Strategic Default, Debt Structure, and Stock Returns

Valta, Philip

doi:10.1017/s002210901600003x

Cited by 63 publications

(11 citation statements)

References 69 publications

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“…Other factors tested in the literature include long-run stockholder consumption risk (Malloy et al, 2009), debt capacity (Hahn and Lee, 2009), market segmentation (Menzly and Ozbas. 2010), cash holdings and risk (Palazzo, 2012), financial intermediary's wealth (Adrian et al, 2012), default and debt structure (Valta, 2016), among others. For the complete list of additional factor models proposed see Harvey, Liu, and Zhu (2016) and Hou, Xue, and Zhang (2017).…”

Section: Accounting For Anomalies: Adding the 'Missing' Variablesmentioning

confidence: 99%

Review of new trends in the literature on factor models and mutual fund performance

Mateus¹,

Mateus

Todorović

2019

International Review of Financial Analysis

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In this paper we provide critical review of recent developments in the mutual fund performance evaluation literature. The new literature centres around two main themes: enhancing explanatory power of the standard Fama-French-Carhart factor models by augmenting them with different factors and altering standard models to account for presence of non-zero alphas in passive indices used as fund benchmarks.The latter includes the literature providing solutions for scenarios in which those benchmarks do not match fund objectives. We find that in the plethora of suggested 'missing' factors, not one can be universally used to explain all anomalies or price all stocks. We also find that new models that adjust a fund's standard Carhart alpha for alpha of its benchmark or for commonalities in its peer-group, provide additional information on fund performance to that given by the standard models. Specifically, these models give account of fund's relative performance -to the benchmark or the peer-group, which is of use to investors.

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Section: Accounting For Anomalies: Adding the 'Missing' Variablesmentioning

confidence: 99%

Review of new trends in the literature on factor models and mutual fund performance

Mateus¹,

Mateus

Todorović

2019

International Review of Financial Analysis

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“…In this paper, we develop and empirically test the argument that borrower information opaqueness strengthens creditor monitoring incentives, explaining the optimal concentrated borrowing structure. Second, institutional investors have been found to influence investment decisions and their financial implications (e.g., Bushee, ; Varta, ). To the best of our knowledge, this study is the first to establish a theoretical and empirical relation between institutional investors and the degree of debt specialisation by type.…”

Section: Introductionmentioning

confidence: 99%

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Platikanova

Soonawalla

2019

Accounting & Finance

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In this study, we suggest that the level of information opaqueness determines the propensity of publicly listed firms to have debt financing from only a few debt types (i.e., debt specialisation). Using accruals quality as a proxy for information opaqueness, we find that the degree of debt specialisation is lower for firms with high-quality accruals. This result is consistent with the notion that information collection and monitoring costs are higher for firms that have higher informational opacity, explaining the tendency towards debt specialisation. We further argue that creditors need not monitor borrowers so closely when they are monitored by institutional owners. The empirical findings support this argument and show that firms with more stable institutional ownership are likely to have less specialised debt types. The empirical evidence is also consistent with the expectation that stable institutional ownership is likely to reduce the demand for monitoring over accruals management. Using S&P 500 membership as an exogenous event driving institutional ownership changes, we further document that debt specialisation is decreasing in accruals quality when institutional investors are expected to have an influence.An extensive literature in corporate finance and financial accounting examines the accounting information properties that facilitate access to debt

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“…To investigate the relationship between CSR and probability of default, we first calculate the probability of default. This paper follows previous studies (e.g., Megginson, Meles, Sampagnaro, & Verdoliva, 2016; Valta, 2016) and determines the firm probability of default using the Altman (1968) z‐score model. The paper adopts the z‐score model because the model uses historic accounting data which are always readily available.…”

Section: Methodsmentioning

confidence: 79%

Does corporate social responsibility influence firm probability of default?

Badayi

Matemilola

et al. 2020

Int. J Fin Econ

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This study extends the literature on the capital structure of corporate social responsibility (CSR) firms by examining the effect of CSR on the firm probability of default using a sample of 496 firms from 17 developing countries for the period 2010–2017. This paper employs the two‐step system generalized method of moments (GMM) technique that mitigates the endogeneity problem. Our findings for the full sample show that high CSR participation reduces the firm probability of default in developing countries. Our results are robust after separating the sample into four regions. Precisely, CSR participation reduces the probability of default in Asian, Latin American, and European regions (except the African and Middle Eastern region). Overall, our findings suggest that as firms in developing countries increase their investments in CSR activities, the probability to default their obligations decreases.

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Strategic Default, Debt Structure, and Stock Returns

Cited by 63 publications

References 69 publications

Review of new trends in the literature on factor models and mutual fund performance

Review of new trends in the literature on factor models and mutual fund performance

Who monitors opaque borrowers? Debt specialisation, institutional ownership, and information opacity

Does corporate social responsibility influence firm probability of default?

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