Search

This essay argues that, to address the Covid-19 crisis, in addition to creating a special temporary insolvency regime, relaxing provisions for companies in the vicinity of insolvency, and enabling companies to hold virtual meetings, policymakers should tweak company law to facilitate equity and debt injections and address the consequences of the extreme uncertainty firms are facing. After some general reflections upon the type of rules that are needed in these exceptional times, examples of temporary corporate law interventions for the emergency are provided. Specifically, rules to facilitate injections of equity capital and shareholder loans are suggested, together with relaxations of directors’ liability rules and measures to protect firms against hostile takeovers. All of these measures should apply merely by default and only for so long as the emergency lasts. The essay concludes with some thoughts about how to make normal-times corporate law ready for similar emergencies in the future. The goal is both to reduce the risk that the temporary extreme measures enacted for this crisis are made permanent under the pretence that another crisis may hit again and to have quick adaptation mechanisms already in place to respond to such a crisis.

Purpose: We examine the mechanism of intercorporate lending outside the business group, and a reaction of capital expenditures (CAPEX) and capital engagement in other firms to shocks in the provision of such loans. We diagnose the causes and effects of intercorporate lending outside the business group. Design/Methodology/Approach: We use panel data from annual reports (balance sheets and income statements) of 4,600 private Polish companies that provided loans to other firms in the period 2003-2014. We apply the vector autoregression panel model for microeconomic data and analysis of Granger causality, impulse response functions, and forecast error variation decomposition to explore the mechanism of intercorporate loan provision. Findings: Non-financial firms provide loans outside the business group through redistribution of their cash holdings generated from operating activity (cash flow) and long-term bank loans. The provision of loans by non-financial enterprises decreases CAPEX, as a result of the absence of free cash flows that were already used for loan provision. Shareholder loans substitute for capital engagement in other firms. Practical Implications: The findings could assist policymakers to notice that emergency borrowings from other companies are being used to defer defaults and introduce a new credit risk into the business sector. Originality/Value: The redistribution effect of cash holdings and money borrowed from banks provided to unrelated firms outside the business group is dangerous for the stability of the financial system due to the risk that these “indirect borrowers” will default., peer-reviewed

La presente investigación tuvo por objetivo, analizar el costo financiero en el que incurrió una Pymes durante los años 2014-2015-2016, revisando indicadores financieros y estimando la tasa de interés de los préstamos bancarios obtenidos, para luego comparar con otras formas de financiamiento que tienen las empresas para conseguir recursos. Se analizó dos teorías sobre las formas que tienen las empresas de conseguir recursos financieros; una teoría es sobre Pecking order que indica 3 formas de obtener endeudamiento a través de las utilidades del ejercicio, préstamos bancarios y accionistas; la otra teoría se denomina Trade Off expresa que los gastos financieros, generan ahorro tributario. El análisis de datos estimó que la tasa de interés pagada por la empresa fue del 18%, relacionándose con lo que sucede con el mercado, donde las PYMES obtienen préstamos con tasas de hasta el 22% y las decisiones tomadas para endeudarse siguen el esquema de las teorías revisadas. Se concluye que una de las formas de endeudamiento es el uso del mercado de valores que ofrece tasas de interés bajas, a través de la denomina RED.

We examine the consequences of pay activism (shareholder democracy) in a model where some forms of compensation (discretionary pay) are unrelated to performance, yet maximize shareholder welfare. Pay is set by a board that can either be aligned with shareholders or with management. This board is armed with multi-dimensional precise information regarding both managerial preferences and the firm’s investment opportunity set while shareholders only receive imprecise signals regarding the firm’s prospects. A shareholder oriented board sets corporate investment policy and discretionary pay to maximize shareholder payoff. A manager oriented board can uses pay and investment policy to enrich management. This causes shareholders, who are uninformed about board type, to view the use of discretionary pay with a degree of “suspicion.” Relative to a charter-based pay policy that either insulates boards from shareholder scrutiny, or imposes ex ante restrictions on discretionary pay, democracy has the advantage that shareholder suspicion, which incorporates their information from a non-verifiable and non-contractible signals, imposes signal-contingent restrictions on compensation policy. However, shareholder suspicion and the threat of sanctions also cause boards to further distort pay and investment policy to reduce suspicion. Simulations over our parameter space suggest that ex ante shareholder welfare is higher under democracy relative to charter-based policy for only 2.29% of the parameter draws.

This article reveals the positions of corporations not only as active players in politics but also as targets of activist shareholders with opposing political preferences. We examine whether a firm's political orientation, as measured by its political spending, serves as a driver of shareholder proposal submissions, one manifestation of shareholder activism. Using data on S&P 500 companies for 1997-2014, we find that the divergence in political orientation between shareholders and corporate management is strongly associated with the number of submissions of shareholder proposals on environmental or social issues. Firms that contribute more to the Republican Party are more likely to be targeted by nonindividual, Democratic-Leaning shareholders. This pattern remains even after controlling for firms' records of corporate social responsibility and Labor relations. This finding implies that corporate political spending prompts shareholders with strong political preferences to target firms on the opposite end of the political spectrum.

In essence, insolvency law is collective debt collection law. By means of a collective procedure, insolvency law seeks to ensure that the going concern value is captured for the creditors. Where the shareholders possess the dominant voice outside of insolvency, in insolvency creditors take over this position and become the economic owners of the company. In three different settings shareholders can interfere with the insolvency process and try to capture all the value in the company or at least leave the creditors with the liquidation value and usurp the going concern surplus. These three settings are (i) shareholders as secured lenders, (ii) shareholders as acquirers out of pre-packs or other asset sales and (iii) shareholders under composition plans. The proposed EU Directive on Preventive Restructuring Frameworks and Second Chance (November 2016) contains measures in the field of composition plans as part of a preventive restructuring. The proposed directive addresses the potential problem that shareholders would usurp the going concern surplus by introducing the Absolute Priority Rule. The proposed directive should be considered a first step in the right direction. It should, however, be realized that the protection offered in the proposed directive could easily be circumvented by a shareholder financing not with capital but with secured shareholder loans. Also, if pre-pack sales or other sale processes do not limit interference by shareholders, shareholders will prefer the route of an asset sale above a restructuring.

Which characteristics of microfinance institutions affect the choice of a decentralized loan approval process? That is the main question this article attempts to answer. A second concern is whether the choice of allocating the loan approval decision to the loan officer enables a microfinance institution to expand its number of loans and improve its loan portfolio quality after controlling for the endogeneity of the choice of decentralizing the loan approval. To achieve this goal, we study an independently pooled cross-section sample of 362 assessment reports for 267 MFIs from 2001 to 2012 across 67 countries. Results suggest that size, cooperative status, and solidarity lending are MFI-level variables that affect the likelihood of choosing a decentralized loan approval process. Allocating the decision-making authority to the loan officer improves MFIs’ breadth of outreach (the number of active borrowers) but does not affect the size of the loan portfolio and does not deteriorate their loan portfolio quality.

PurposeThe purpose of this paper is to test whether diversification of credit portfolios across economic sectors leads to improved profitability and reduced credit risks for Ghanaian banks that have been characterized by high non-performing loans in recent times (IMF, 2011).Design/methodology/approachStatic and dynamic estimations, namely Prais-Winsten, fixed and random effect estimators, feasible generalized least squares as well as the system generalized methods of moments are employed on the annual data of 30 Ghanaian banks that operated between 2007 and 2014 to determine the effect of loan portfolio diversification on bank performance.FindingsThe study shows that loan portfolio diversification does not improve banks’ profitability nor does it reduce banks’ credit risks.Research limitations/implicationsThe study focuses on a single banking system in Africa largely as a result of data limitation.Practical implicationsThe study emphasizes the need for banks to perform a careful assessment of the effects of their lending policies geared toward increased sectoral diversification on their monitoring efficiency and effectiveness. A further investment in loan screening and monitoring is necessary to minimize credit risks.Originality/valueThis study is the first to present empirical evidence on the effects of loan portfolio diversification on bank performance in an emerging banking market in Africa.

A loan guarantee occurs when a company guarantees payment of an affiliate’s loan. Conflicting arguments regarding loan guarantees provided to affiliates have prevailed. First, some suggest that loan guarantees provided to affiliates would decrease firm value because they are contingent liabilities (Shim, 1996; Berkman, Cole & Fu, 2009). Second, others suggest firm value is high when the amount of loan guarantees provided to affiliates is large because loan guarantees would be regarded as a positive indicator of future cash flow (Lee, 2005). The purpose of this study was to present additional empirical evidence of these arguments. The result of this study showed that cost of debt is high when the amount of loan guarantees provided to affiliates is large. This result indicates that creditors demand higher risk premiums when the amount of loan guarantees provided to affiliates is large because they regard loan guarantees as contingent liabilities. Therefore, this result supports the assertion that loan guarantees decrease firm value.

We use Swedish ownership data to explore whether a large and diversified shareholder base leads to lower volatility by improving the information content of stock prices. We find that volatility increases in the number of shareholders with respect to both the number of relatively large shareholders and the fraction of shares held by investors with stakes below 0.1%. Volatility is also positively related to the number of institutional owners but negatively related to the number of large and underdiversified institutional owners. Foreign investors have no impact. Our results suggest that a large shareholder base does not lower volatility.

By investigating shareholder proposals in Japan during 2004–2013, this study aims to address the question whether exercising legally powerful shareholder rights has an impact on the management. Compared with their counterparts in the United States, Japanese shareholders are entitled to more statutory rights, including binding shareholder resolutions on issues relating to board election, charter amendment, and profit disposal. The empirical tests reveal several important results. First, different types of shareholder proposals are triggered by varying firm characteristics. Second, resolutions on the board election and charter amendments relating to corporate governance receive higher votes than those for profit disposal. Voting outcome is also positively associated with foreign shareholding, duration of the general meeting, and the firm's history of receiving proposals. Moreover, resolutions initiated by large shareholders have positive impacts on the target firms, which reported positive announcement-associated abnormal returns. Improvements in the operating performance are observed for firms passing board election resolutions and firms receiving charter amendment proposals from large shareholders. The management also increased share buyback and dividend payout in response to demands by large shareholders, although there was no significant change in the post-resolution operating performance. Overall, the results indicate that statutorily powerful shareholder rights, when exercised by large shareholders, can have a positive impact.

The extant literature shows that shareholder and creditor rights positively affect corporate payout policy in a static macroeconomic environment. This study examines how the effects of shareholder and creditor rights on dividend policy change under the impact of the global financial crisis. We posit that this exogenous shock increases agency costs of both shareholders and creditors. With a sample of 133,631 firm-year observations from 23,890 firms incorporated in 41 countries, we find that both shareholder and creditor rights are less effective in dividend decisions in the post-crisis period and the extent of shareholder (creditor) expropriation in the post-crisis period is larger when creditors (shareholders) are adequately protected.

Firms receiving shareholder proposals are 16% more likely to become a target of acquisition. Such companies earn approximately 7.2% lower acquisition returns compared to gains for targets with no proposals. Higher acquisition likelihood and lower target returns are primarily associated with proposals drawing a larger proportion of favorable votes, larger voter turnout, as well as with proposals submitted shortly before takeover announcements, and motivated by the removal of antitakeover provisions. Our findings suggest that shareholder proposals can assist bidders in the identification of targets or signal the willingness of target shareholders to accept bids with lower premiums.

We study how corporate social responsibility relates to investors, firms, and shareholder proposals. We examine shareholder proposals on environmental, social, and governance issues at the annual general meeting of shareholders with US Fortune 250 firms during 2011–2014. We find that the probability of receiving shareholder proposals on environmental issues is positively associated with responsible institutional ownership. We find no systematic evidence that the outperformance regarding social responsibility of the firms themselves would significantly matter regarding the likelihood of shareholders filing proposals about corporate social responsibility, except for employee wellbeing. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

This study investigates the relationship between the level of shareholdings and identities of the largest shareholders, and cash dividend policy. The study is conducted with a sample of 180 firms listed on Vietnam stock exchange markets from 2009 to 2013. The fixed effect model is employed to analyze the balanced panel data. The results show that the higher the level of holdings by the largest shareholders, the lower the dividend payout. Moreover, companies with the State and Foreign investors as the largest shareholders have higher dividend payout ratio than companies with local investors and managers as the largest shareholders. The study also finds that companies tend to pay higher dividends when profits decrease or growth opportunities increase.

Purpose The purpose of this paper is to examine how a firm’s investment behavior relates to its subsequent bank loan contracting. Design/methodology/approach Using a sample of US firms during the period 1992-2011, the authors examine the association between overinvestment (underinvestment) and three characteristics of bank loan contracts: loan spread, collateral requirement, and loan maturity. Findings The authors find that overinvesting firms obtain loans with higher loan spreads. Additional tests show that the effect of overinvestment on loan spreads is generally more pronounced in firms with lower reputation, weaker shareholder rights, and lower institutional ownership. The effect of overinvestment on collateral requirement is mixed, and investment efficiency has no significant relation to loan maturity. Research limitations/implications The results are subject to the following caveats. First, while the study provides empirical evidence that investment efficiency affects bank loan contracting terms, especially the cost of bank loans, the underlying theory is not well-developed. The authors leave it up to future research to provide a theoretical framework to clearly distinguish the cash flow and credit risk effects of past investment behavior from those of existing agency conflicts. Second, due to data limitation, the sample size is small, especially when the authors control for corporate governance measured by G-index and institutional ownership. Practical implications The finding that overinvestment is costly to corporations suggests that managers should consider the potential trade-offs from such investment decisions carefully. The evidence also alerts shareholders and board members to the importance of monitoring management investment decisions. In addition, the authors find that corporate governance moderates the relationship between investment decisions and cost of bank loans, suggesting that it would be beneficial to design effective governance mechanisms to prevent management from empire building and motivate managers to pursue efficient investment strategies. Originality/value First, the findings enhance understanding of the potential economic consequences of overinvestment decisions in the context of a firm’s private debt contracting. The evidence suggests that lenders perceive higher credit risk from overinvestment than from underinvestment, likely because firms squander cash in the current period by investing in (negative net present value) projects that are likely to result in future cash flow problems. Second, the study contributes to the literature on the determinants of bank loans by identifying an observable empirical proxy for uncertainty in future cash flows that increases credit risk.

Contrary to the evidence based on US firms, we find that a large shareholder base does not benefit firms in China. Our results suggest that a large shareholder base in China implies elevated agency conflicts between individual investors and the controlling shareholders. We find that a larger shareholder base is associated with lower levels of capital expenditures, a lower standard deviation of return on assets, a lower standard deviation of return on equity, and no reduction in dividend payout. Our results imply that insiders increase the expropriation of outsiders as agency conflicts escalate. The shareholder base is associated with a decrease in firm value in China.

[Resumen]: La internacionalización de las economías nacionales es ya un acontecimiento consolidado en los mercados, ante el cual la regulación fiscal asume un papel transcendental. En este contexto, las políticas ficales no pueden solo ser planteadas dentro del marco gubernamental de un país concreto, sino que resulta inevitable tener en cuenta las relaciones establecidas en el plano internacional, en el que de hecho operan las empresas. En particular, especial consideración merecen los mecanismos híbridos, cuyas diferencias en el tratamiento tributario en distintas jurisdicciones permiten someter una operación a una menor carga impositiva. Este es el objeto del presente estudio, a través del cual se ofrece una aproximación al Plan de Acción sobre Erosión de Bases Imponibles y Traslado de Beneficios (BEPS) y a la normativa formulada en el seno de la Unión Europea, considerando su transposición a los derechos internos y ejemplificándolo a través de un supuesto práctico. [Abstract]: The internationalization of national economies is already a consolidated event in the markets, before which fiscal regulation assumes a transcendental role. In this context, taxation policies cannot only be developed within the governmental framework of a specific country, but it is inevitable to consider the dealings established at the international level, in which companies actually operate. In particular, special consideration should be given to hybrid mechanisms, whose differences in tax treatment in several jurisdictions make it possible to subject a transaction to a lower tax burden. This is the object of this study, through which an approach is offered to the Action Plan on Base Erosion and Profit Shifting (BEPS) and the regulations formulated within the European Union, considering their transposition into domestic law and exemplifying it through a practical case. Traballo fin de grao (UDC.ECO). ADE. Curso 2019/2020

This paper reopens the debate on the substitutability of dividends and shareholder control in mitigating free cash flow concerns, by examining dividend behavior when shareholder control is restricted in the firm. We consider the stakeholder-oriented governance regime of the Netherlands, where shareholdings are concentrated, but shareholder rights are often severely restricted by a legally imposed governance regime and anti-shareholder devices such as Dutch-style poison pills. We find that dividend payouts are generally low, unresponsive to earnings changes and show little relationship with size, leverage, and investment opportunities. Shareholder power restrictions affect dividend behavior to varying degrees, but those that do are used by the vast majority of Dutch listed firms. Once accounting for these, we find no evidence that strong shareholders would allow firms to relax their dividend policy, as has been proposed in the existing literature. As shareholders, institutional investors and managers actually force higher payouts. Thus, it seems that dividends often complement rather than substitute shareholders' efforts to alleviate agency concerns. This finding is unlikely to be specific to the Netherlands, and could possibly be extended to other stakeholder-oriented governance regimes. Keywords: Dividend policy, Corporate governance, Shareholder power restrictions, Ownership and control JEL Codes: G35, G32, G30

Magistrsko delo zajema nabor pravnih in ekonomskih vprašanj, vezanih na 498. člen Zakona o gospodarskih družbah, ki ureja posojilo družbenika družbi namesto lastnega kapitala (kapitalsko posojilo). Konflikt interesov med lastniki in upniki, ki nastopi v primeru finančnih težav podjetja, narekuje, da upnikom zagotovimo posebno varstvo pred ravnanji lastnika, ki niso skladna z njegovo dolgoročno vlogo v strukturi virov financiranja podjetja. Ker je slovenska ureditev kapitalskega posojila povzeta po zastareli nemški ureditvi, je pomemben element magistrske naloge tudi primerjalnopravna analiza instituta, ki nakaže na možne alternative trenutni ureditvi in s tem na več možnih pristopov k urejanju treh ključnih elementov instituta, namreč pojmov družbenik, finančna kriza in posojilo. V okviru identifikacije družbenika v smislu 498. člena ZGD-1 ugotavljam, da je za uresničitev namena člena ključno, da le-ta velja tudi za horizontalne transakcije med sestrskimi družbami, nad katerimi družbenik izvaja prevladujoč vpliv. Ključni element člena, je stanje finančne krize podjetja. Ugotavljanje slednje je nestandardiziran proces, ki je v praksi sicer izvedljiv preko t. i. Testa kreditne sposobnosti, vodi pa lahko do nasprotujočih si rezultatov. To potrjuje tudi empirična analiza, opravljena med bankami, ki delujejo v slovenskem bančnem sektorju. Široko razumevanje posojila in njegovih gospodarskih ustreznikov v smislu 498. člena ZGD-1 vodi do nekaterih neživljenjskih rešitev, ki ustvarjajo napačne vzpodbude. Slednje še zlasti velja v primeru zavarovanih posojil družbenika ter v primerih izvensodnih finančnih prestrukturiranj podjetij. Posledično zaključujem, da je smiselno razmisliti o dopolnitvi ali spremembi zakonodaje. The master's thesis deals with an array of legal and economic issues, related to the Article 498 of the Slovenian Companies Act, which governs shareholder loans and their treatment in insolvency procedures. The conflict of interest between shareholders and creditors, which arises when a company faces financial difficulties points to the need to protect the creditors from inequitable actions of shareholders, which are inconsistent with their long-term role in the company's capital structure. Slovenian rules on shareholder loans are based on the since-reformed German Act on Limited Liability Company. Therefore, a comparative analysis was performed to point at possible alternative legislative approaches to defining the key elements of the legal concept, namely the terms shareholder, financial crisis and loan. To effectively fulfill the purpose of the legal construct, the term shareholder must be understood so it includes horizontal transactions between connected companies, which are controlled by the same shareholder. The key issue of Art. 498. ZGD-1 is defining whether at the time when a shareholder granted a loan, the company was in financial crisis. Defining the state of financial crisis is a non-standard process, which, although practical to execute through performance of the Creditworthiness test, can lead to contradictory results. This view is confirmed by the empirical analysis, performed amongst banks operating in the Slovenian banking sector. Broad understanding of loans, which qualify as shareholder loans in terms of Art. 498 ZGD-1 leads to several impractical outcomes, especially when it comes to secured shareholder loans and treatment of shareholder loans in corporate restructurings. There are thus several substantial issues, which call for a change or an amendment of the existing legislation.

Relatório de Estágio do Mestrado em Contabilidade e Finanças apresentado à Faculdade de Economia Este trabalho serve de relatório do estágio realizado na My Business Consultores Financeiros e Informáticos durante o período de 12 de fevereiro de 2018 a 20 de junho do mesmo ano. Sendo a entidade acolhedora um gabinete de contabilidade, as tarefas que o mestrando realizou durante o seu estágio relacionavam-se com a elaboração da contabilidade e das obrigações contabilísticas e fiscais dos seus clientes.As empresas tomam inúmeras decisões aquando da prossecução da sua atividade. Destas destacam-se as decisões de investimento e de financiamento. Para investir as empresas precisam primeiro de garantir uma fonte de financiamento. Normalmente, caberá à gerência da empresa tomar a decisão sobre a modalidade de financiamento a realizar. Contudo, e se tal decisão coubesse ao próprio financiador? Mais concretamente, e se o direito de tomar a decisão de financiamento pertencesse a um acionista que pretendesse investir na sua empresa-filha? Será sobre esta temática que o presente trabalho será realizado. Mais especificamente, será abordado a escolha do acionista entre a realização de um aumento do capital ou realização de suprimentos. Ambas apresentam caraterísticas específicas, as quais serão estudadas no decorrer deste trabalho. Enquanto que o aumento de capital será um reforço da posição do acionista na empresa, os suprimentos serão o assumir de uma posição de credor perante a mesma. A principal conclusão a que se chegou neste estudo foi que caso os dividendos por ação se mantenham constantes e a gerência prossiga os interesses dos seus acionistas iniciais, a participação social que o acionista detenha inicialmente na empresa em nada irá influenciar a sua escolha. Por outras palavras, o acionista deverá tomar a sua decisão como que se tratasse de um normal investidor na sociedade, pois o valor da sua participação social será o mesmo para ambas as opções de financiamento. This paper serves as a report of the internship conducted at My Business Consultores Financeiros e Informáticos during the period from Frebruary 12, 2018 to June 20 of the same year. Being the welcoming entity an accounting office, the pasks performed during the internship where related with the preparation of the accounting and the accounting and tax obligations of their clientes. Companies make numerous decisions when pursuing their activity. These include investment and financing decisions. To invest companies first need to secure a source of finance. Normally, it will be up to the company's management to decide on the type of financing to be undertaken. However, what if it was up to the lender himself? More specifically, what if the right to make the financing decision belonged to a shareholder who wanted to invest in a company where he already had a participation? It will be on this theme that the present work will be done. More specifically, it will be adressed the choice of the shareholder between making a capital increase or making a shareholder’s loan. Both have specific characteristics, which will be studied during this work. While the capital increase will be a reinforcement of the shareholder’s position in the company, the shareholder’s loan will be the assuming of a creditor position towards the company. The main conclusion reached in this study was that if dividends per share remain constant and management pursues the interests of its initial shareholders, the shareholding that the shareholder initially holds in the company will not influence his choice. In other words, the shareholder should make his decision as if he were a normal investor in the company, as the value of his shareholding will be the same for both financing options.

In order to support national economic growth, the government created a 35,000 MW program for Indonesia.. PT PLN (Persero) has assigned PT PJB to developed some projects under the IPP scheme as shareholders and project sponsors. PJB throughs its subsidiary, PJBI, has to carry out its role as a shareholder and project sponsor of projects with a 51% stake. PJBI could only deposit cash equity of 10% equity. The equity portion of 49% is the responsibility of the partner and 41% of the equity portion is fulfilled through loans. There are three equity funding scheme options discussed in this paper, namely a loan partner (option 1), shareholder loans (option 2), and bond issuance (option 3). It is assumed that the three options have the same project profiles. The feasibility indicators calculated in this paper are Net Present Value (NPV) and Internal Rate of Return (IRR) Project, IRR Equity, NPV of PJBI, and IRR of PJBI. The approach taken is to lock the tariffs of components A, B, C, D, and E on the three options, so that the effect of differences between schemes is generated in each output. Financial model calculations show that option 2 offers the largest NPV and IRR for PJBI, up to US$ 68,385,771 and 16.90%, followed by option 3 and option 1. Based on these calculations, option 2 is giving the greatest benefits to PJBI and suggested as the equity-funding schema.

We examine the impact of corporate social responsibility (CSR) activities on loan spreads of syndicated bank loans, with a particular interest in how CSR and credit ratings are interrelated as a joint determinant of loan spreads. Focusing on private debt contracts, we show that both CSR strengths and concerns are related to their loan spreads. CSR strengths work to lower firm risk, hence reducing the loan spread, whereas CSR concerns increase firm risk, thus increasing the loan spread. Once we include detailed credit rating information in the models, however, CSR concerns lose significance, but CSR strengths remain significantly related to the loan spread. We also find that both CSR strengths and CSR concerns are related to loan spread for non-rated firms, but the CSR concern effect is stronger than the CSR strength effect for these firms. A further test shows that firm risk measured by stock return volatility plays as a direct channel through which a firm’s CSR activities affect loan spreads, whose result lends further support to our main results. Overall, our results provide strong evidence that CSR matters to the pricing of loan contracts beyond credit rating information and the results remain robust to the possible firm size effect and the endogeneity issues.

The main aim of this study is to investigate the effect of credit risk management on the shareholder value in listed commercial banks in Sri Lanka. The research has used only the secondary data for the purpose of analysis and the sources of data include the annual reports of selected quoted public banks. This study employed return on shares to measure the shareholder value while non-performing ratio, Capital adequacy ratio and Loans to deposits ratio have been used as the indicators of the credit risk management of the banks. Regression models were employed to do the empirical analysis and focuses on the descriptions of the output obtained from the SPSS. The findings reveal that credit risk management has a significant effect on shareholder value in all eight banks. Among the three credit risk management indicators, NPLR has the most significant effect on the return on shares. Through the results of the study it can be concluded that null hypothesis can be rejected since there is a significant relationship between credit risk management and shareholder value.

This paper analyzes the interplay between shareholder loans and earnings smoothing in German private corporations. Shareholders who grant loans have a dual stakeholder role, being both equity holders and creditors. Those loans could be lost, because bankruptcy law requires their subordination in the event of bankruptcy. We therefore expect shareholder loans to mitigate agency problems of debt. This reduces the need for debt covenants and earnings smoothing. Moreover, the interest payments from shareholder loans tend to lower payout volatility which also reduces the need for dividend and earnings smoothing. We expect and find that private firms with shareholder loans exhibit significantly lower levels of earnings smoothing than other private firms. We find that with a 10 percentage-point increase in the shareholder loans to total assets ratio, earnings smoothing decreases by about 10% of the mean value. We also find that this substitution effect usually occurs in case of managerial ownership and te...

Egypt has opened the gate for international investment, especially after the 25 January Revolution in 2011, to compensate investments lost both during and after the revolution. Expanding shareholder protection laws may have a positive impact on companies as well as on the Egyptian national income. For example, as companies expand their external financing and decrease conflicts between shareholders and company managers, their profits can increase. Therefore, in order to assess whether the legal and contractual protection of shareholders functions efficiently, it will first be necessary to determine and analyse the system's possible shortcomings. 2016 Koninklijke Brill NV, Leiden, The Netherlands. Scopus

In this study, we examine the options market reaction to bank loan announcements for the population of US firms with traded options and loan announcements during 1996–2010. We get evidence on a significant options market reaction to bank loan announcements in terms of levels and changes in short-term implied volatility and its term structure, and observe significant decreases in short-term implied volatility, and significant increases in the slope of its term structure as a result of loan announcements. Our findings appear to be more pronounced for firms with more information asymmetry, lower credit ratings and loans with longer maturities and higher spreads. Evidence is consistent with loan announcements providing reassurance for investors in the short-term, however, over longer time horizons, the increase in the TSIV slope indicates that investors become increasingly unsure over the potential risks of loan repayment or uses of the proceeds.

Non-controlling large shareholders play an important role in corporate governance in emerging markets where controlling shareholder expropriation is a major concern. We argue that non-controlling large shareholders are faced with two non-conflicting incentives: to take advantage of their information advantage and obtain positive abnormal returns when they trade company shares, and to serve as effective monitors and minimize controlling shareholders' appropriation of company wealth. Using a sample of large shareholders' selling events upon the expiration of the lockup period following the split-share structure reform in China, we find that non-controlling large shareholders successfully time the market, as shown by their positive abnormal returns when selling their shares. Their returns are higher if they have a greater information advantage. Furthermore, the positive returns of the controlling large shareholder are negatively related to non-controlling large shareholders' ownership, suggesting that non-controlling large shareholders play a monitoring role and prevent controlling shareholders from looting the company. We also show that large shareholders affiliated with the controlling shareholders are not subject to as high a level of monitoring as those controlling shareholders are. Furthermore, both firm opaqueness and the severity of agency cost affect the quality of non-controlling large shareholders' monitoring.

The majority of companies rely on commercial borrowing—loan capital—from high street banks and financial institutions. The lender will need security to cover the amount lent. This chapter discusses: company charges, fixed and floating charges, the approach to categorisation, registration of charges, and enforcement of a floating charge. The key concern for the creditor is to obtain the maximum security while the company is concerned to have the maximum freedom to act. The distinction between fixed and floating charges is considered and the characteristics of a floating charge are discussed with particular regard to charges on book debts. The chapter also considers the registration requirements with the registrar of companies.

The purpose of this study is to investigate empirically whether there is a positive correlation between debt levels and total shareholder return (TSR) of platinum JSE-listed companies. The study field comprised annual analyses for 12 companies listed under the Platinum and Precious Metals sector on the JSE Ltd for the 14-year period 2000 to 2013. The results of the study were inconclusive as a statistically significant positive correlation between changes in debt levels and changes in TSR could only be found in two of these years. The core audience of the study will be the management of South African platinum companies considering changes in their capital structure, and investors considering investment in a listed platinum company. The contribution of the study is therefore to add to the body of literature on capital structure decisions from a South African platinum mine context.

We investigate the changes in bank loan supply during the 2007–2008 financial crisis, with particular focus on the influence of political connections. We demonstrate that although political connections can help firms obtain lower loan rates during the precrisis period, such benefits disappear in the postcrisis period. Moreover, the loan acceptance ratio for politically connected firms is enhanced in the postcrisis period, especially for the politically connected firms with high risks. Evidence reveals that the focus of the benefits for politically connected firms is more likely to shift from the loan rate to the loan acceptance ratio during the postcrisis period.

Manuscript Type Empirical Research Question/Issue This paper addresses the effect of having multiple large shareholders on shareholder protection. More specifically, we examine to what extent this effect depends on whether such large shareholders are beneficiary or fiduciary. Research Findings/Insights Analyzing longitudinal, hand-collected data covering Swiss listed companies, we find that having several large shareholders leads to overall higher shareholder protection (i.e. adoption of more formal corporate governance mechanisms). This is because large shareholders have an interest in putting more formal governance mechanisms in place when there is another large shareholder that might try to extract rents at the expense of others. Moreover, we find that this effect is driven by the presence of several beneficiary shareholders, i.e. shareholders that invest their own wealth in the company in contrast to dispersed ownership and fiduciary shareholders, i.e. shareholders acting on behalf of others. Theoretical/Academic Implications Building on recent developments in agency theory, this paper contributes to the corporate governance literature by empirically showing that potential “principal-principal” conflicts among large shareholders lead to overall better shareholder protection in terms of more formal governance mechanisms being adopted. This finding contrasts with situations in which there is only one large shareholder that does not have an interest in strengthening formal corporate governance. Our findings imply, however, that the characteristics of the large shareholders matter: Fiduciary shareholders in the Swiss setting are mostly passive buy-and-hold shareholders and therefore do not engage extensively in improving shareholder protection. Beneficiary shareholders, in contrast, directly intervene in the governance of the firm (i.e. governance by voice), so that in the presence of multiple beneficiary shareholders, more formal governance mechanisms help to monitor not only management but the other large shareholders as well. In addition, more formal governance mechanisms serve as a platform to coordinate their diverging objectives. Practitioner Implications We demonstrate the influence of a second (or several) large beneficiary shareholder(s), on corporate governance and the benefit to all shareholders. In addition, we propose the strengthening of governance mechanisms as a platform to reconcile conflicting interests among prominent shareholders and contribute to the debate on the allocation of certain voting privileges to long-term shareholders.

The formation and management of loan portfolio’s quality of a bank is one of the fundamental points of any bank’s operation. High quality loan portfolio affects not only the liquidity of the bank, but also its reliability. In turn, bank’s reliability is a very important characteristic of its operation for companies, shareholders, people who are investors and use the services of the bank. Bank’s financial instability reduces the overall level of the confidence to the credit system of the country and affects others sectors of economics. In the paper the introduction of an additional stage of classification of the loan portfolio is proposed, which will allow to provide preliminary conditions for further optimization of the structure of the loan portfolio in the short term, by construction organization model which takes into account the Bank’s credit policy from the standpoint of risks, profitability and liquidity.

Certain hedge funds focus on shareholder activism as a core investment strategy. This chapter discusses the role activist shareholder and its impact that acquires minority equity position in a public corporation and then applies pressure on management in order to increase shareholder value through changes in corporate policy. Some of the common changes advocated by activist shareholders include reducing corporate costs, repurchasing common shares, increasing corporate leverage, increasing dividends, reducing CEO compensation, reducing cash balances, and divesting certain businesses. There is disagreement on whether hedge fund shareholder activism makes companies stronger or merely generates short-term gains that principally benefit the activist at the expense of long-term shareholders. During 2008, there were more than 75 U.S. hedge funds dedicated to event-driven, activist-style investing, and these funds managed more than $50 billion in assets. Some significant institutional investors have lined up with these hedge funds to push boards to be more responsive to shareholders. In a number of cases, it appears that improvements have been made in companies that, in the absence of shareholder activism, may not have occurred. In other cases, large share repurchases pushed by activists and executed by companies created large opportunity costs when the repurchases occurred before subsequent steep share price drops. In addition, a number of acquisitions pushed by activist shareholders have seen significant share price drops since closing.

High-technology firms per se are perceived to be more risky than other, more conventional, firms. It follows that financial institutions will take this into account when designing loan contracts, and that this will manifest itself in more costly debt. In this paper we empirically test whether the provision of a government loan guarantee fundamentally changes the way lenders price debt to high-tech firms. Further, we also examine whether there are differential loan price effects of a public guarantee depending on the nature of the firms themselves and the nature of the economic and innovation environment that surrounds them. Using a large UK dataset of 29,266 guarantee backed loans we find that there is a high-tech risk premium which is justified by higher default, but, in general, that this premium is altered significantly when a public guarantee is provided for all firms. Further, all these loan price effects differ on precise spatial economic and innovation attributes.

This study examines the financial consequences of the moral hazard of the controlling shareholder. Using a sample of Chinese listed companies during the 2003–2009 period, we find that companies characterized by a wider divergence between the controlling shareholder's control and cash flow rights have a significantly higher cash flow sensitivity of cash. This result is consistent with the argument that the agency problem between the controlling shareholder and minority shareholders induces financing constraints. We also find that the divergence of the control and cash flow rights increases the cost of equity, suggesting that minority shareholders take into account the moral hazard of the controlling shareholder and demand higher risk premium. Our results imply that the moral hazard of the controlling shareholder prevents a firm from funding all its desired investments and that minority shareholders discount the terms at which they are willing to provide financing.

Although the European Insolvency Regulation does not provide limitations on comi-migration, comi-migration can lead to the application of the principle of abuse of Union law. This article provides a theoretical framework to distinguish between abusive and non-abusive comi-migration. Comi-migration which seeks to overcome common pool problems and their related tragedy of the commons is in principle allowed, as is comi-migration aimed at dealing with anticommons problems and their related hold-out behaviour. Comi-migration aimed at a different ranking is, however, not allowed. If this framework is applied to failing companies migrating to England, this leads to the following. Comi-migration aimed at benefitting from the English rules on reorganisation, such as the CVA and the Scheme of Arrangements are allowed since they deal with anticommons problems and their related hold-out behaviour. Also comi-migration aimed at benefitting from a prepack and preference law is in principle allowed as these rules deal with overcoming common pool problems and their related tragedy of the commons. Comi-migration aimed at a different ranking, e.g. German, Spanish and Italian companies migrating to England in order to prevent shareholder loans from beingsubordinated, is not allowed. Such a comi-migration will qualify as abuse of Union law to be established by the judge of the incoming jurisdiction. Such comi-migration could therefore remain without effect, even if the comi has factually been moved. A more subtle sanction could also be applying English preference law against any upgrade of a creditor’s claim, most notably an upgrade from a subordinated shareholder claim to an ordinary claim.

Using a large dataset of 8,870 shareholder corporate social responsibility (CSR) proposals for US firms, we employ a novel methodological approach that allows for the estimation of dynamic share price and risk reactions. We show that formal activist shareholder recommendations can affect stock returns and risk. However, the direction and magnitude of these effects are conditional upon the nature of the proposal and the identity of the sponsor.

This paper summarizes recent research into the cost of higher education, and specifically the effects of growing student debt loads. It explores the utility of debt related to access to degree programs, entry into the job market, and economic impact in later life. It is not an economic analysis of higher education financing, but a consideration of the costs and benefits of education financing today. The central ethical consideration of “who benefits” applied to the current state of play in higher education financing leads to the questions: With constantly rising debt loads for individual students and the general population, is higher education still worth it? What are some of the issues that school debt creates and what impact do they have on diverse student and graduate populations? Finally, what are some potential areas for further research that can positively affect the cost vs. benefit of higher education for students and the state, while respecting prevailing social, economic, and political realities? The research shows while going into debt for a college degree is still “worth it” for the average student, as debt rises the payback of obtaining a degree is delayed. Debt loads have a negative disparate effect on vulnerable populations and a negative impact to the states as debt load drives some students away from careers that could benefit populations. Finally, there is a need for improved financial literacy and an opportunity to research and implement less costly financing options for students pursuing higher education.

This study explores the extent to which a firm's debt maturity structure affects the cost of bank loans. By examining the U.S. syndicated loans from 1990 and 2014, we find that debt maturity structure is a major determinant of loan spreads, after accounting for firm- and loan-specific variables and firm and year fixed effects. A one standard deviation increase in the ratio of short-term debt to total assets is associated with an increase of 11.44 basis points in loan spread, representing an additional $0.644 million in interest expenses. The results support the rollover risk hypothesis, which predicts that short-term debts intensify the shareholder and bondholder conflicts and lead to greater credit risk. In addition, high-growth firms experience significantly smaller increases in their loan spreads than low-growth firms when the short-term debt ratio increases. This finding is consistent with the asset substitution theory that short-term debt mitigates the managerial/shareholders’ risk-taking incentives, leading to a decrease in firm risk. Our results remain strong when we use alternative short-term debt proxies, address endogeneity concerns, and perform various robustness tests.

Given the worldwide economic importance of bank loan financing, we empirically investigate the roles of borrowers’ ownership and board structure in bank loan terms through a comprehensive dataset, which includes the complete history of individual bank loan contracts for firms publicly listed in the Taiwan Stock Exchange (TWSE). We find that firms with smaller deviation in shareholder voting and cash flow rights, larger non-retail shareholding, fewer shares pledged by the board of directors, independent directors, and firms without dual boards are more likely to borrow from banks at lower spread. In addition, good governance practices are also associated with larger loan size or longer loan period, suggesting that banks take into account borrowers’ governance practices when designing loan contracts. This fact is consistent with the agency cost and information risk explanations of Bhojraj and Sengupta (2003) . Furthermore, this study uncovers that the beneficial effect of good governance practices on bank loan contracting is more pronounced in borrowers with high leverage and poor rating, which implies that the monitoring role of governance is more crucial in risky firms. Our findings are robust to the various characteristics of firms and loans.

We investigate the effect of shareholder activism on debtholders by examining a sample of bank loans for firms targeted by activist hedge funds. We compare loan spreads before and after intervention and show the effects of heterogeneous shareholder actions. Spreads increase when shareholder activism relies on the market for corporate control or financial restructuring. In contrast, spreads decrease when activists address managerial entrenchment. Furthermore, the effects are more pronounced when pre-existing governance mechanisms are weak. Our findings suggest that shareholder activism does not necessarily exacerbate bondholder-shareholder conflicts of interest and highlight the role of activism in aligning investors.

Авторы: Андрей Борисович Анкудинов- Электронная почта: ankudia@mail.ru Олег Владимирович Лебедев - Электронная почта: lebolegan@yandex.ru В работе представлены результаты эмпирического исследования детерминант создания акционерной стоимости. Анализ основан на панельных данных; выборка сформирована по данным 107 крупнейших российских публичных компаний нефинансового сектора за период 2004-2012гг. Метод исследования состоял из двух частей, сначала проведен регрессионный анализ детерминант создания акционерной стоимости в терминах стоимостных мультипликаторов цена/балансовая стоимость, цена/прибыль, а также совокупной акционерной доходности, затем проведена оценка детерминант вероятности превышения стоимостными мультипликаторами среднерыночных показателей и получения совокупной акционерной доходности выше средней по рынку. Результаты исследования показывают, что макроэкономическая конъюнктура выступает более мощным детерминантом создания акционерной стоимости по сравнению с индивидуальными характеристиками компании. Доходность активов, леверидж, инвестиционные расходы, уровень рисковости компании позитивно коррелированы с индикаторами создания акционерной стоимости. Государственные компании торгуются с некоторым дисконтом, а представленные в структуре собственности крупным акционером-нерезидентом – с некоторой премией к рынку. Размер, возраст компании, отраслевые эффекты статистически значимо связаны с индикаторами создания акционерной стоимости. Индивидуальные характеристики компаний имеют большое значение в относительной оценке стоимости компании рынком и существенно меньшее значение в объяснении совокупной акционерной доходности.

Manuscript Type Empirical Research Question/Issue Previous studies, primarily based on evidence from the United States, fail to link shareholder activism to firm performance, with one explanatory factor being that the legal and regulatory system in the United States limits the anti-director rights of shareholders. This study is motivated by the question of whether legally binding shareholder resolutions can pressure management to improve firm performance and to enhance firm value. Research Findings/Insights By investigating 135 publicly listed Japanese firms which received shareholder resolutions from 2004 to 2010, this study finds supportive evidence for shareholder proposals. Announcement-associated abnormal returns are higher for firms receiving election-related proposals by large sponsors, than those unrelated to board election. Furthermore, an improving trend begins to appear in the post-resolution year, particularly significant for firms receiving proposals to remove board members. Theoretical/Academic Implications This study provides new evidence suggesting that large shareholder activism in Corporate Japan can perform roles that used to be played by main banks before the 1990s. It also suggests that in countries where there is no active takeover market, large shareholders can effectively discipline entrenched management through active engagement. Practitioner/Policy Implications This study offers insights to corporate managers on the importance of communicating with large shareholders and addressing their concerns.