The Experts below are selected from a list of 564 Experts worldwide ranked by ideXlab platform
Jaewoo Kim - One of the best experts on this subject based on the ideXlab platform.
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asymmetric timely loss recognition adverse shocks to external capital and underinvestment evidence from the collapse of the Junk Bond market
2014Co-Authors: Jaewoo KimAbstract:This paper uses the collapse of the Junk Bond market in the early 1990s as an exogenous adverse shock to external capital to examine whether asymmetric timely loss recognition (ATLR) mitigates underinvestment. This study also investigates whether speculative-grade (SPG) firms adjust ATLR upward in response to the adverse shock to their primary source of credit. For a sample of 450 firm-years over the period 1988-1991, I find that high ATLR firms experience a smaller reduction in investment from the pre- to post-collapse period relative to low ATLR firms, suggesting that ATLR attenuates underinvestment that otherwise would follow. I also document that the effect of ATLR on investment is more pronounced for SPG firms that lack collateral, indicating that ATLR serves as a substitute for collateral to enhance SPG firms’ debt capacity. Further analyses reveal that ATLR increases for SPG firms from the pre- to post-collapse period, and this increase is stronger for SPG firms with greater debt financing needs. This evidence suggests that SPG firms adjust ATLR to enhance their ability to obtain debt financing in response to private lenders’ demand for it.
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Asymmetric Timely Loss Recognition, Adverse Shocks to External Capital, and Underinvestment: Evidence from the Collapse of the Junk Bond Market
SSRN Electronic Journal, 2014Co-Authors: Jaewoo KimAbstract:Using the collapse of the Junk Bond market in the early 1990s as an exogenous shock to external capital, I document, in both difference-in-differences and triple difference designs, that speculative-grade firms that recognize economic losses in a timely manner experience a smaller reduction in investment following the collapse. The effect is more pronounced for speculative-grade firms with a low level of asset liquidation value. Using the excess Bond premium as a proxy for fluctuations in the supply of capital, I also extend the generalizability of my findings to a broader sample of 84,421 firm-years over the 1972–2011 period.
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ASYMMETRIC TIMELY LOSS RECOGNITION, PRIVATE DEBT MARKETS, AND UNDERINVESTMENT: EVIDENCE FROM THE COLLAPSE OF THE Junk Bond MARKET
2013Co-Authors: Jaewoo KimAbstract:Asymmetric timely loss recognition, private debt markets, and underinvestment: evidence from the collapse of the Junk Bond marke
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Asymmetric timely loss recognition, private debt markets, and underinvestment: evidence from the collapse of the Junk Bond market
1Co-Authors: Jaewoo KimAbstract:This paper uses the collapse of the Junk Bond market in the early 1990s as a natural experiment to examine the effect of asymmetric timely loss recognition (ATLR) on speculative-grade (SPG) firms' access to private debt markets and underinvestment. For a sample of 450 firm-years over the period 1988-1991, I find that SPG firms that recognize economic losses in a timelier fashion experience a smaller reduction in debt financing and investment from the pre- to post-collapse period relative to SPG firms that recognize economic losses in a less timely fashion. I also document that the effect of ATLR on debt financing and investment is more pronounced for SPG firms that lack collateral and are not followed by sell-side equity analysts. These findings support the notion that ATLR improves a firm's ability to access private debt markets, thereby attenuating underinvestment. They also suggest that both collateral and sell-side equity analysts serve as substitutes for ATLR to facilitate SPG firms' access to private debt markets. Further analyses reveal that ATLR increases for SPG firms from the pre- to post-collapse period and this increase is more pronounced for SPG firms with net issuance of debt. This evidence suggests that firms adjust ATLR to obtain debt financing in response to private lenders' demand for it.
Harry Deangelo - One of the best experts on this subject based on the ideXlab platform.
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Ancient redwoods and the politics of finance: The hostile takeover of the Pacific Lumber Company
Journal of Financial Economics, 1998Co-Authors: Harry Deangelo, Linda DeangeloAbstract:Abstract Pacific Lumber was acquired in 1986 by MAXXAM, whose decision to double PL's harvest of old-growth redwoods precipitated 11 years of environmental protests. Intense media coverage blames the Drexel-financed takeover for threatening Headwaters Forest, the largest privately owned ancient redwood forest. This ‘Wall Street greed’ portrayal aroused such public outrage that the Clinton administration agreed to pay $380 million for Headwaters weeks before the 1996 election. We establish that the threat to Head-waters is not attributable to MAXXAM's Junk Bond-financed takeover. Government's response to dramatic crises encourages interest groups to use emotional appeals to influence resource allocation.
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Ancient Redwoods, Junk Bonds, and the Politics of Finance: A Study of the Hostile Takeover of the Pacific Lumber Company
SSRN Electronic Journal, 1997Co-Authors: Harry Deangelo, Linda DeangeloAbstract:In 1986 Pacific Lumber (PL). the largest private owner of old-growth redwood trees, was acquired in a highly leveraged hostile takeover by MAXXAM Group. MAXXAM subsequently doubled the rate at which PL harvested its ancient redwoods, precipitating 10 years of environmental protests and intensive coverage in the national news media. This highly negative coverage almost universally blames the Junk Bond-financed takeover for the threat to PL's ancient forests, and thereby provides for many people unequivocal evidence of the distinctive impact of 1980s Wall Street greed. This paper provides contradictory evidence which establishes that the threat to PL's old-growth redwoods is not attributable to Junk Bonds, high leverage, or hostile takeovers. Our analysis of the media treatment of the PL takeover sheds light on the process through which the public came to hold strongly negative views of Wall Street in the wake of the 1980s wave of corporate rest rupturings.
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Perceptions and the politics of finance: Junk Bonds and the regulatory seizure of First Capital Life
Journal of Financial Economics, 1996Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large Junk Bond holdings, and both had experienced ‘bank runs’. FCLIC’s run followed regulators’ televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC’s statutory capital - with Junk Bonds, real estate, and mortgages marked to market - was far from lowest among major insurers with California policyholders. It becomes lowest if Junk Bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the Junk Bond market’s 21% return in early 1991). Our findings suggest a regulatory bias against Junk Bonds in the political backlash against the 1980s.
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The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the 'Run on the Bank' Phenomenon
Journal of Financial Economics, 1994Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in Junk Bonds. During the Junk Bond market turmoil of 1989-1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50-60 percent in 1991-1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the Junk Bond decline. Seizure of FE's subsidiaries was defensible, although FE would become solvent within a year, given average Junk Bond market appreciation.
Linda Deangelo - One of the best experts on this subject based on the ideXlab platform.
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Ancient redwoods and the politics of finance: The hostile takeover of the Pacific Lumber Company
Journal of Financial Economics, 1998Co-Authors: Harry Deangelo, Linda DeangeloAbstract:Abstract Pacific Lumber was acquired in 1986 by MAXXAM, whose decision to double PL's harvest of old-growth redwoods precipitated 11 years of environmental protests. Intense media coverage blames the Drexel-financed takeover for threatening Headwaters Forest, the largest privately owned ancient redwood forest. This ‘Wall Street greed’ portrayal aroused such public outrage that the Clinton administration agreed to pay $380 million for Headwaters weeks before the 1996 election. We establish that the threat to Head-waters is not attributable to MAXXAM's Junk Bond-financed takeover. Government's response to dramatic crises encourages interest groups to use emotional appeals to influence resource allocation.
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Ancient Redwoods, Junk Bonds, and the Politics of Finance: A Study of the Hostile Takeover of the Pacific Lumber Company
SSRN Electronic Journal, 1997Co-Authors: Harry Deangelo, Linda DeangeloAbstract:In 1986 Pacific Lumber (PL). the largest private owner of old-growth redwood trees, was acquired in a highly leveraged hostile takeover by MAXXAM Group. MAXXAM subsequently doubled the rate at which PL harvested its ancient redwoods, precipitating 10 years of environmental protests and intensive coverage in the national news media. This highly negative coverage almost universally blames the Junk Bond-financed takeover for the threat to PL's ancient forests, and thereby provides for many people unequivocal evidence of the distinctive impact of 1980s Wall Street greed. This paper provides contradictory evidence which establishes that the threat to PL's old-growth redwoods is not attributable to Junk Bonds, high leverage, or hostile takeovers. Our analysis of the media treatment of the PL takeover sheds light on the process through which the public came to hold strongly negative views of Wall Street in the wake of the 1980s wave of corporate rest rupturings.
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Perceptions and the politics of finance: Junk Bonds and the regulatory seizure of First Capital Life
Journal of Financial Economics, 1996Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large Junk Bond holdings, and both had experienced ‘bank runs’. FCLIC’s run followed regulators’ televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC’s statutory capital - with Junk Bonds, real estate, and mortgages marked to market - was far from lowest among major insurers with California policyholders. It becomes lowest if Junk Bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the Junk Bond market’s 21% return in early 1991). Our findings suggest a regulatory bias against Junk Bonds in the political backlash against the 1980s.
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The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the 'Run on the Bank' Phenomenon
Journal of Financial Economics, 1994Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in Junk Bonds. During the Junk Bond market turmoil of 1989-1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50-60 percent in 1991-1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the Junk Bond decline. Seizure of FE's subsidiaries was defensible, although FE would become solvent within a year, given average Junk Bond market appreciation.
Stuart C. Gilson - One of the best experts on this subject based on the ideXlab platform.
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Private Versus Public Debt: Evidence From Firms That Replace Bank Loans With Junk Bonds
SSRN Electronic Journal, 1998Co-Authors: Stuart C. Gilson, Jerold B. WarnerAbstract:We study firms that reduced private debt by repaying bank loans with proceeds from Junk Bonds. The debt contracts differ dramatically, and the contractual restrictions in bank debt are tighter. Sample firms are profitable, but experience operating earnings declines just prior to the Junk Bond issues. The earnings declines further tighten restrictions in bank debt, and the firms have limited borrowing capacity under their existing bank revolvers. Our tests indicate that bank debt paydowns enabled the firms to maintain their ability to grow rapidly. Alternative explanations for the paydowns, such as managers' desire to avoid bank monitoring, have little support.
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Junk Bonds, Bank Debt, and Financial Flexibility
1997Co-Authors: Stuart C. Gilson, Jerold B. WarnerAbstract:New issues of public high yield debt, or Junk Bonds, reached record levels in the 1990s. This paper studies transactions where firms issue Junk Bonds and use the proceeds to repay their bank debt. These substitutions represent the most frequent use of Junk Bonds. Our analysis suggests that firms undertake these substitutions to preserve financial flexibility--a capital structure's ability to support activities at low transaction and opportunity cost. Junk Bond substitutions typically occur around negative earnings surprises. Since Junk Bonds contain substantially fewer and less restrictive covenants than bank debt, and also mature later, these substitutions reduce the probability of default and increase the range of activities in which firms can engage. The earnings surprises are short-term, and firms eventually reborrow from banks. Junk Bond issues convey negative information about sample firms' prospects and cause stock prices to fall, but the decline is less severe for firms that benefit more from the increased financial flexibility. While giving managers increased flexibility could also harm shareholders (by allowing them to take actions that reduce firm value) our evidence does not strongly support this possibility.
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Perceptions and the politics of finance: Junk Bonds and the regulatory seizure of First Capital Life
Journal of Financial Economics, 1996Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large Junk Bond holdings, and both had experienced ‘bank runs’. FCLIC’s run followed regulators’ televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC’s statutory capital - with Junk Bonds, real estate, and mortgages marked to market - was far from lowest among major insurers with California policyholders. It becomes lowest if Junk Bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the Junk Bond market’s 21% return in early 1991). Our findings suggest a regulatory bias against Junk Bonds in the political backlash against the 1980s.
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The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the 'Run on the Bank' Phenomenon
Journal of Financial Economics, 1994Co-Authors: Harry Deangelo, Linda Deangelo, Stuart C. GilsonAbstract:In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in Junk Bonds. During the Junk Bond market turmoil of 1989-1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50-60 percent in 1991-1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the Junk Bond decline. Seizure of FE's subsidiaries was defensible, although FE would become solvent within a year, given average Junk Bond market appreciation.
Edward I. Altman - One of the best experts on this subject based on the ideXlab platform.
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REVISITING THE HIGH YIELD Bond MARKET: MATURE BUT NEVER DULL
Journal of Applied Corporate Finance, 2000Co-Authors: Edward I. AltmanAbstract:Ten years ago the author of this article wrote a piece for this journal reviewing the history of the "Junk" Bond market from its start in the mid-1970s through the collapse of the leveraged restructuring movement at the end of the 1980s. In the summer of 1990, the high yield market was at a critical point in its development. With defaults high and still rising, the yield spreads over Treasuries of Junk Bonds had jumped to over 700 basis points and the new issue market had all but dried up. Drexel Burnham Lambert had recently filed for Chapter 11, and Michael Milken had been indicted. At that time, when many market observers were pronouncing the Junk Bond market "finished," the author of this article said that the market performed a valuable economic function and, despite investor losses, would weather the crisis. 2000 Morgan Stanley.
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Revisiting the High-Yield Bond Market
Financial Management, 1992Co-Authors: Edward I. AltmanAbstract:The low-grade, high-yield corporate debt market is revisited after it has persevered through a tumultuous 14-year 1978-1991 ) modern Junk" Bond period. Empirical findings are combined with conceptual issues to shed further light on the continuing debate surrounding the measurement and interpretation of defaults and returns. We find evidence of a resiliency in this market and a profile that has gone front a moderately risky market in the early 1980s to much higher risk in the late 1980s and a return to more conservatively financed issues in the early 1990s. Our forecast is for a continued presence of publicly issued low-grade corporate debt although the size of the market has decreased of late.
