Industry Conditions, Growth Opportunities, and Market Reactions to Convertible Debt Financing Decisions

We examine the issuance choice across rights issues of equity, unit offerings, and standalone warrants and investigate the market reactions to these issue types. We find that agency costs, growth opportunities, and current funding needs relative to assets in place are prime drivers of the type of equity issuance choice. Managers use quality signals such as underpricing, underwriting status, and the proportion of funds raised by exercising warrants in determining the features of the warrant issue. Furthermore, we document that the market reacts more favorably to standalone warrants issues than units and equity during the rights offering period.

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Meta-analysis of transactional and financial possibilities of using trade credit

Wiadomości Statystyczne. The Polish Statistician ◽

10.5604/01.3001.0015.5549 ◽

2015 ◽

Vol 60 (7) ◽

pp. 51-73

Author(s):

Natalia Nehrebecka ◽

Anna Białek-Jaworska ◽

Aneta Dzik-Walczak

Keyword(s):

Research Methods ◽

International Research ◽

Logit Model ◽

Trade Credit ◽

Meta Analysis ◽

Debt Financing ◽

Company Size ◽

Growth Opportunities ◽

Funding Sources

Article aims to systematize the knowledge acquired in the independent international research on the determinants of financing enterprises using trade credit by conducting a meta-analysis for the main groups of factors taken into account in the models: debt, liquidity, company size, profitability, stocks and growth opportunities. On the basis of publications review devoted to funding sources, 26 companies using trade credit from suppliers are selected. A database containing information about 232 of the estimated models is built. A logit model is estimated to identify the characteristics of trials and research methods determinants influencing the importance of trade credit finance companies. Results of the effect of debt financing on commercial credit utilization depend on the country and the characteristics of surveyed enterprises.

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Corporate Governance Quality and Capital Structure Decisions: Empirical Evidence from Canada

Advances in Social Sciences Research Journal ◽

10.14738/assrj.69.7140 ◽

2019 ◽

Vol 6 (9) ◽

pp. 303-311

Author(s):

Dan Lin ◽

Lu Lin

Keyword(s):

Corporate Governance ◽

Capital Structure ◽

Empirical Evidence ◽

Composite Index ◽

Free Cash Flow ◽

Debt Financing ◽

Cost Of Debt ◽

Financing Decisions ◽

Governance Quality ◽

Corporate Governance Quality

This study examines the relationship between corporate governance quality and capital structure of firms listed on the S&P/TSX composite index between 2009 and 2012. Using an aggregate corporate governance index, this study finds support for the outcome hypothesis, which argues that capital structure is an “outcome” of corporate governance quality. Governance quality is found to be positively associated with firms’ leverage. Firms with lower governance quality have lower leverage as these firms’ managers do not like to have only little free cash flow leftover or have extra constraints imposed by debt financing. In contrast, firms with higher governance quality are more leveraged because these firms have lower agency costs and thus lower cost of debt financing. As a result, they can take on more debts. The empirical evidence from this study illuminates important links between governance quality and financing decisions of firms.

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The performance of corporate bond issuers in times of financial crisis: empirical evidence from Latin America

The Journal of Risk Finance ◽

10.1108/jrf-06-2020-0129 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Marc Berninger ◽

Bruno Fiesenig ◽

Dirk Schiereck

Keyword(s):

Latin America ◽

Latin American ◽

Empirical Studies ◽

Corporate Bond ◽

Economic Conditions ◽

Corporate Debt ◽

Market Reactions ◽

Content Type ◽

Financing Decisions ◽

Theoretical Approaches

PurposeThe fundamental theory of Modigliani and Miller (1958) states that a firm's financing decisions are independent from the firm's value. Nevertheless, several empirical studies as well as theoretical approaches from the past decade impugn this relation for real markets with their immanent inefficiencies. However, these questions are rather than academic in nature: Especially the influence of macroeconomic conditions on the market perception of debt issues is from high economic importance, since the need for new liquidity usually becomes even more urgent when the economic conditions worsen.Design/methodology/approachThis paper analyzes the reaction of shareholders to the issue of debt by Latin American firms under special consideration of the macroeconomic sentiment. To do so, a sample of debt issued by Latin American companies between 2003 and 2010 is empirically examined through an event study.FindingsThe authors empirically demonstrate that specifically in Latin America, debt issuing companies show a significant underperformance during recessionary periods and an overperformance during nonrecessionary periods. These findings differ from previous results for mature capital markets. The authors conclude that not only the overall economic conditions matter to explain stock market reactions on bond issues but also the maturity of the corporate debt market plays an important role.Originality/valueThe authors provide first evidence that the previously described changes in the returns on specific stocks depending on the economic sentiment (Baker and Wurgler, 2006) are under certain conditions also present in the market for corporate debt.

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