We study the relationships between firm financial structure and growth for a large sample of Italian firms (1998-2003). We expand upon existing analyses testing whether liquidity constraints affect firm performance by considering among growth determinants also firm debt structure. Panel regression analyses show that more liquid firms tend to grow more. However, firms do not use their capital to...

The objective of this paper is to estimate the relative contribution of a wide array of determinants to outbreak of financial crises in the EU candidate countries (Croatia, Macedonia and Turkey) and to identify the best-performing early warning indicators of financial crises. We have estimated a binomial logit model of the three EU candidate countries for the period 2005Q1 to 2009Q4 using actua...

The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of credit agencies and debt issuers may have resulted in conflict of interest when pricing these securities which has lead to incorrect risk assumptions and val...

We analyze optimal fiscal and monetary policy in an economy with distortionary labor income taxes, nominal rigidities and nominal debt of various maturities. Optimal policy prescribes the exclusive use of long term debt. Such debt mitigates the distortions associated with hedging fiscal shocks by allowing the government to allocate them efficiently across states and periods.

Why do some developing country governments accumulate large foreign debts while others do not? I hypothesize that variation in foreign borrowing is a function of variation in the breadth of public participation in the political process. Specifically, governments borrow less when political institutions enable broad public participation in the political process and encourage the revelation of inf...

The paper explores the implications of different autonomous demands, with differing rates of growth, in a demand-led growth model where policy makers are concerned about the ratios of public sector debt to income and external debt to income. The actual growth rate is explained in terms of the growth rate of aggregate demand, with emphasis in the formation of expectations about growth in the lat...

On the Pricing of Corporate Debt: The Risk Structure of Interest Rates Author(s): Robert C. Merton Source: The Journal of Finance, Vol. 29, No. 2, Papers and Proceedings of the Thirty-Second Annual Meeting of the American Finance Association, New York, New York, December 28-30, 1973 (May, 1974), pp. 449-470 Published by: Blackwell Publishing for the American Finance Association Stable URL: http...

Risk generated by uncertainty about future management policies appears to affect firms’ cost of borrowing. In a sample of S&P 1500 firms between 1987 and 2012, CDS spreads, loan spreads and bond yield spreads all decline over the first three years of CEO tenure, holding other macroeconomic, firm, and security level factors constant. This decline occurs regardless of the reason for the prior CEO...

A neoclassical growth model is augmented by a corporate sector, financial intermediation, and a set of tax rates. In this setting, capital structure is determined by the interplay between a tax advantage of debt finance and costly state verification entailed by asymmetric information. Effects of capital tax reforms are investigated with a special focus on this micro-founded credit channel of ta...

This paper investigates the impact of exchange rate fluctuations on the value of nonfinancial firms in Chile. Using a detailed dataset on firms’ foreign activities, the potential determinants of the identified exposure are examined. Foreign exchange exposure depends on the levels of foreign currency debt and foreign currency assets. Levels of tradeables (exports and imports) do not explain expo...