Infos rund um Performance Pricing

The diagnostic case, BTR Ltd., Rampur, UP, raised many questions such as reasons for BTR's poor performance, pricing policies of the Consortium of producers of which BTR was a member, and the implications of state intervention in pricing and allocation of resin, the main input. In this Diagnoses feature, experts from both practising and academic worlds examine these and other questions. Vederah, Dholakia, and Sandesara argue, based on the analysis of case data, that the relatively poor performance of BTR has more to do with its own inefficiency than with the rosin prices fixed by the Consortium. They suggest the areas where BTR should improve its performance and comment on how the Consortium could strengthen and redefine its role. Gurdev Singh develops a framework for evaluating state intervention and applies it to the various stages of resin processing. Vederah's comparison of the cost of imported and indigenous rosin shows how neglected the interests of the users are. The high level of protective import duty and the inadequacy of resource allocation for improvement of production and productivity point to the need for coordinated strategies that take account of both producers and users.

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BENCHMARKS FOR THE EFFICIENT DESIGN OF A PERFORMANCE PRICING GRID IN DEBT CONTRACTS

SGEM 2014 Scientific SubConference on POLITICAL SCIENCES, LAW, FINANCE, ECONOMICS AND TOURISM ◽

10.5593/sgemsocial2014/b22/s6.011 ◽

2014 ◽

Author(s):

Peter Hostak

Keyword(s):

Efficient Design ◽

Debt Contracts ◽

Performance Pricing ◽

A Performance

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Security Design with Correlated Hidden Cash Flows: The Optimality of Performance Pricing

SSRN Electronic Journal ◽

10.2139/ssrn.875900 ◽

2006 ◽

Cited By ~ 33

Author(s):

Alexei Tchistyi

Keyword(s):

Cash Flows ◽

Security Design ◽

Performance Pricing

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The Effects of Debt Contracting on Voluntary Accounting Method Changes

The Accounting Review ◽

10.2308/accr.2003.78.1.119 ◽

2003 ◽

Vol 78 (1) ◽

pp. 119-142 ◽

Cited By ~ 104

Author(s):

Anne Beatty ◽

Joseph Weber

Keyword(s):

Interest Rate ◽

Interest Rates ◽

Bank Debt ◽

Accounting Choice ◽

Debt Contracts ◽

Debt Contracting ◽

Dividend Payment ◽

Debt Contract ◽

Performance Pricing ◽

The Interest Rate

This study examines whether the provisions of a firm's bank debt contracts affect its accounting choices. Starting with a sample of firms who have bank debt and who also voluntarily changed accounting methods, we investigate whether the likelihood that the change in accounting method increased (rather than decreased) the borrower's income depends on (1) whether the change in accounting method affects the bank debt contract calculations, (2) the expected costs of violating the bank debt covenants, (3) whether performance pricing provisions affect the interest rate on the loan, and (4) whether the bank debt contract contains accounting-based dividend restrictions. After controlling for other motives for changing accounting methods, we find that borrowers whose bank debt contracts allow accounting method changes to affect contact calculations are more likely to make income-increasing rather than income-decreasing changes. This increase in likelihood of an income-increasing change is attenuated when expected costs of technical violation are lower because there is a single lender, and occurs for borrowers whose debt contacts have performance pricing and dividend restrictions. These results suggest that incentives to lower interest rates through performance pricing or to retain dividend payment flexibility influence borrowers' accounting method choices, thereby addressing the fundamental questions posed by Fields et al. (2001) of whether, under what circumstances, and how accounting choice matters.

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Syndicate Size and the Choice of Covenants in Debt Contracts

The Accounting Review ◽

10.2308/accr-52023 ◽

2018 ◽

Vol 93 (6) ◽

pp. 301-329 ◽

Cited By ~ 10

Author(s):

Daniel Saavedra

Keyword(s):

Capital Expenditure ◽

Accounting Information ◽

Relationship Lending ◽

Debt Contracts ◽

Corporate Policies ◽

Performance Pricing ◽

The World ◽

Jel Classifications

ABSTRACT I investigate whether and how syndicate size influences the type of covenants used in debt contracts. Prior theory and evidence suggest renegotiation considerations from coordination difficulties in large syndicates and intertemporal transfers due to relationship lending in small syndicates are factors in the design of covenants. I find that for large syndicates, borrowers and lenders avoid the use of flexibility-reducing covenants that are more likely to impact negatively on value-enhancing corporate policies in good states of the world. This effect becomes stronger when the borrower has fewer outside financing options. Additionally, I find contracts with large syndicates are more likely to have more covenant slack, include performance pricing provisions, have tailored capital expenditure covenants, and principally rely on covenants that are directly linked to the current performance of the borrower. Collectively, these results imply that syndicate size and related renegotiation considerations affect how accounting information is used in debt contracts. JEL Classifications: G32; G21; C78; L14.

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