The state of capital markets looks particularly poor when we consider the efforts already undertaken to improve the macroeconomic environment and reform the institutions believed to foster financial development. In the case of Latin America, the results appear even more discouraging in light of the better evolution of capital markets in East Asia and their rapid growth in developed economies (e...

Macroeconomic analyses of capital controls face a number of imposing challenges and have yielded mixed results to date. This paper takes a different approach and surveys an emerging literature that evaluates various microeconomic effects of capital controls and capital account liberalization. Several key themes emerge. First, capital controls tend to reduce the supply of capital, raise the cost...

This paper investigates the relationship of capital structure and corporate performance of firm before and during crisis (2007). This study focuses on construction companies which are listed in Main Board of Bursa Malaysia from 2005 to 2008. All the 49 construction companies are divided into big, medium and small sizes, based on the paid-up capital. The result shows that there is relationship b...

We show that the value of corporate diversification increased during the 2007–2009 financial crisis. Diversification gave firms both financing and investment advantages. First, conglomerates became significantly more leveraged relative to comparable focused firms. Second, conglomerates’ access to internal capital markets became more valuable not just because external capital markets became more...

Although capital inflows affect positively economies in long-run, it is possible to generate somehow destructive effects if there is no any control on financial markets. This study tries to explore main determinants of large capital inflows episodes to emerging markets. It is also investigated whether the large capital inflows episodes lead to financial crises in forms of sudden stop phenomenon...

T he most important recent developments in bank regulation are based on capital requirements. For example, the Basle Accord of 1988 specifies that bank capital must be at least 8 percent of a bank’s risk-weighted assets.1 Also, the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) requires regulators to shut down a bank whose capital has dropped below a cutoff level. While ...

This paper examines the interaction between capital structure and advertising competition. Using a sample of firms that raise significant amounts of capital, we find that firms whose financial leverage has decreased as a result of their new funding increase their advertising significantly more than firms whose leverage has increased. We also find that these firms’ industry rivals respond less a...

We study an incentive model of financial intermediation in which firms as well as intermediaries are capital constrained. We analyze how the distribution of wealth across firms, intermediaries, and uninformed investors affects investment, interest rates, and the intensity of monitoring. We show that all forms of capital tightening (a credit crunch, a collateral squeeze, or a savings squeeze) hi...

Risk capital is the contribution of an exposure to the default risk of a financial institution. We investigate its relationship with required shareholder returns, showing that the use of return on risk capital (RAROC) as a risk-adjusted performance measure is inconsistent with the standard theory of financial valuation and that using this one measure to represent at the same time both contribut...

This paper studies theoretically how the cross-country differences in the institutional quality (IQ) of the domestic credit markets shape the patterns of international capital flows when such IQ differences cause productivity differences across countries. IQ affects productivity by changing productivity-agency cost trade-offs across heterogeneous investment projects, which have opposite effects...