creator: Talavera, Oleksandr
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Macroeconomic Uncertainty and Firm Leverage
description- – This paper investigates the link between the optimal level of nonfinancial firms' leverage and macroeconomic uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as macroeconomic uncertainty increases the firm will decrease its optimal level of borrowing. We test this proposition using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1991-2001. The estimates confirm that as macroeconomic uncertainty increases, firms decrease their levels of leverage. Furthermore, we demonstrate that our results are robust with respect to the inclusion of the index of leading indicators.
- – WP602
- – 2004-09-01
- – application/pdf
Uncertainty Determinants of Corporate Liquidity
description- – This paper investigates the link between the optimal level of non-financial firms' liquid assets and uncertainty. We develop a partial equilibrium model of precautionary demand for liquid assets showing that firms change their liquidity ratio in response to changes in uncertainty. We test this proposition using a panel of non-financial US firms drawn from the COMPUSTAT quarterly database covering the period 1993--2002. The results indicate that firms increase their liquidity ratios when macroeconomic uncertainty or idiosyncratic uncertainty increases. We demonstrate that our results are robust with respect to the inclusion of interest rates and the index of leading indicators.
- – WP634
- – 2005-12-07
- – application/pdf
Uncertainty Determinants of Firm Investment
description- – We investigate the impact of measures of uncertainty on firms' capital investment behavior using a panel of U.S. firms. Increases in firm-specific and CAPM-based measures have a significant negative impact on investment spending, while market-based uncertainty has a positive impact.
- – WP646
- – 2006-07-28
- – application/pdf
The Effects of Short-Term Liabilities on Profitability: The Case of Germany
description- – Using data from Germany this paper examines the direct effect of non-financial firms' use of short-term versus long-term liabilities. We develop a structural model of a firm's value maximization problem that predicts that profitability of the firm will change if firms alter their use of short-term versus long-term liabilities. We find that firms that rely more heavily on short-term liabilities are likely to be more profitable.
- – WP636
- – 2006-03-22
- – application/pdf
Firm Investment and Financial Frictions
description- – In this paper we investigate the linkages between firms' capital investment behavior and financial frictions arising from asymmetric information, proxied by their liquidity and degree of uncertainty. In our empirical investigation, we use measures of uncertainty derived from firms' daily stock returns and S&P 500 index returns along with a CAPM-based risk measure. Using a panel of U.S. manufacturing firm data obtained from COMPUSTAT over the 1984-2003 period, we specifically find that financial frictions caused by increases in both intrinsic and CAPM-based measures of uncertainty have a significant negative impact on firms' investment spending.
- – WP638
- – 2006-03-14
- – application/pdf
The Effects of Industry-Level Uncertainty on Cash Holdings: The Case of Germany
description- – This paper investigates the link between the optimal level of non-financial firms' liquid assets and industry-level uncertainty. We develop a structural model of a firm's value maximization problem that predicts that as industry-level uncertainty increases the firm will increase its optimal level of liquidity. We test this hypothesis using a panel of German firms drawn from the Bundesbank's balance sheet database and show that greater uncertainty at the industry level causes firms to increase their cash holdings. The strength of these effects differ among subsamples of the firms with different characteristics.
- – WP637
- – 2006-02-11
- – application/pdf
Political patronage in Ukranian banking
description- – This paper empirically investigates the link between political patronage and bank performance for Ukraine during 2003Q3-2005Q2. We find significant differences between politically affiliated and non-affiliated banks. We present evidence that affiliated banks have significantly lower interest margins. Politically affiliated banks also seem to increase their capital ratio. We conjecture that the reason behind these behavioral differences is to attract foreign investors; we report several mergers that recently took place between affiliated and foreign banks.
- – WP657
- – 2007-02-13
- – application/pdf
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