Corporate Finance

ZigZag Zippers planned a $90 million renovation of their 100-year-old factory site. What was the least expensive option for funding this long-term project?

This study investigates the information content of variation analysis—that is, analysis of year-over-year changes in the components of operating profit. Using industry level data, we find that the effects on profitability of changes in the prices of output products and costs of intermediate inputs are more persistent than the effects of changes in output volume, labor cost, labor productivity, and intermediate input productivity. We further show that this information is priced by investors.

Accounting for Value teaches investors and analysts how to handle accounting in evaluating equity investments. The book's novel approach shows that valuation and accounting are much the same: valuation is actually a matter of accounting for value.

<p>We present a tractable, linear model for the simultaneous pricing of stock and bond returns that incorporates stochastic risk aversion. In this model, analytic solutions for endogenous stock and bond prices and returns are readily calculated. After estimating the parameters of the model by the general method of moments, we investigate a series of classic puzzles of the empirical asset pricing literature.

This paper proposes a simple model to study how domestic institutions affect patterns of international capital flows. Inefficient financial system, and poor corporate governance, may be bypassed by two-way capital flows in which domestic savings leave the country in the form of financial capital outflows but domestic investment takes place via inward FDI. While financial globalization always improves the welfare of a developed country with a good financial system, its effect is ambiguous for a developing country with an inefficient financial sector or poor corporate governance.

In the fall of 2008, fifteen of the world's leading economists — representing the broadest spectrum of economic opinion — gathered at New Hampshire's Squam Lake. Their goal: the mapping of a long-term plan for financial regulation reform.

This article starts by discussing the concept of "inflation hedging" and provides estimates of "inflation betas" for standard bond and well-diversified equity indices for over 45 countries. We show that such standard securities are poor inflation hedges. Expanding the menu of assets to Treasury bills, foreign bonds, real estate and gold improves matters but inflation risk remains difficult to hedge. We then describe how state-of-the-art term structure research has tried to uncover estimates of the inflation risk premium, the compensation for bearing inflation risk.

We examine the issue of executive compensation within an inter-temporal general equilibrium production context. Inter-temporal optimality places strong restrictions on the form of a representative manager's compensation contract, restrictions that appear to be incompatible with the fact that the bulk of many high-profile managers' compensation is in the form of various options and option-like rewards. We therefore measure the extent to which “options-like” convex contracts alone can induce the manager to adopt near-optimal investment and hiring decisions.

We examine whether securitization impacts renegotiation decisions of loan servicers, focusing on their decision to foreclose a delinquent loan. Conditional on a loan becoming seriously delinquent, we find a significantly lower foreclosure rate associated with bank-held loans when compared to similar securitized loans: across various specifications and origination vintages, the foreclosure rate of delinquent bankheld loans is 3% to 7% lower in absolute terms (13% to 32% in relative terms).