The timing of new corporate debt issues and the risk-return tradeoff

Koutmos, Dimitrios; Bozos, Konstantinos; Dionysiou, Dionysia; Lambertides, Neophytos

doi:10.1007/s11156-017-0651-z

Cited by 7 publications

(16 citation statements)

References 58 publications

(59 reference statements)

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“…Our findings indicate a significant negative difference between stock returns on recessionary and non-recessionary periods. This finding deviates from results of Koutmos et al (2018) for the British market which brings us to the conclusion that not only the overall economic conditions matter to explain stock market reactions on bond issues but also the maturity of corporate debt markets. This paper contributes to the existing literature as it sheds light upon how a region might influence shareholders' sentiment towards the issue of debt during periods of bad economic condition.…”

Section: Introductioncontrasting

confidence: 99%

“…Baker and Wurgler (2006) argue that investor's sentiment, which worsens during recessionary periods, changes the returns on specific types of stocks, such as high volatility and extreme-growth stocks. Consistent to this evidence, there is recent evidence of an increase in systematic risk and a decrease of risk-adjusted returns in the UK during periods of bad economic conditions, leading to increasing negative stock returns during such periods (Koutmos et al, 2018). This paper aims to examine whether the presence of recessionary periods have the same influence in stock returns following debt issue announcements in Latin America.…”

Section: Introductionmentioning

confidence: 87%

“…We further conduct comparisons between mature and emerging financial markets to point out characteristic differences in times of turmoil. We therefore relay on the previous findings of Koutmos et al (2018) who analyzed stock market reactions on debt issues for British firms during the same time span. The authors of that study provide first evidence that that the timing of debt issues is fundamental in determining the relationship between shifts in the capital structure and subsequent risk-adjusted returns.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The performance of corporate bond issuers in times of financial crisis: empirical evidence from Latin America

Berninger

Fiesenig

Schiereck

2021

JRF

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PurposeThe fundamental theory of Modigliani and Miller (1958) states that a firm's financing decisions are independent from the firm's value. Nevertheless, several empirical studies as well as theoretical approaches from the past decade impugn this relation for real markets with their immanent inefficiencies. However, these questions are rather than academic in nature: Especially the influence of macroeconomic conditions on the market perception of debt issues is from high economic importance, since the need for new liquidity usually becomes even more urgent when the economic conditions worsen.Design/methodology/approachThis paper analyzes the reaction of shareholders to the issue of debt by Latin American firms under special consideration of the macroeconomic sentiment. To do so, a sample of debt issued by Latin American companies between 2003 and 2010 is empirically examined through an event study.FindingsThe authors empirically demonstrate that specifically in Latin America, debt issuing companies show a significant underperformance during recessionary periods and an overperformance during nonrecessionary periods. These findings differ from previous results for mature capital markets. The authors conclude that not only the overall economic conditions matter to explain stock market reactions on bond issues but also the maturity of the corporate debt market plays an important role.Originality/valueThe authors provide first evidence that the previously described changes in the returns on specific stocks depending on the economic sentiment (Baker and Wurgler, 2006) are under certain conditions also present in the market for corporate debt.

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Section: Introductioncontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 87%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The performance of corporate bond issuers in times of financial crisis: empirical evidence from Latin America

Berninger

Fiesenig

Schiereck

2021

JRF

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“…In the present paper, we explore the deviation between Mafia companies and No Mafia ones by adopting a financial risk perspective. In so doing, we contribute to the macroarea of corporate risk (see Cao et al 2015;Firth and Smith 1995;Koutmos et al 2018, only to name a few). We contextualize Mafia and No Mafia companies in this field of studies; this might be helpful, to some extent, in explaining uncertainty in financial systems.…”

Section: Literature Review and Statement Of The Research Hypothesismentioning

confidence: 99%

Evaluating risks-based communities of Mafia companies: a complex networks perspective

Castellano

Cerqueti

Franceschetti

2021

Rev Quant Finan Acc

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This paper presents a data-driven complex network approach, to show similarities and differences—in terms of financial risks—between the companies involved in organized crime businesses and those who are not. At this aim, we construct and explore two networks under the assumption that highly connected companies hold similar financial risk profiles of large entity. Companies risk profiles are captured by a statistically consistent overall risk indicator, which is obtained by suitably aggregating four financial risk ratios. The community structures of the networks are analyzed under a statistical perspective, by implementing a rank-size analysis and by investigating the features of their distributions through entropic comparisons. The theoretical model is empirically validated through a high quality dataset of Italian companies. Results highlights remarkable differences between the considered sets of companies, with a higher heterogeneity and a general higher risk profiles in companies traceable back to a crime organization environment.

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“…The trend of increasing debt in the sector can be caused by many factors. According to Halling, Yu, and Zechner (2016); Koutmos, Bozos, Dionysiou, and Lambertides (2018); Michalski et al (2018), the factors included were the level of sales, asset structure, company growth, profitability, profits, tax protection, company scale, internal conditions of the company and macroeconomics. Many previous researchers have linked the company growth with debt policy.…”

Section: Background Of the Studymentioning

confidence: 99%

The Role of Profitability in the Effect of Company Growth on the Debt Policy

Akhmadi

Yunia

Robiyanto

2020

IJFR

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This study aims to examine the role of profitability as a mediating variable on the effect of company growth on debt policy. The samples were companies of textile and garment sub-sector listed on the Indonesia Stock Exchange in the 2014-2018 period. The results show that asset growth (AG) did not affect the debt to equity ratio (DER). In addition, return on asset (ROA) was found to have a positive effect on the DER. Meanwhile, the ROA could not mediate the effect of asset growth on the DER.

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The timing of new corporate debt issues and the risk-return tradeoff

Abstract: This is a repository copy of The timing of new corporate debt issues and the risk-return tradeoff.

Cited by 7 publications

References 58 publications

The performance of corporate bond issuers in times of financial crisis: empirical evidence from Latin America

The performance of corporate bond issuers in times of financial crisis: empirical evidence from Latin America

Evaluating risks-based communities of Mafia companies: a complex networks perspective

The Role of Profitability in the Effect of Company Growth on the Debt Policy

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