Quebec incorporation law the excess control and, therefore, cost of capital is higher than for firms incorporated in the other provinces under the common law regime. Originality value – Prior work examined the relationship between excess control and firm value, mostly Tobin's Q. By using cost of capital, the study explores another channel through witch excess control may affect firm value.

Performance Contingencies in CEO Equity Awards and Debt Contracting

2018 ◽  
Vol 94 (5) ◽  
pp. 57-82 ◽  
Author(s):  
John M. Bizjak ◽  
Swaminathan L. Kalpathy ◽  
Vassil T. Mihov
Keyword(s):  
Firm Value ◽  
Stock Price ◽  
Lower Cost ◽  
Incentive Compatibility ◽  
Debt Financing ◽  
Cost Of Debt ◽  
Debt Contracting ◽  
Agency Conflict ◽  
Loan Terms ◽  
The Cost

ABSTRACT We find that firms that grant performance-contingent (p-c) equity awards with accounting-based vesting conditions to their CEOs have lower cost of debt and less restrictive loan terms. The benefits of p-c accounting-based awards on debt financing are greater when the moral hazard problem faced by debtholders is potentially more significant—for example, for firms with poorer credit ratings and lower asset tangibility. We find some evidence that certain types of p-c equity awards with stock price-based conditions increase the cost of debt financing. The adoption of p-c accounting-based awards increases firm value, as indicated by stock and bond event studies. Overall, our findings suggest that the incentive compatibility of accounting-based p-c awards mitigates the potential agency conflict between shareholders and debtholders. JEL Classifications: G32; G34; J33; M12; M52.

Credit Default Swaps and Firm Value

2018 ◽  
Vol 53 (3) ◽  
pp. 1227-1259 ◽  
Author(s):  
Rajesh Narayanan ◽  
Cihan Uzmanoglu
Keyword(s):  
Firm Value ◽  
Cost Of Capital ◽  
Credit Default Swaps ◽  
Cash Flows ◽  
Stock Liquidity ◽  
Credit Quality ◽  
Credit Default ◽  
Incremental Information ◽  
The Cost ◽  
Free Cash Flows

This article provides evidence that firm value declines when credit default swaps (CDSs) are initiated and that the effect is greater when CDS trading activity is higher. This decline, which arises from an increase in the cost of capital as opposed to a decrease in free cash flows, traces to a deterioration in the firm’s credit quality and stock liquidity. Firm value declines less when CDS trading is likely to produce incremental information, suggesting that CDS trading has informational benefits for firm value. However, the evidence does not indicate that firm value increases because CDS availability facilitates investments.

scholarly journals The Impacts of Environmental, Social, and Governance Factors on Firm Performance: Panel Study of Malaysian Companies

2019 ◽  
Author(s):  
Ruhaya Atan ◽  
Md. Mahmudul Alam ◽  
Jamaliah Said ◽  
Mohamed Zamri
Keyword(s):  
Firm Value ◽  
Cost Of Capital ◽  
Panel Study ◽  
Policy Makers ◽  
Responsible Investment ◽  
Firm Profitability ◽  
The Cost ◽  
Environmental Agencies ◽  
The Impact ◽  
A Company

Purpose - The ESG factor, which consists of environmental, social, and governance factors, represents the non-financial performance of a company. United Nations Principles for Responsible Investment (UN-PRI) invites investors to consider ESG issues when evaluating the performance of any company. Moreover, nowadays the contribution of corporations towards sustainable development is a major concern of investors, creditors, government, and other environmental agencies. Therefore, the purpose of this paper is to examine the impact of ESG factors on the performance of Malaysian public limited companies in terms of profitability, firm value, and cost of capital.Design/methodology/approach – A total of 54 companies are selected from Bloomberg’s ESG database that has complete ESG and financial data from 2010 to 2013. This study conducted panel data regressions such as the pooled OLS, fixed effect, and random effect.Findings - Based on the regression results, there is no significant relationship between individual and combined factors of ESG and firm profitability (i.e., ROE) as well as firm value (i.e., Tobin’s Q). Moreover, individually, none of the factors of ESG is significant with the cost of capital (WACC), but the combined score of ESG positively and significantly influences the cost of capital (WACC) of a company.Practical implications - As this is a new study on Malaysia, the findings of this study will be useful to investors, SRI analysts, policy makers, and other related agencies.Originality/value – To the best of the authors’ knowledge, this study is among the first empirical study to examine the impact of ESG factors on the performance of Malaysian public limited companies in terms of profitability, firm value, and cost of capital.

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