This paper examines risk-taking incentives in banks under different accounting regimes with capital regulation. In the model the bank’s decisions of capital issuance and investment policy are jointly determined. Given exogenous minimum capital requirement, the bank is more likely to issue equity capital in excess of the minimum required level and implement less risky investment policy under eit...

This paper considers the impact of Regulation Fair Disclosure (FD) on firms’ information environments and costs of capital. For NYSE/Amex firms we find little evidence of a change in the cost of capital attributable to Regulation FD. For Nasdaq firms we find that Regulation FD increased firms’ costs of capital by 10–19 basis points per annum though the statistical significance of this change is...

The main objective of this study is to investigate the feasibility and costs of ionic liquid (IL)-based CO2 capture systems at pulverized coal-fired (PC) power plants. The IL selected for this assessment is trihexyl(tetradecyl)phosphonium 2-cyanopyrrolide ([P66614][2-CNpyr]), achieving a 1:1 and reversible chemical reaction between [2-CNpyr] and CO2. A multi-stage equilibrium-based modeling fra...

It is expected that more accounting conservation (environmental uncertainty) reduces manager optimism. Prior research, however, has struggled to establish this relation empirically. Moreover, some evidence points to the possibility that the manager optimism is lower for firms with more accounting conservation. In this paper, the author examine the link between accounting conservation, environme...

This study examines the association between the cost of debt capital and corporate governance practices. Utilizing a unique data set of firm-level corporate governance practices that is provided by the Korea Corporate Governance Service (KCGS), this study examines whether sound corporate governance practices reduce agency costs and thus the default risk and cost of debt capital of a firm. The f...

This paper examines the conditions required to guarantee positive prices in the CAPM. Positive prices imply an upper bound on the equity premium. This upper bound depends on the degree of diversity of firms’ fundamentals, and it is independent of investors’ preferences. In economies with realistically diverse assets the only positive-price CAPM equilibrium theoretically possible is a degenerate...

We consider the standard discrete-time model of a frictionless financial market and show that the law of one price holds if and only if there exists a martingale density process with strictly positive initial value. In contrast to the classical no-arbitrage criteria, this density process may change its sign. We also give an application to the CAPM.