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Abstract Purpose--The purpose of this paper is to investigate, from an undeveloped market perspective, the nature and significance of firm size as a determinant of corporate financial leverage. Design/methodology/approach--A panel [...]

Interest rate structured products are often described as useful leveraging and diversification instruments for fixed income investors. However, the question of which structured products should be used in practice to [...]

We challenge asset pricing theory with numerous stylized facts regarding risk and return on U.S. Treasury securities. Most striking is our finding that reward/risk ratios vary inversely with maturity and are incredibly high for short-term bills. Apparently investors would do much better engaging in highly leveraged investments in bills instead of purchasing long-maturity bonds or common stocks. Simulations of estimated three-factor affine term structure models do not replicate the high ratios of reward to risk for bills. Other results include business cycle patterns in risk premiums, volatility, and the reward to volatility that vary with maturity.

The paper examines whether security issues and repurchases adjust the capital structure toward the target. The time-series patterns of debt ratios imply that only debt reductions are initiated to offset the accumulated deviation from target leverage. The importance of target leverage in earlier debt-equity choice studies is driven by the subsample of equity issues accompanied by debt reductions. Unlike debt issues and reductions, equity issues and repurchases have no significant lasting effect on capital structure. Therefore, even firms that have target debt ratios can engage in timing the equity market.

The theory of informational leverage in the context of bundling, a product of established quality to one of unknown quality that can alleviate problem of asymmetric information encountered in the latter market, is discussed. It is further suggested that leveraging reputation in one market into another has implications for the timing of new product introductions.

New business models in the deregulated shareholder-owned electric utility industry are discussed. The need for liquidity and financial flexibility is a concern in 2002; debt-to-equity ratios and credit ratings are discussed.

Issues concerning the basic elements of a debt service coverage ratio are discussed, focusing on the negotiation of debt service coverage ratio provisions in loan documents.

The market for leverage lending has increased at an exponential rate during the years, as banks and financial service companies continue to find it appealing and beneficial. The growth, however, has alarmed the Comptroller of the Currency (OCC) office, which issued an advisory to all companies concerned regarding the potential risks associated with increased leveraged lending on May 3, 1999. OCC officials claim that the leveraged lending sector is beginning to reach a saturation point, which may eventually hinder the growth of banks.

Corporations are leveraging their investments in foreign debt and equities markets not only as a form of capital formation and risk insurance for their operations in the local market, but also as a form of public relations to increase brand name recognition among investors and consumers. This strategy is especially useful for multinationals, since they have to protect their investments from local currency fluctuations. Much of the trouble in employing this strategy stems from the investment regulations of the local market.

The leverage of highly leveraged firms (HLFs) depends on their cash flow and is therefore uncertain. Two complementary approaches to value HLFs that explicitly account for uncertain leverage are developed: an extension of adjusted present value, and an option pricing model. These valuation models apply to firms undergoing financial restructuring, as well as to leverage buyouts and project financing. (Reprinted by permission of the publisher.)

A nonlinear relationship between insider holdings and leverage have provided proof of the positive association of corporate ownership with financial leverage. Using a cross-sectional regression approach, it was established that leverage increases with insider holdings and then decreases and increases again as inside ownership reaches 100%. This nonlinear relationship can be due to the likelihood that agency costs of debt decrease faster than agency costs of equity as insider holding decreases.

The exposure of banks to highly leveraged transactions (HLT) was assessed. This involved the utilization of confidential information from the first quarter of 1991 to the first quarter of 1992. The different risks represented in the highly leveraged activity were used as the parameters of the evaluation. It was ascertained that the serious involvement of banks with HLT does not have any bearing on bank capital or to the insurance fund.

* Exchange offers and swaps are noncash transactions that alter the capital structure of the firm without changing its current portfolio of assets.(1) For this reason, they are thought to [...]

Most leveraged buyouts (LBO) have been successful, and the benefits of LBOs appear to outweigh the costs. Organizations that have undergone LBOs are able to reduce costs, spend cash more carefully, and realize a return on investment that is about 80% over the market return. Some jobs may be lost in the short run, but huge layoffs do not usually occur after an LBO. Many LBOs have resulted in much greater profitability and employment.

Over the last year, leveraged ESOPs have seen explosive growth. But the economic value of leveraged ESOPs comes not from tax benefits, but from corporate leveraging. In fact, compared with a debt-financed stock buy-back program, leveraged ESOPs are often economically inferior. Security analysts and corporate treasurers should be cautious when analyzing this widely heralded transaction. (Reprinted by permission of the publisher.)

Cash flow lending has its allure and its foibles for senior lenders. The author looks at what mistakes were made and suggests a way that senior lenders can make cash [...]

Byline: Mairi MacDonald Zurich aims to reduce the combined operating ratio in its UK general insurance business in 2010 after it deteriorated beyond the break-even point due to rising expenses. [...]

Since taking over the helm of Lloyd's in 2006 it would appear to have been plain sailing for Richard Ward, given the recent string of record profit-making years he has [...]

'Leverage' is at the heart of the financial crisis. To be 'leveraged' is to borrow money in the hope that the profit you make with it will outstrip the interest [...]

Banks will be affected by corporations' use of more traditional types of financing. Leverage has become less popular as a result of the decrease in takeovers and the collapse of the junk bond market. The decrease in leveraging should help banks acquire stronger loan portfolios and balance sheets. Corporations will continue to use debt financing, however, and banks should be more selective when extending credit by carefully evaluating capital structures.

Given the frequent reference to operating leverage during discussions of banks' financial performance, it's natural to assume that there is some common definition. Only there isn't. With the confounding state [...]

The use of leverage by commodity traders increases returns but reduces survival likelihood. However, commodity trading advisors' diversification brings higher leverage and volatility levels.