scholarly journals The impact of ECB loan valuation metrics on third-party loan pricing: A EU firm perspective

2020 ◽  
Vol 10 (2) ◽  
pp. 45-52
Author(s):  
Federico Beltrame ◽  
Luca Grassetti ◽  
Maurizio Polato ◽  
Giulio Velliscig
Keyword(s):  
Third Party ◽  
Cost Of Debt ◽  
Loan Pricing ◽  
Loan Portfolio ◽  
Prediction Ability ◽  
Debt Pricing ◽  
Default Prediction ◽  
Loan Quality ◽  
The Cost ◽  
The Impact

This paper delves into the implications for the bank behaviour about firm loan pricing conditions of the new direction undertaken by supervisory and regulatory authorities in the aftermath of the deterioration of the loan portfolio quality that hit EU banks. The 2014 AQR exercise embraces the new direction and extensively uses debt service coverage measures to assess a firm’s loan quality. We, therefore, check whether the DSCR has influenced debt pricing conditions by analysing a panel of 655 listed EU firms from 2009 to 2017. Our findings show that Z-score is unable to discriminate between high and low credit risk firms. The DSCR becomes significant only after 2014, highlighting the incremented importance of this ratio in the bank’s loan pricing determination. Our work contributes to the literature investigating third-party interdependencies with the interplay between lender-borrower relationship and loan pricing and further extends the literature on creditworthiness metrics beyond their mere default-prediction ability (Beaver, 1966; Houghton & Woodliff, 1987). Our results highlight the relevance of the DSCR in the bank’s loan pricing determination and inform firm managers about the drivers that influence the cost of debt thereby enhancing their operational and financial planning.

Does opening high-speed railways affect the cost of debt financing? A quasi-natural experiment

2020 ◽  
Vol 10 (4) ◽  
pp. 473-496
Author(s):  
Hongling Guo ◽  
Keping Wu
Keyword(s):  
High Speed ◽  
Geographical Location ◽  
Debt Financing ◽  
Cost Of Debt ◽  
High Speed Railway ◽  
Content Type ◽  
Financing Cost ◽  
Debt Market ◽  
The Cost ◽  
The Impact

PurposeThis study aims to investigate how opening high-speed railways affects the cost of debt financing based on China's background.Design/methodology/approachUsing panel data on Chinese listed firms from 2008 to 2017, this study constructs a quasi-natural experiment and adopts a difference-in-difference model with multiple time periods to empirically examine the relation between the high-speed railway openings and debt financing cost.FindingsOur results show that opening high-speed railways reduces the cost of debt financing, and this negative correlation is more significant in non-state firms, firms with weaker internal control, and firms that hire non-Big Four auditors. Besides, we explore the impact mechanisms and find that opening high-speed railways improves analyst attention, institutional investor participation, and information disclosure quality, which in turn lowers the cost of debt financing.Research limitations/implicationsThe results imply that the opening of high-speed railways helps to alleviate the information asymmetry and adverse selection between firms and creditors and ultimately reduces the cost of corporate debt financing.Practical implicationsThis paper can inform firms and stakeholders about the impact of opening high-speed railways on debt financing cost: it improves the information environment, reduces the geographical location restrictions of debt financing, ensures the reasonable pricing of corporate debt, and thus promotes the healthy and sound development of the debt market.Originality/valueThis paper provides theoretical support and empirical evidence for the impact of infrastructure construction on the information environment of the debt market in China, which enriches the research on the “high-speed railway economy.” In addition, as an exogenous event, the opening of high-speed railways instantly shortens the time distance between firms and external stakeholders, which gives us a natural environment to conduct empirical research, thus providing a new perspective for financial research on firms' geographical location.

scholarly journals MODELING OF INFORMATION SECURITY SYSTEM IN COMPUTER NETWORK

2019 ◽  
pp. 36-41
Author(s):  
Bogdan Korniyenko ◽  
Liliya Galata
Keyword(s):  
Information Security ◽  
Computing System ◽  
Security System ◽  
Third Party ◽  
Virtual Network ◽  
Service Reliability ◽  
Network Simulator ◽  
Network Bandwidth ◽  
The Cost ◽  
The Impact

This article presents simulation modeling process as the way to study the behavior of the Information Security system. Graphical Network Simulator is used for modeling such system and Kali Linux is used for penetration testing and security audit. To implement the project GNS3 package is selected. GNS3 is a graphical network emulator that allows you to simulate a virtual network of more than 20 different manufacturers on a local computer, connect a virtual network to a real one, add a full computer to the network, Third-party Applications for network packet analysis are supported. Depending on the hardware platform on which GNS3 will be used, it is possible to build complex projects consisting of routers Cisco, Cisco ASA, Juniper, as well as servers running network operating systems. Using modeling in the design of computing systems, you can: estimate the bandwidth of the network and its components; identify vulnerability in the structure of computing system; compare different organizations of a computing system; make a perspective development forecast for computer system; predict future requirements for network bandwidth; estimate the performance and the required number of servers in the network; compare various options for computing system upgrading; estimate the impact of software upgrades, workstations or servers power, network protocols changes on the computing system. Research computing system parameters with different characteristics of the individual components allows us to select the network and computing equipment, taking into account its performance, quality of service, reliability and cost. As the cost of a single port in active network equipment can vary depends on the manufacturer's equipment, technology used, reliability, manageability. The modeling can minimize the cost of equipment for the computing system. The modeling becomes effective when the number of workstations is 50-100, and when it more than 300, the total savings could reach 30-40% of project cost

Earthly Reward to the Religious: Religiosity and the Costs of Public and Private Debt

2018 ◽  
Vol 53 (5) ◽  
pp. 2131-2160 ◽  
Author(s):  
Feng Jiang ◽  
Kose John ◽  
C. Wei Li ◽  
Yiming Qian
Keyword(s):  
Corporate Culture ◽  
Credit Ratings ◽  
Explanatory Power ◽  
Bank Loans ◽  
Soft Information ◽  
Cost Of Debt ◽  
Private Debt ◽  
Public And Private ◽  
The Cost ◽  
The Impact

We document that a firm’s culture, specifically, its religiosity, affects its cost of debt. Firms in higher-religiosity counties have higher credit ratings and lower debt costs. The impact of religiosity is stronger for firms with greater information asymmetry and during recessions. Further, religiosity has additional explanatory power for the cost of bank loans (but not the cost of public bonds) beyond its impact through ratings. This supports the argument that banks have superior abilities in pricing soft information, such as corporate culture. Finally, the impact of religiosity is stronger when the lender is a small bank.

scholarly journals The impact of financing policy on the cost of debt

2021 ◽  
Vol 18 (4) ◽  
pp. 177-189
Author(s):  
Tetiana Konieva
Keyword(s):  
Capital Structure ◽  
Cost Of Debt ◽  
Financing Policy ◽  
Financing Policies ◽  
Conservative Policy ◽  
Industrial Level ◽  
The Cost ◽  
The Impact ◽  
A Company ◽  
Interest Payments

The cost of debt is a key element to define the amount of the regular interest payments of a company and its business value. It is used for indicators that warn of the economic crisis, which is relevant for the countries where most companies are financially dependent on liabilities. The formalized criteria for the types of financing policy, improved procedure for the cost of debt calculation make it possible to reveal policy with the capital structure that minimizes the cost of debt.The study is based on Ukrainian food processing companies for the period 2013–2020. The studied database was distributed by the types of financing policies: 22% of the cases have a conservative policy, 15% – moderate, 26% – aggressive, 37% – super-aggressive. The results show that the highest weighted cost of debt (24.1%) belongs to the conservative policy, which replaces negative equity by the expensive long-term debts, as well as super-aggressive policy (20.8%) with trade payable that is near half of the capital, and long days payable outstanding. A company can reduce the cost of debt relying on non-interest-bearing liabilities and trade payable if its days payable outstanding are kept at the industrial level or below. Moderate and conservative financing policies, which are based on equity and avoid debts, provide the lowest weighted cost of debt: 2.1% and 1.2%.Thus, choosing the desired type of financing policy for the company, it is possible to form a capital structure that will reduce the cost of debt.

Web-based disclosure and the cost of debt: MENA countries evidence

2020 ◽  
Vol 18 (3) ◽  
pp. 533-561
Author(s):  
Henda Abdi ◽  
Mohamed Ali Brahim Omri
Keyword(s):  
Information Disclosure ◽  
Developed Countries ◽  
Economic Consequences ◽  
Cost Of Debt ◽  
Mena Region ◽  
Web Based ◽  
Content Type ◽  
Mena Countries ◽  
The Cost ◽  
The Impact

Purpose The aim of this study is to investigate the effect of web - based disclosure on the cost of debt for the MENA region setting. Design/methodology/approach The sample of this paper consists of 237 MENA listed non-financial companies for the year 2017. Multiple regression models were used to examine the impact of online disclosure on the cost of debt. Content analysis is used to measure the extent of web-based disclosure. Findings The results reveal that there is a negative and significant association between the web-based disclosure and the company’s cost of debt. These results support the hypothesis of the economic utility of the information disclosed on the website for creditors in this region. Practical implications The results of the study have important implications for managers in the MENA region. It is necessary for managers to improve the company’s transparency through web-based disclosure. The companies must benefit from the different technologies offered by the Internet in order to offer to the creditors unlimited access to up to date information. In fact, web-based disclosure may mitigate the information asymmetry, the uncertainty of creditors and, consequently, reduces the cost of debt. 10; 10;Moreover, the results of the study provide empirical evidence for the advantages of voluntary web-based disclosure. The results highlight the importance to companies and regulators of understanding the benefits of using the website as a means of information disclosure. The regulators in MENA countries can rely on these results to establish suitable policies to improve the quality of web-based disclosure. The regulators need also to put in rules in relation to the online disclosure. In fact, an understanding of web-based disclosure is important for regulators and companies. Given the positive effect of online disclosure (the reduction of the cost of debt), knowledge about the economic consequences of web-based disclosure would enable companies in the MENA region to optimize their online disclosure policies. Originality/value This study, added to the existing literature by examining the consequences of online disclosure practices in MENA countries. Most previous studies conducted in this region were limited to analyzing the determinants of the company’s web-based disclosure. This paper would extend the literature on the online disclosure practices by investigating the association between these practices and the cost of debt in a developing economics: the MENA region. Previous studies were limited to testing this association only in developed countries.

scholarly journals Contingent Convertible Debt: The Impact on Equity Holders

Risks ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 47 ◽  
Author(s):  
Delphine Boursicot ◽  
Geneviève Gauthier ◽  
Farhad Pourkalbassi
Keyword(s):  
Capital Structure ◽  
Financial Distress ◽  
Cost Of Debt ◽  
Debt Ratio ◽  
Convertible Debt ◽  
Total Cost ◽  
Contingent Convertible Debt ◽  
The Cost ◽  
The Impact ◽  
The Capital Structure

Contingent Convertible (CoCo) is a hybrid debt issued by banks with a specific feature forcing its conversion to equity in the event of the bank’s financial distress. CoCo carries two major risks: the risk of default, which threatens any type of debt instrument, plus the exclusive risk of mandatory conversion. In this paper, we propose a model to value CoCo debt instruments as a function of the debt ratio. Although the CoCo is a more expensive instrument than traditional debt, its presence in the capital structure lowers the cost of ordinary debt and reduces the total cost of debt. For preliminary equity holders, the presence of CoCo in the bank’s capital structure increases the shareholder’s aggregate value.

The impact of government ownership on the cost of debt and valuation of Vietnamese listed companies

2020 ◽  
Vol 32 (2) ◽  
pp. 255-270
Author(s):  
Ben Le
Keyword(s):  
Instrumental Variable ◽  
Ordinary Least Squares ◽  
Firm Valuation ◽  
The Other ◽  
Cost Of Debt ◽  
Government Ownership ◽  
Content Type ◽  
The Cost ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to examine the impact of government ownership on the cost of debt and firm valuation in listed Vietnamese companies for the period 2007 to 2016. Design/methodology/approach The authors use both the generalised methods of the moment (GMM) and the ordinary least squares (OLS) regressions to analyse a panel data spanning over the period 2007 to 2016 in the markets of Vietnam. Further, the instrumental variable is used in the paper. Findings The authors find that firms with relative higher government stockholdings or state-owned companies where the government owns 50 per cent or more of shares outstanding enjoy a lower cost of debt compared to the other firms. Consequently, these firms have higher firm valuation and profitability. The results are robust for both the GMM and the OLS regressions. Further, firms that no longer retain government ownership have a higher cost of debt than the other firms. The results of the paper imply the importance of political connections in businesses in the market of Vietnam. Originality/value This paper connects the relationship between government ownership and the cost of debt with the relationship between government ownership and firm valuation. The paper tests the relationship between the cost of debt and government ownership using both OLS and GMM specifications and the results are robust for both approaches. The manuscript uses an instrumental variable to show that government ownership has a positive impact on higher firm performance through reducing cost of debt. Further, this paper addresses the possible issue of endogeneity.

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