Stock markets, the cost of capital and corporate investment
Article Abstract:
It is interesting to consider why a rise in the cost of equity capital to firms cuts the incentive to invest. Attention must also be given to the possibility that a change in capital structure could assist companies in offsetting some of the recent rise in the cost of equity funds. A company's cost of capital is a weighted average of the costs of its components. Bonds pay a fixed rate of interest. In contrast, dividend payments to shareholders vary. This indicates that boosting the proportion of debt in a company's capital structure should reduce the weighted average cost of capital, but this is not necessarily the case.
Publication Name: British Economy Survey
Subject: Business, international
ISSN: 0263-3523
Year: 1998
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Stock market turbulence: the corporate implications
Article Abstract:
Stock prices have dropped dramatically in many Asian countries, which have also seen currency price falls. This has increased the cost of equity finance and has affected the expansion plans of some firms. Rising interest rates have also affected the cost of capital and have depressed consumption. A drop in asset prices is also likely to depress consumption. Corporate profit can be affected as well as future corporate growth. A serious financial crash can have major effects on the real economy.
Publication Name: British Economy Survey
Subject: Business, international
ISSN: 0263-3523
Year: 1998
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Merger and consolidation in the banking industry
Article Abstract:
There have been waves of mergers in the banking industry, and the most recent wave began in 1997 in Europe and the US. Banks benefit from greater predictability of net flows when they are larger, and larger banks can also diversify more easily. Financial services deregulation has meant that banks can more easily move into new areas. Technological change has also led to a drop in marginal costs. This was shown through telephone banking, and then through the development of internet banking.
Publication Name: British Economy Survey
Subject: Business, international
ISSN: 0263-3523
Year: 1999
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