Top PDF FINANCING PRACTICES IN CORPORATE FINANCE

FINANCING    PRACTICES   IN   CORPORATE   FINANCE

FINANCING PRACTICES IN CORPORATE FINANCE

This research paper shows about the finance practices in the corporate finance. There are three leading areas of corporate finance practices that consistently require the academic concentration of scholars in corporate finance theory. These include corporate financial practices relating to investing, financing and finally the practices concerning distribution. However, in modern finance, the investing practices have been further classified into two categories, that is, long term financing and short term financing. The long term financing refers to capital budgeting practices and short term refers to working capital practices. A brief account of leading practices in these areas of corporate finance is presented in this paper.
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Essays in corporate finance

Essays in corporate finance

Managers of small firms often complain that they are unable to grow because they have difficulties raising finance and lack the collateral that lenders require as secu- rity for loans. For example, in a survey of small firms in UK, only 18% of those that sought finance said they obtained all they needed, and 20% cited insufficient security as the reason why their financial provider rejected their application for more funds (BIS, 2012). Consistent with managers’ contentions, an extensive theoretical and empirical literature suggests that small firms are constrained in their access to finance (see: Whited (1992); Rajan and Zingales (1998); Beck et al. (2005); Liberti and Sturgess (2014)). How do small firms adapt to financing constraints? And what are the costs of these adjustments? In this paper, we answer these relatively unex- plored questions, using as laboratory the Great Recession. We exploit differential access to a Credit Guarantee Scheme as exogenous firm-level determinant of financial access, and take advantage of novel administrative small-firm data in the UK. We show compelling evidence that financial constraints during the crisis prolonged the real effects of negative demand shocks, particularly by affecting small firms’ ability to finance employment rather than fixed assets. 1 Our results provide prima facie
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Essays in Corporate Finance

Essays in Corporate Finance

Anecdotal evidence seems to back this prediction. In particular, impact investors often claim that their actions provide financing to projects which traditional investors are not willing to fund either because they are too small or not profitable enough. This may hint at a credit constraint problem for poorer projects in line of what was identified in the model. Though the model predicts that any investor may then provide financing through a social financial contract, in reality it might be that some level of expertise is needed in order to offer social financial contracts. Impact investors may then step up to the plate and solve the credit constraint problem by financing certain projects through a social financial contract. Secondly, in the discussion of the model it was emphasized that the results in the paper rely on the presence of a third party agent with strong bargaining power. The strong bargaining position of the third party is necessary in the model in order to allow him to provide incentives through penalties and minimize the rents flowing to the entrepreneur. In addition, it was suggested in the paper that the strong bargaining power can originate from a variety of sources ranging from social pressure from the local community or the entrepreneur’s social network but also pressure groups which support the third party’s cause.
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Essays in corporate finance

Essays in corporate finance

cipline imposes strong incentives on banks to conduct their business in a safe, sound and efficient manner”. This definition can be easily rephrased within the framework of this model : the Buy Side imposes discipline on banks if it induces the majority of them to perform a proper due diligence on financed loans. Notice that this definition abstracts from welfare considerations within the model. In this sense, I am assuming that Market Discipline is part of the social planner’s optimization problem because of positive externalities arising from screening effi- ciency. In order to relate our previous results on securitization to market discipline, I will proceed as follows. I will first impose the bank’s participation constraint P C (x) = (1 + r) (1−x) on the securitization equilibrium. Each bank will choose be- tween investing in the risk free asset or financing the loan (and trying to sell it on the market ) . Once the participation constraint is introduced, it is possible to iden- tify three distinct and exhaustive subsets in the continuum of banks, on the basis of their investment decision and optimal actions. Specifically, one subset of banks will finance the project and screen, one subset of banks will finance the project and will not screen and the last subset will invest in the risk free asset. Finally, I will investigate the effect of investors’ sophistication on the size of the subset of banks that undertake the efficient action (screening). Investors’ sophistication will implement market discipline if it induces the maximum possible mass of banks to choose a ∗ = S. This comparative statics exercise will be conducted for equilibria arising in the different regions of q , as identified in the previous section.
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Essays in Corporate Finance

Essays in Corporate Finance

innovative firms have few other assets to pledge. Figure 4 displays the top ten industries by 3-digit SIC code among Compustat-matched borrowers. These are all low-tangibility, research-intensive industries in which patents are particularly important assets. Brown et al. (2009) show that seven of these ten industries account for nearly all of the growth in aggregate US R&D expense since the early 1990s. (Subsequent results will show that these seven industries are also particularly responsive to a strengthening of creditor rights.) Individual examples also illustrate that patent collateral can be valuable for credit-constrained, innovative firms: Insite Vision, a developer of optical pharmaceuticals, raised $6 million of debt financing in 2005 (more than the total assets reported on its balance sheet) by pledg- ing its patent portfolio as collateral. The money financed clinical trials, and the company warned investors that restrictive debt covenants or lack of access to debt finance might inhibit future product development. Scientific Learning, an educational software company, added patents to its collateral portfolio after deteriorating financially and violating a loan covenant. Its lender simultaneously reduced the amount of the loan, but presumably the additional collateral kept the consequences from being worse. These examples and others are described further in Section 1.7.
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Carbon Trade Financing Strategies and Opportunities for Competitiveness of Private Sector SMEs in Uganda

Carbon Trade Financing Strategies and Opportunities for Competitiveness of Private Sector SMEs in Uganda

Availability of strategies and opportunities can drive SMEs competitive investment potential. In Uganda, several SMEs are emerging and their activities are having huge environmental impact hence contributing to global warming in form of carbon-dioxide release. There has been less effort to create awareness among public and private enterprises with an aim of reducing these negative effects. For example, water risks are rampant today, given population and climate change trends (www.ceres.org/), the demand for primary energy is projected to increase globally by a factor of 1.6 to 3.5 by the year 2050. Among developing countries, these factors are increasing from 2.3 to 5.2 (World Bank 2007). This study assessed corporate carbon financing strategies and competitiveness of small and Medium Enterprises with different management practices in Uganda. We used correlation analysis to find out whether there is significant relationship be- tween company factors and competitiveness. The findings indicated Pearson correlation r = 0.435. The result of 0.435 **
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An assessment of corporate finance strategies and practices by the business organizations in Ethiopia

An assessment of corporate finance strategies and practices by the business organizations in Ethiopia

almost all of the business organizations have faced cash shortage in their life and majority of them will finance their cash shortage by borrowing from friends and relatives. 5. The study indicates that majority of the respondents do not make credit sales regularly. Of those that make credit sales, have never set any credit policy and don‟t determine their customer towards credit limit. This implies that, business organizations in Dessie town are weak in setting credit policy and evaluation of credit limit.

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CORPORATE FINANCIAL STRUCTURE ROLE OF LAWYERS IN THE FIELD OF CORPORATE FINANCE

CORPORATE FINANCIAL STRUCTURE ROLE OF LAWYERS IN THE FIELD OF CORPORATE FINANCE

 Role of Lawyers in Corporate Finance: Corporate finance lawyers educate companies on all perspectives with respect to the purchasing and selling of entire organizations or business resources. It requires direction on the most proficient method to follow company law systems, the raising of assets and, on account of worldwide transactions, consistence with outside laws. It is conceivable to take a shot at mergers and acquisitions (M&A) with public or privately possessed companies. The Companies Act, 2013 alongside certain revisions have come into power with all the more brilliant thoughts regarding financing in companies with the assistance of lawyers. It has thought of the adjustment in the concept of advances and investments by a company. The segment (1), 2013 states that companies before the 2013 Act that is the companies enrolled under 1956 are not limited however the rest will make investments in two layers. The companies outside India are absolved under this revision. The Role of Lawyers in the Corporate-
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Essays In Corporate Finance

Essays In Corporate Finance

metric method in Erickson and Whited (2002), which uses higher order moments 12 to point identify the equation coefficients, and cannot reject that the effect of cash flow on invest- ment may be zero, thereby corroborating the prediction of q theory. Almeida, Campello, and Galvao (2010) use lagged variables in a panel structure as instrumental variables to address the measurement error in Tobin’s q and find that cash flow affects investment pos- itively, contradicting the theoretical prediction in the absence of financing frictions (see also Fazzari, Hubbard, and Petersen, 1988; Gilchrist and Himmelberg 1995; Love, 2003). Similarly, using regression analysis, Almeida, Campello, and Weisbach (2004) find that a firm’s cash flow affects its saving positively whereas Riddick and Whited (2009) use higher order moments to account for measurement error in Tobin’s q and find that cash flow af- fects saving negatively. Last, Rajan and Zingales (1995) and Hennessy and Whited (2005) study firm profitability and cash flow respectively and find that either variable negatively affects debt (see also Gomes and Schmid (2010)) and Erickson, Jiang and Whited (2014) corroborate this finding for profitability when using higher order moments to account for measurement error.
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Essays In Corporate Finance

Essays In Corporate Finance

The steam engine is widely recognized as one of the most important inventions that drove the Industrial Revolution. In 1698, Thomas Savery invented the first modern steam engine which he described as “Machine for Raising Water by Fire”. He published this invention four years later. The first known working model of steam engine emerged about a decade after that in 1712 when Thomas Newcomen refined James Savery’s design. In the coming years, inventors, engineers, and industrialists continued to make improvements on the previous designs and soon steam engines were driving ships and powering factories. Few know that the very first steam engine actually appeared almost 1700 years earlier in the first century AD. It was called the aeolipile at that time and was invented by Heron of Alexandria in modern day Egypt. Unfortunately, it was viewed as a mere curiosity and used only as a toy at that time. The idea never spread beyond the region and it became forgotten soon afterward. While it is not entirely fair to compare two drastically different eras, it might be worth contemplating why the invention did not catch fire the first time round during the Hellenistic period. Among many forces, the ease of knowledge transfer could be a deciding factor. Richart Trevithick decided not to patent his new high-pressure engine that he developed in 1812 and made it available for all. A group of mine managers founded the monthly journal Leans Engine Reporter that publishes improved engine designs “with the explicit intention of aiding the rapid diffusion of best practices among these competing firms (von Hippel and von Krogh, 2006)”. Had Heron’s aeolipile reached a broader audience, our history could possibly be rewritten.
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Advanced Corporate Finance

Advanced Corporate Finance

Analysts gave the drug a slightly better than 50% chance of success. This case focuses on stage financing and a simple decision-tree evaluation. Students have the opportunity to consider the impact of past staged financing decisions on the ownership structure of the firm and to evaluate the current stock market price in light of analyst forecasts of the cash flow and the probability of success for each drug. These two analyses help inform the private placement decision …

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Corporate Finance II

Corporate Finance II

The course Finance II is aimed at providing basic knowledge necessary for capital budgeting decision making process. Departing from the concepts and the form of reasoning learned in Finance I, this course analyzes and studies some decisions that financial manager has to make on regular basis. All companies are faced with new investment projectswhich they have to analyze from both, economic and financial perspective. In this course the principal existent techniques will be studied, their application, interpretation and adaption to real world. In addition, as there is no investment without financing, the characteristics of the principal source of financing available to companies will be studied, differentianting bwtween small and big companies.
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Programme Specification Postgraduate

Programme Specification Postgraduate

The aim of the programme is to provide postgraduate-level education in corporate finance principles, theories and practice within a global context. The programme’s aim is to provide a sound theoretical basis for understanding and analysing practical issues in corporate finance and to provide knowledge of international financial markets and institutions as a context within which corporate financial decision making takes place. The programme deals with key themes relating to how companies manage their investment, financing and distributions decisions and the consequences of these decisions for valuation.
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Deficit financing in developing countries: Application and consequences

Deficit financing in developing countries: Application and consequences

The vital question is: why do developing economies fall into external debt traps? Some reasons are obvious. There is a demonstration effect. Expanding means of transportation and communication, especially the internet resources and global advertising, have really converted the planet earth into a global village. The living standards and material affluence of the West coming into observation of people and leaders in developing economies awaken in them the urge to copy. In their eagerness to imitate the society is more and more divided into haves and have-nots. The upper class is created in a good measure through corrupt and exploitative practices to finance lavish living. Foreign loans taken in the name of development projects in part land in Swiss or Panama accounts of leader and the affluent. Can this all be stopped so that money is spent where it is meant to be spent? Imran Khan is trying to do it for building a Pakistan of his vision. Either he will soon give up or will achieve a miracle.
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Project Financing Versus Corporate Financing under Asymmetric Information

Project Financing Versus Corporate Financing under Asymmetric Information

The results of the paper can also be applied to asset-backed securities (ABS). Suppose that the firm can issue ABS to finance the first project. If the project fails then the creditors (or the holders of ABS) do not have any legal rights of recourse to the assets of the firm. In addition, there is a bankruptcy remoteness condition. If the parent company fails it cannot use the assets of the project company. Therefore, formally this debt is analogous to the case of non-recourse debt issued for both projects in the model. ABS are now used by many corporations as a financing method. The standard explanation in existing literature is that these securities exist primarily for regulatory reasons (for instance, banks were trying to avoid minimal capital requirements). However, recent empirical literature (Calomaris and Mason, 2004) argues that securitization seems to be motivated more by reasons related to efficient contracting.
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Corporate Finance Practices in Sri Lanka

Corporate Finance Practices in Sri Lanka

There is a vital issue in the contemporary financial management that how companies should maintain their optimal capital structure in order to maximize the shareholders wealth. Two different approaches were viewed by financial researchers that trade off theory and pecking order theory (e.g: Myers (1984)). In case of static trade off theory, organizations will maintain a target value ratio and then step by step progress towards this target (Anand, 2002). But in case of pecking order theory companies have a preference retained earnings to external financing. If fund requirement exceeds than retained earnings then debt will be preferred to equity (Anand, 2002). The finance professionals avoid depending on external finance because it would subject the firms to the discipline of the capital market as it will be affected by uncertainty (Berle, 1954). As indicated in the Anand's study in 2002 there are number of previous studies evidenced in line with the pecking order theory (Baskin, 1989; Fan and So, 2000) and previous studies were not in line with the pecking order theory (Brennan and Kraus, 1987; Noe, 1988).
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DISTRIBUTION AND INVESTING PRACTICES IN CORPORATE FINANCE

DISTRIBUTION AND INVESTING PRACTICES IN CORPORATE FINANCE

With a view to revisit leading corporate financial practices in India, the researcher visualized to study the issue. Further, to make a concentrated attempt in select industry, the present study has picked up Indian Banking and Information Technology Industries for detailed investigation. The majority of the corporate finance studies have excluded Banking and Financial industry for their study (for instance, Rajan and Zingales (1995), Bhattacharyya and Banerjee(2001), Bhole and Mahakud (2004). Nevertheless, several previous studies, like, Fama (1980), Taggart and Greenbaum (1978) have taken the view that banks are corporations and thus susceptible to corporate finance theories. There exist, however, a fundamental difference lies in the regulatory environment. Approximately three decade ago Stephen A. Buser, Andrew H. Chen and Edward J. Kane (1981) held that banks have traditionally been conceived as more than just another business firm; they operate under unusual regulatory restrictions including entry limitations, interest rate ceilings, reserve requirements and government guarantees on their deposit liabilities . The situation has not changed much since then. Only that the earlier systems of regulated deposit rates etc. have now been replaced by regulatory capital requirement (Matten, 2001). The regulatory zeal has traversed the national boundaries. Banking is now the only industry, which has been subjected to international capital regulation through Basel Capital Accords. The meaning of all such Accords is simply that someone else other than the market tells the bank promoter that he must bring in so much equity to the firm calculated by a certain prescribed methodology. It is often forgotten that the market laws are almost akin to natural laws. Any attempt to impinge on such laws will drive the market to seek alternative ways to reach equilibrium. The study attempts to apply corporate theories on banking industry keeping in view the difference between financial and non – financial industry. Here is the brief overview of the two industries for the purpose of analysis.
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Corporate Governance, Competetion, The new International Financial Architecture and Large Corporations in Emerging Markets

Corporate Governance, Competetion, The new International Financial Architecture and Large Corporations in Emerging Markets

The second and rather different critical line of argument against the central LLSV thesis has been presented by Glen, Lee and Singh (2000). They suggest that over the past 20 years there have been major changes in corporate financing patterns and in stock market development in emerging markets. It would be difficult to attribute these enormous variations, as detailed below, to changes in corporate law or to legal origin. This will be illustrated by considering the specific experience of India, a pre-eminently common law based country. Despite this fact, in accordance with political decisions of the Indian leadership the stock market up to 1980 played hardly any role in the economy. Stock market capitalisation as a proportion of GDP was a mere 5 percent until then. The government began a change in its economic policy stance in the early 1980s and began to implement financial liberalisation internally. However, following the balance of payments and liquidity crisis of 1990-1991, the government initiated a more full-scale internal as well as external liberalisation. The net result was that there was a stock market boom. Total market capitalisation rose from 5% in 1980 to 13% in 1990 and to 40% in 1993. There were two million mutual fund investors in India in 1980 but by 1995 there were over 40 million, second only to the US. The number of companies listed on the Indian stock markets rose to nearly 8,000, a figure bigger than that for the US, the largest developed country market. Hundreds of companies made IPOs as well as a large number of existing listed companies raised fresh equity finance on the stock market.
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Corporate governance, the big business groups and the G 7 reform agenda: A critical analysis

Corporate governance, the big business groups and the G 7 reform agenda: A critical analysis

The second and rather different critical line of argument against the central LLSV thesis has been presented by Glen, Lee and Singh (2000). They suggest that over the past 20 years there have been major changes in corporate financing patterns and in stock market development in emerging markets. It would be difficult to attribute these enormous variations, as detailed below, to changes in corporate law or to legal origin. This will be illustrated by considering the specific experience of India, a pre-eminently common law based country. Despite this fact, in accordance with political decisions of the Indian leadership the stock market up to 1980 played hardly any role in the economy. Stock market capitalisation as a proportion of GDP was a mere 5 percent until then. The government began a change in its economic policy stance in the early 1980s and began to implement financial liberalisation internally. However, following the balance of payments and liquidity crisis of 1990-1991, the government initiated a more full-scale internal as well as external liberalisation. The net result was that there was a stock market boom. Total market capitalisation rose from 5% in 1980 to 13% in 1990 and to 40% in 1993. There were two million mutual fund investors in India in 1980 but by 1995 there were over 40 million, second only to the US. The number of companies listed on the Indian stock markets rose to nearly 8,000, a figure bigger than that for the US, the largest developed country market. Hundreds of companies made IPOs as well as a large number of existing listed companies raised fresh equity finance on the stock market.
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Corporate governance, competition, the new international financial architecture and large corporations in emerging markets

Corporate governance, competition, the new international financial architecture and large corporations in emerging markets

underdevelopment and imperfections of developing country capital markets, firms in these countries would largely be self-financing. However, these two studies produced results that were quite contrary to these expectations. Large developing country firms, it was found, depended overwhelmingly on external rather than internal finance, and used equity financing to a surprisingly large degree (see Table 7). Table 7 suggests that during the 1980s the average company among the 100 largest listed manufacturing firms in each country, in a sample of ten emerging markets, financed merely 40 per cent of its growth of net assets from retained profits. About 60 per cent of corporate growth in the sample of emerging markets was financed by external sources – 40 per cent from new equity capital and 20 per cent from long-term debt. Even though the equity financing figures were to some extent overstated by virtue of the fact that an indirect method of estimation was used (on account of lack of direct information), these figures were much larger than might have been expected a priori. 9 In advanced economies with well-developed capital markets, the typical large firm is thought to follow a ‘pecking order’ in which most of the needed finance fo r growth us obtained from retained profits. If additional resources are required, the firm would borrow funds and only as a last resort would it issue new shares in the equity market.
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