This paper studies the joint effect of conservatism and aggregation on the cost of equity capital and the efficiency of debt contracts. In the model, a firm’s two assets are valued at either the lower-of-cost-or-market or fair value and the accounting report aggregates the value of the two assets. While the process of aggregation leads inevitably to a loss of information, what information is lo...

The tax preference for interest payments by corporations as compared to dividend payments is a long surviving feature of many tax systems. Many have argued that there is no reason for this preference and so it distorts the capital structure of corporations needlessly. This article argues that because the returns to equity are more positively skewed as compared to debt, individual investors will...

This paper analyses the roles of debt, equity and warrants under asymmetric information and provides two rationales for the issuance of combinations of debt and equity as well as for the use of warrants. Two cases are considered: i) pure adverse selection and ii) adverse selection cum moral hazard. In the former case, a combination of securities is only used to convey socially costless informat...

We study optimal security design by an informed issuer when the investor faces Knightian uncertainty about the distribution of cash flows and demands robustness: she evaluates each security by the worst-case distribution at which she could justify it being offered by the issuer. First, we show that both standard outside equity and standard risky debt arise as equilibrium securities. Thus, the m...

In this paper, we review the changes which took place on India’s equity and debt markets in the decade of the 1990s. In understanding these experiences, we focus on four interesting questions: (a) Why did NSE succeed? (b) Why did the equity market lurch from crisis to crisis? (c) Why did reforms on the debt market falter? (d) How important are crises as a mechanism for obtaining reforms? Lookin...

We provide a simple comparative test of contracting and value relevance theories of accounting, using data on the importance of countries’ debt and equity markets. Contracting (debt markets) theory predicts conditional conservatism, in the Basu (1997) sense of asymmetrically timelier loss recognition than gain recognition, as proxied by a stronger relation between earnings and negative returns....

This study aims to determine the solvency and profitability of State-Owned Enterprises (SOE) in city palembang. uses a quantitative descriptive approach. The population this research is sampling method was PT. Pupuk Sriwidjadja (Persero) Semen Baturaja period 2014-2018. ability PT (Persero), seen from Debt Asset Ratio Equity Ratio, bad condition Meanwhile, return on assets equity has decreased ...

This article provides a literature review about the impact of the intangible assets on the design of corporate financial and governance policies. Intangible assets show a set of characteristicsnamely, high levels of risk and uncertainty, firm-specificity, human capital intensity, low observability and long-term naturethat make them markedly distinct from other categories of assets. These charac...

Research has been done with the title Effects of Financial Performance and Company Size on Stock Prices Dividend Policy as a Moderating Variable (Empirical Study Basic Industry Chemical Companies Listed Indonesia Exchange for 2017-2021 period). The researcher took sample 20 companies Exchange. purpose this research is to prove influence Return Assets, Current Ratio, Debt Equity Ratio both parti...