In recent years, with the quickly development of the supply chain finance, the cost of corporate finance would become an important way for enterprises to solve their financial problems. In China, the financing model of supply chain finance mainly for accounts receivable financing, inventory financing pledge financing, advances and financing. Three financing models are used in different larger c...

This paper focuses on different avenues of corporate social responsibility as alternative methods for alleviating agency problems between shareholders and bondholders. Specifically, the paper documents the relationship between capital structure (leverage) and corporate social responsibility. Using agency theory, a positive causal relationship is shown between leverage and certain corporate soci...

T he U.S. government subjects corporate dividends to double taxation: It first taxes corporate income, then taxes the same income again when shareholders receive dividends paid out of corporate income. Until 2003, individuals were taxed on dividend income at the same rates as on other forms of income, resulting in overall taxes on dividends much higher than those in most other countries (PriceW...

In many OECD countries, statutory corporate tax rates are lower than personal income tax rates. The present paper argues that this tax rate differentiation is an optimal tax policy if there are problems of asymmetric information between investors and firms in the capital market. The reduction of the corporate tax rate below the personal tax rate encourages equity financing and thus mitigates th...

This paper examines how external governance pressure provided by both the product market and the market for corporate control affects a borrowing firm’s choice of debt source. Using reductions in import tariffs to capture exogenous changes in a firm’s competitive environment, we find that increased product market competition has a significant negative impact on a firm’s reliance on bank debt fi...

We study the choice between public and private debt in a firm’s marginal financing decision and its effects on corporate investment. To do so, we build a dynamic model of investment and financing decisions in which firms can choose not only the amount but also the type of debt to issue to finance investment. The paper shows how various firm and industry characteristics, such as liquidation cost...

In the broad literature of corporate risk management classic models of optimal hedging assume a one-period hedging decision, and therefore no financing need arises to maintain the hedge position. The multi-period models are usually based on the assumption of no liquidity constraints, and accordingly the eventual financing need can always be met from the market. As a consequence of the recent cr...

While much attention has been focused on the optimal ratio of a firm’s debt to equity, the “optimal” or best balance between bond financing and (longer-term) bank financing has scarcely been addressed. This essay examines the principal differences between an economy with a well-developed corporate bond market free from government interference and an economy in which bank financing plays a centr...

We use hand-collected data on a sample of German public firms during 2011-2014 to show that firms use currency derivatives more often when they export or import, and especially when exchange-rate fluctuations are larger, but to a lesser extent when having high export and import shares simultaneously. We interpret this finding as evidence of operational hedging that arises as foreign-denominated...