Corporate Debt and Corporate Taxes: An Extension

Conine, Thomas E.

doi:10.1111/j.1540-6261.1980.tb03519.x

Cited by 37 publications

(19 citation statements)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Hamada's decomposition is defined only for risk-free debt since he assumes that all participants can borrow an unlimited amount at the risk-free rate. This decomposition was later generalized by Bierman and Oldfield (1979), Conine (1980), andMcAnally (1996) by substituting expected return on risky debt E(R debt ) in place of the rate on the risk-free debt. Since E(R debt ) covaries with the return on the market portfolio, debt has its own beta.…”

Section: Hamada's Decompositionmentioning

confidence: 99%

The Association Between Market and Exchange Rate Risks and Accounting Variables: A GARCH Model of the Japanese Banking Institutions

Elyasiani

Mansur

2005

Rev Quant Finan Acc

View full text Add to dashboard Cite

This study has two purposes. First, it estimates the market, interest rate, and exchange rate sensitivities (betas) of the Japanese banking institutions. Second, it investigates the relationship between the market-based measures of risk and accounting-based financial ratios. We extend the literature in three important ways. First, we employ a multi-factor GARCH model to estimate the betas. This framework incorporates non-linearities in the bank stock return modeling and allows for time-varying risk premia. Second, we investigate the determinants of market and exchange rate risk in terms of bank financial ratios. To this end, we regress the beta measures derived from the GARCH model against the corporate decision variables to determine the direction and the magnitude of the impact of the latter on the market and exchange rate risk exposures. Third, by using data on the Japanese banking institutions, we provide a comparison of the bank interest rate and exchange rate sensitivities and the strength of the links between the risk measure and the corporate decision variables between the U.S. and the Japanese banking institutions. This comparison sheds light on the robustness of the results concerning interest rate and exchange rate risk, and their determinants, across the two countries. Several interesting results are obtained. First, empirical results indicate that interest rate is only occasionally significant while market and exchange rate variables are significant for all the banks in the sample. Second, market and exchange rate risk measures do impound information in the financial ratios with the explanatory power of the market beta model being higher than that of the exchange rate beta model. Third, the association of the market-based risk measures and the financial ratios is weaker for the Japanese banks than those found for their U.S. counterparts in the existing literature. Copyright Springer Science + Business Media, Inc. 2005bank, Japanese, risk, accounting ratios,

show abstract

Section: Hamada's Decompositionmentioning

confidence: 99%

The Association Between Market and Exchange Rate Risks and Accounting Variables: A GARCH Model of the Japanese Banking Institutions

Elyasiani

Mansur

2005

Rev Quant Finan Acc

View full text Add to dashboard Cite

show abstract

“…Equation is based on the bottom‐up logic, by which the idiosyncratic risk is determined by firm‐specific characteristics (Banz, ; Beneda, ; Conine, , ; Hamada, ).…”

Section: The Modelmentioning

confidence: 99%

Risk patterns, structural characteristics, and organizational configurations

2017

View full text Add to dashboard Cite

show abstract

“…Conine 11,121, however, has shown that when corporate debt is risky in the framework of the CAPM, the Hamada formulation is misspecified.2 The exact linkage, derived and discussed in [12], among the expected returns on debt, unlevered and levered stock is given by …”

Section: Equations (1) and (2) Correspond Respectively To The Aforemementioning

confidence: 99%

Divisional Cost of Capital Estimation: Adjusting for Leverage

Conine¹,

Tamarkin²

1985

Financial Management

Self Cite

View full text Add to dashboard Cite

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. Wiley and Financial Management Association International are collaborating with JSTOR to digitize, preserve and extend access to Financial Management.

show abstract

Corporate Debt and Corporate Taxes: An Extension

Cited by 37 publications

References 15 publications

The Association Between Market and Exchange Rate Risks and Accounting Variables: A GARCH Model of the Japanese Banking Institutions

The Association Between Market and Exchange Rate Risks and Accounting Variables: A GARCH Model of the Japanese Banking Institutions

Risk patterns, structural characteristics, and organizational configurations

Divisional Cost of Capital Estimation: Adjusting for Leverage

Contact Info

Product

Resources

About