A test of the control hypothesis of bond creation

Article Abstract:

The relationship between the abnormal stock returns on the offering date of debt and outstanding free cash flow is investigated to test the control hypothesis of bond creation. The control hypothesis states that 'debt created, without retention of the proceeds of the issue, allows managers to bond their promise to pay out future cash flows.' Findings suggest that there is no relation between abnormal returns and free cash flow in debt offerings for financial capital expenditure, working capital and general purposes, as well as between abnormal returns and free cash flow for debt offering made for refunding. These findings buttress the control hypothesis.

Research, Bonds, Bonds (Securities), Debt, Cash flow, Agency (Law)

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Intra-industry effects of voluntary corporate liquidations

Article Abstract:

A study was conducted on the ability of voluntary liquidations to provide asymmetric information about a particular industry. The theory of Lang and Stulz (1992) on corporate bankruptcies is considered. Results show negative valuation effects for competing portfolios in aggregate, indicating the dominance of signs of adverse industry conditions in the perceived shifts of competitive positions.

Analysis, Liquidation

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Financial modernization in US banking markets: a local or global event?

Article Abstract:

A hypothetical study is conducted on various banks across United States and other parts the world, to analyze the impact of Financial Services Modernization Act (FSMA) of 1999 on financial modernization of these banks.

United States, Commercial Banks, Public affairs, Ethics, Financial Systems & Controls, Financial Management, Banking industry, Ethical aspects

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