Contagion and competitive intra-industry effects of bankruptcy announcements

Lang, Larry H.P.; Stulz, Renl M.

doi:10.1016/0304-405x(92)90024-r

Cited by 808 publications

(784 citation statements)

References 12 publications

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“…Other studies showed that a bad situation for a company could reduce the expected competition rate inside industry. Lang and Stulz (1992) reported the competition impacts in response to time failure declarations in which the competition rate and financial lever rate were low among competitors. They evaluated the effects of inter-industry of share offering in secondary market.…”

Section: Introductionmentioning

confidence: 99%

The relationship between IPOs and long-term industry performance: Evidence from Tehran Stock Exchange

Sohrabi¹,

Biglar²,

Jamshidian³

2013

10.5267/j.msl

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Every year, the companies with favorable perspective are entered into stock exchange through Initial public offering (IPO). This issue is a treat for share of competitors in market and usually, IPO is offered while industry is in top of its valuation, which could be corrected after offering price. In this regard, we study the relationship between IPO and long-term performance of industry, identification and explaining the effective factors. In addition, the relationship of IPS has compared with portfolios of corresponding competitors. In this study, we conclude that the portfolios of competitors had an undesirable performance three years after initial offering. Six effective variables are verified on performance including industry concentration, industry valuation and homogeneity, size of offering, industry operating leverage and industry financial leverage. Undesirable effects of industry is specified when the industry valuation is rather high, industry is in top of valuation or concentration is high in industry, also, when the homogeneity of industry is more, undesirable effect is less.

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Section: Introductionmentioning

confidence: 99%

The relationship between IPOs and long-term industry performance: Evidence from Tehran Stock Exchange

Sohrabi¹,

Biglar²,

Jamshidian³

2013

10.5267/j.msl

View full text Add to dashboard Cite

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“…Depositors who are late to withdraw their funds stand to lose part of their assets. Some of these depositors may be banks themselves; therefore, the insolvent bank may drive other financial institutions into bankruptcy, in addition to nonbank firms [Lang and Stulz (1992), Furfine (2003)]. Second, investors in the capital market at large may re-evaluate the estimated risk of insolvency.…”

Section: Solvency Regulation Of Banksmentioning

confidence: 99%

Solvency Regulation of Banks and Insurers: A Two-Pronged Critique

Zweifel

2015

International Journal of Financial Research

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This paper puts forth two models, one of a bank and one of an insurer. Their divisions responsible for investment (and risk underwriting, respectively) seek to maximize the expected risk-adjusted rate of return on capital (RAROC). For the bank, higher solvency lowers the cost of refinancing; for the insurer, it attracts more premium income. In both cases, however, higher solvency ties costly capital. Sequential decision making is tracked over three periods. In period 1, exogenous changes in expected returns and in volatility occur, each suggesting optimal adjustments in solvency. However, there can be only one adjustment, which in period 3 creates an endogenous trade-off between expected returns and volatility. This tradeoff is shown to involve parameters that differ between banks and insurers, calling for bank-specific and insurance-specific solvency regulation. In addition, Basel I and II (Solvency I and II, respectively) are shown to modify this tradeoff, inducing senior management of both banks and insurers to opt for higher volatility and lower solvency than otherwise. Therefore, existing solvency regulation can run counter their stated objective in both cases, which quite likely is also true of Basel III and Solvency III.

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“…According to Lang and Stulz (1994), Berger and Ofek (1995), Comment and Jarrell (1995), Servaes (1996), diversified companies badly allot their investment capacity setting up cross subsidies that are value destroyers. This reflects the inefficiency of cross-subsidies.…”

Section: Cross Subsidies Post and Pre-restructuringmentioning

confidence: 99%

Restructuring via Tracking Stocks Issuance: The Hidden Side of Growth: Case of American Listed Companies

Msolli¹

2014

JFSR

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The advent of new technologies, accompanied by the obsolete situation which the old economy is confronted with, have paved the way for the appearance of numerous legal and financial instruments constituting a particularly challenging stimulus for reflection for specialists in financial and legal fields. A keen interest has also taken root in financial market trends for greater transparency in managing diversified groups whose financial visibility is often reduced. Such a requirement for clarity is at the centre of the definition of tracking stocks. Having emerged across the Atlantic in the early 80's, they benefited from the advent of the new economy and a renewed interest with a high issuance level on the American financial markets since the 90's. The issuance of tracking stock, apart from its hybrid nature, constitutes a rather specific restructuring measure which comes to complete the basis of studies already established around the subject of capital restructuring. This research work aims to highlight an instrument that has been discarded by the French financial system at a time when its expansion continued to grow on the British, German and American market. It will allow expanding the choice of restructuring forms on offer to companies seeking new financing sources, new acquisition means and to reach the fundamental objective which is value creation. As a result, tracking stock issuance faces other rival forms of restructuring (spin-offs and equity carve-outs). Consequently, we will identify the factors that companies have had to take into account when choosing tracking stock restructuring. The obtained results confirm the hypotheses pertaining to the improvement of the internal capital market and company performance. Thus, leading us to deduce that through the actual restructuring, the goal of value creation is achieved by reinforcing an internal capital market weakened by a pointless diversification strategy and also by improving company performance.

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Contagion and competitive intra-industry effects of bankruptcy announcements

Cited by 808 publications

References 12 publications

The relationship between IPOs and long-term industry performance: Evidence from Tehran Stock Exchange

The relationship between IPOs and long-term industry performance: Evidence from Tehran Stock Exchange

Solvency Regulation of Banks and Insurers: A Two-Pronged Critique

Restructuring via Tracking Stocks Issuance: The Hidden Side of Growth: Case of American Listed Companies

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