Leverage and investment in diversified firms☆

Ahn, Seoungpil; Denis, David J.; Denis, Diane K.

doi:10.1016/j.jfineco.2005.03.002

Cited by 206 publications

(165 citation statements)

References 22 publications

Supporting

Mentioning

144

Contrasting

Unclassified

Order By: Relevance

“…For country-level variables, the GDP growth rate (∆GDP) has a positive effect on investment, as does the stock market return (MKTRETURN). Similar to prior studies, such as Lang et al (1996) and Ahn et al (2006), financial leverage ratio (LEV) is negatively associated with investment. As we use gross profit margin (GPM) to control for the product market competition, high values for GPM indicates that the firm is operating in a product market with relatively low levels of competition.…”

Section: Empirical Results: the Effect Of Interest Rates And Bank Loasupporting

confidence: 78%

Monetary policy, bank lending and corporate investment

Vithessonthi

Schwaninger

Müller³

2017

International Review of Financial Analysis

View full text Add to dashboard Cite

The purpose of this study is to shed light on the chain of causality from macroeconomic financial policy to the microeconomic investment function. Concretely, we aim to provide an in-depth analysis of the relationships between the monetary policy of central banks, the loan policy of commercial banks, and the investment behavior of firms. We focus on countries that conduct their monetary policy under the inflation-targeting framework. Our empirical analysis with data from Germany, Switzerland and Thailand provides several new insights. First, after controlling for the US monetary policy, the monetary policy in Germany andThailand appears to influence the banks' lending rate in the short run (i.e. within two months), whereas the monetary policy in Switzerland seems to be ineffective at influencing the banks' lending rate in the short run. Second, our results show that the banks' lending rate has a negative effect on their loans and that this negative effect is weakened by their growth opportunities. Third, we find that the supply of bank loans plays a more pivotal role in determining firms' investment than the lending rate. Last but not least, we document that neither the lending rate nor the loan-to-assets ratio moderates the sensitivity of the firms' investment to growth opportunities. JEL classification: E4; E5; G1; G2; G3

show abstract

Section: Empirical Results: the Effect Of Interest Rates And Bank Loasupporting

confidence: 78%

Monetary policy, bank lending and corporate investment

Vithessonthi

Schwaninger

Müller³

2017

International Review of Financial Analysis

View full text Add to dashboard Cite

show abstract

“…Unfortu-nately, the sample period in other research on non-financial firms usually ends in 1997 or earlier, even for recent studies (e.g., the sample periods in Campa and Kedia (2002), Fauver, Houston, and Naranjo (2004), and Ahn, Denis, and Denis (2006Denis ( ) end in 1996Denis ( , 1995Denis ( , and 1997, respectively) and therefore we do not know whether the subsequent increase in the percentage of diversified firms is a general phenomenon or exclusively related to financial firms. Finally, the results in Table 2 show a large jump in the percentage of diversified firms between 1997 and 1998.…”

Section: Univariate Analysismentioning

confidence: 89%

Do financial conglomerates create or destroy economic value?

Schmid

Walter

2009

Journal of Financial Intermediation

211

View full text Add to dashboard Cite

This paper attempts to ascertain whether or not functional diversification is valueenhancing or value-destroying in the financial services sector. Based on a U.S. dataset comprising approximately 4060 observations covering the period 1985-2004, we report a substantial and persistent conglomerate discount among financial intermediaries. Our results suggest that it is diversification that causes the discount, and not that troubled firms diversify into other more promising areas. We also investigate the geographic dimension of diversification as well as the interaction between geographic scope and functional diversification and find that the value-destruction associated with functional diversification is not apparent in geographic diversification. A further finding is that there is a significant premium for the very largest of our sample firms (with total assets above 100bn USD) indicating that there are "too big to fail" guarantees for very large financial conglomerates.

show abstract

“…Unfortunately, the sample period in other research on non-financial firms usually ends in 1997 or earlier, even for recent studies (e.g., the sample periods in Campa andKedia (2002), Fauver, Houston, andNaranjo (2004), and Ahn, Denis, and Denis (2006Denis ( ) end in 1996Denis ( , 1995Denis ( , and 1997. Consequently, we do not know whether the subsequent increase in the percentage of diversified firms is a general phenomenon or exclusively related to financial firms.…”

Section: Univariate Analysismentioning

confidence: 92%

Do Financial Conglomerates Create or Destroy Economic Value?

Schmid

Walter

2008

SSRN Journal

View full text Add to dashboard Cite

This paper investigates whether functional diversification is value-enhancing or valuedestroying in the financial services sector, broadly defined. Based on a U.S. dataset comprising approximately 4,060 observations covering the period 1985-2004, we report a substantial and persistent conglomerate discount among financial intermediaries. The study differs materially from earlier work on scope dimensions of financial institution structures. Our results suggest that it is diversification that causes the discount, and not that troubled firms diversify into other more promising areas. In addition, the discount applies to all financial services industries with the exception of investment banking and is stable over different combinations of financial activity-areas with the exception of commercial banking units combined with insurance companies and/or investment banking activities. Finally, our results reveal that geographic diversification per se is not associated with a significant discount. Although geographic diversity is value destroying in all financial services activity-areas when there are more geographic segments and the activities are distributed relatively evenly over these segments.

show abstract

Leverage and investment in diversified firms☆

Cited by 206 publications

References 22 publications

Monetary policy, bank lending and corporate investment

Monetary policy, bank lending and corporate investment

Do financial conglomerates create or destroy economic value?

Do Financial Conglomerates Create or Destroy Economic Value?

Contact Info

Product

Resources

About