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Since 1934, the Swiss Wirtschaftsring/Cercle Economique (Economic Circle), now the WIR-Bank, has issued its own currency, not backed by Swiss Francs. Turnover in WIR is countercyclical: firms use it more in a recession. A money-in-the-production-function model implies that this spending arises through larger WIR Balances for larger firms, but greater WIR Velocity for smaller ones. Panel data by industrial sector confirm this pattern, similar to commercial trade credits, a major source of non-bank credit. The countercyclical multiplier on WIR expenditures is highly leveraged, and its impact on the Swiss Economy greater than its turnover would suggest. Comparative Economic Studies (2016) 58, 570-605. doi:10.1057/s41294-0160001-5; published online 14 July 2016 Keywords: complementary currency, community currency, countercyclical JEL Classification: E51, G21, P13, INTRODUCTION The Swiss Wirtschaftsring or 'Economic Circle,' founded in 1934, is nowadays called the WIR-bank. Those studying reciprocal payment mechanisms refer to it as a 'social,' 'community,' or 'complementary' currency--terms [...]

Daily deal websites help small local merchants to attract new consumers. A strategy adopted by some websites is to continually track and display the number of deals sold by a merchant. We investigate the strategic implications of displaying deal sales and the website's incentive to implement this feature. We analyze a market in which a merchant offering an experience good is privately informed of its type. Whereas daily deals cannibalize a merchant's revenue from experienced consumers, we show that, by displaying deal sales, the website can transform this cannibalization into an advantage. Displaying deal sales can leverage discounted sales to experienced consumers to help a high-quality merchant signal its type and acquire new consumers at a higher margin. Signaling is supported through observational learning from displayed deal sales since it reveals how experienced consumers respond to the deal. Nevertheless, the website may not implement this feature if signaling entails too much distortion in the merchant's deal price. We also find that it can be optimal for the website to offer the merchant an up-front subsidy, but only if the website displays deal sales. Our analysis leads to managerial insights for daily deal websites. Keywords-, customer acquisition; daily deals; observational learning; online intermediaries; promotions; signaling; strongly undefeated perfect Bayesian equilibrium; two-sided market History: Received August 14, 2014; accepted July 4, 2015, by J. Miguel Villas-Boas, marketing. Published online in Articles in Advance March 3, 2016., As customers, we like the counter because it indicates how popular deals are. --Director of Communications, Groupon, as quoted in Julie M (2011) We were concerned that the counter was [...]

We use contract negotiation data to study how leverage affects the interaction between firms and an important nonfinancial stakeholder, labor unions. Consistent with the idea that leverage diminishes the bargaining position of labor, we find that unions are less likely to strike when a firm has high leverage or increases leverage prior to a contract negotiation. We also find large leverage increases after a strike, consistent with the idea that firms intentionally use leverage to improve their bargaining position. This poststrike increase in leverage is particularly pronounced when the union wins the strike. Moreover, we do not find any clear indication that such increases in leverage are linked to changes in investments. In addition, firms that experience a strike subsequently invest more internationally and in right-to-work states where union are afforded fewer legal protections, and they increase their disposal of production units that are located in states where strikes have occurred. Keywords: leverage; nonfinancial stakeholders; contract negotiations; union strikes History: Received September 27, 2012; accepted April 28, 2015, by Brad Barber, finance. Published online in Articles in Advance December 18, 2015., 1. Introduction Firms constantly interact with other economic agents who do not have a direct equity or debt stake in the firm, but who, nevertheless, have a claim to a [...]

Abstract Why did the conventional leverage indicators not pick up any meaningful signal of the mounting systemic risk before the subprime crisis? They remained almost unchanged in recent decades, whereas [...]

This study focuses on an issue particularly relevant in these difficult financial times. Can family businesses afford the risk associated with making investments that could generate higher returns? Studies examining financing behavior of family firms report higher control risk aversion than nonfamily firms, whereby control risk is measured through leverage levels. We found that family firm owners' degree of control risk aversion depends on reference points. Investment alternatives implying higher leverage levels become significantly more attractive to family owners when considered from a secure reference point with low leverage levels, than when the same investment alternatives are assessed from a less secure reference point with higher leverage levels. Implications are discussed. We wish to thank Sabine Klein, Peter Jaskiewicz, Lorraine Uhlaner, Katrin Burmeister, Bill Schulze, and Isabell Welpe for their insightful comments on a previous version of this paper., INTRODUCTION Studies examining leverage levels of family firms report a rather unanimous picture: be they large or small, publicly quoted or privately held, family firms exhibit lower leverage levels and [...]

In this paper, we first explore the targets' performance around the announcement of cancelled bids. Using a sample of 272 firms between 2000 and 2007, we document positive abnormal returns at the time of the bid announcement and negative returns at the time of the bid withdrawal. We find that the negative abnormal returns around withdrawal do not completely reverse the positive returns earned around the initial announcement. The returns around withdrawal depend on whether the transaction has been terminated by the target or by the bidder and on whether it involves a target from the same industry. We also investigate what determines the probability that the transaction is terminated by either party and examine the probability that the target is acquired successfully after the bid withdrawal. We find the latter to depend on the target's profitability, the target's industry, and the number of days between announcement and termination., Introduction Mergers and acquisitions (M&A) are important economic phenomena. Much of the existing research on M&A focuses on the market returns to bidders' shareholders at the time of acquisition announcements. [...]

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1468-0297.2010.02357.x Byline: Marcus Miller (1), Joseph Stiglitz (1) Abstract: An iconic model with high leverage and overvalued collateral assets is used to illustrate the amplification mechanism driving asset prices to 'overshoot' equilibrium when an asset bubble bursts - threatening widespread insolvency and what Richard Koo calls a 'balance sheet recession'. Besides interest rates cuts, asset purchases and capital restructuring are key to crisis resolution. The usual bankruptcy procedures for doing this fail to internalise the price effects of asset 'fire-sales' to pay down debts, however. We discuss how official intervention in the form of 'super' Chapter 11 actions can help prevent asset price correction causing widespread economic disruption. Author Affiliation: (1)University of Warwick and Columbia University

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jeconom.2008.12.001 Byline: Tim Bollerslev (a), Uta Kretschmer (b), Christian Pigorsch (c), George Tauchen (a) Abstract: We develop an empirically highly accurate discrete-time daily stochastic volatility model that explicitly distinguishes between the jump and continuous-time components of price movements using nonparametric realized variation and Bipower variation measures constructed from high-frequency intraday data. The model setup allows us to directly assess the structural inter-dependencies among the shocks to returns and the two different volatility components. The model estimates suggest that the leverage effect, or asymmetry between returns and volatility, works primarily through the continuous volatility component. The excellent fit of the model makes it an ideal candidate for an easy-to-implement auxiliary model in the context of indirect estimation of empirically more realistic continuous-time jump diffusion and Levy-driven stochastic volatility models, effectively incorporating the interdaily dependencies inherent in the high-frequency intraday data. Author Affiliation: (a) Department of Economics, Duke University, Box 90097, Durham, NC 27708, United States (b) Department of Economics, University of Mannheim, L7, 3-5, D-68131 Mannheim, Germany (c) Department of Economics, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany

Threshold models are compared to predict volatility and determine the best model for forecasting. Generalized Autoregressive Conditional Heteroskedastic model (GARCH) and Stochastic Volatility model (SV) are employed to study the behavior on returns and leverage effects on the mean. Based on the study, the SETAR-THSVt is the best method for IBEX35 returns since this type of series produces more accurate predictions. Application of the Monte Carlo study to estimate the quality of the different procedures is discussed.

Effects of financial leverage on equity risk, which is measured by loss-oriented risk measures, are presented.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jmacro.2004.07.008 Byline: Jean-Bernard Chatelain (a), Jean-Christophe Teurlai (b) Keywords: Investment; Financial constraints; Generalized method of moments Abstract: Using a large panel of French manufacturing firms, this paper first reports tests for cash flow misspecification in structural Euler equation including or not leverage. If those tests are not rejected for both Euler equations, in a second step, a direct test on the omission of leverage in the Euler equation is reported. Three groups of 'financially healthy' firms (high dividend payout, rising debt, high cash flow with respect to investment) exhibit (in some cases, small) risk premia which significantly increases with leverage. The neo-classical Euler equation is rejected on all groups of firms that have been investigated. Author Affiliation: (a) LEO, University of Orleans, PSE and Cepremap, Rue de Blois, B.P. 6739, 45067 Orleans Cedex 2, France (b) Mutuelles du Mans, 10 Boulevard Alexandre Oyon, 72030 Le Mans, France Article History: Received 31 October 2000; Accepted 19 July 2004 Article Note: (footnote) [star] We thank two referees for their very helpful comments.

A study is conducted on various capital structures adopted by firms to analyze the long-run leverage targets of the firms. The study also analyzes firm's speed of adjustment to the new capital structures.

A method of calculating the weighted average cost of capital by adjusted present value and net present value is presented. A comparative analysis of the WACC calculated in the said manner is also presented.

The role of bidders' leverage in tender offers in corporate governance is examined from the bootstrap acquisition model.

Byline: Pek Yee Low (1), Kung H. Chen (2) Keywords: international diversification; product diversification; financial leverage; capital structure Abstract: This study examines the effects of international and product diversification on capital structure with 232 firms from 30 countries. Results for the full sample show that international diversification is negatively related to financial leverage, but further analyses indicate that this is mainly attributable to US firms. For non-US firms, we fail to find a significant relationship. Results also show that product diversification is positively related to financial leverage, indicating that such diversification allows firms to reduce their risks, thereby enabling firms to carry higher debt levels. Author Affiliation: (1) Department of Accountancy, City University of Hong Kong, Hong Kong (2) School of Accountancy, The University of Nebraska-Lincoln, Lincoln, NE, 68588-0488, USA Article History: Registration Date: 03/10/2004

The impact of restrictions in a small economy, on the debt and equity proportions, and the varied classes of international capital flows are discussed. Cross-border private financial capital is influenced by regulations. Factors like the taxation policy, and the characteristics of the capital market regulations affect the amount of such capital flows.

Byline: Jose M. Marin (1), Jacques Olivier (2) Keywords: JEL Classification: C61, D50, G11, G12, G23; Key words: Leverage constraints, trading volume, asset prices, mean reversion Abstract: Abstract. Researchers have used stylized facts on asset prices and trading volume in stock markets (in particular, the mean reversion of asset returns and the correlations between trading volume, price changes and price levels) to support theories where agents are not rational expected utility maximizers. This paper shows that this empirical evidence is in fact consistent with a standard infinite horizon -- perfect information -- expected utility economy where some agents face leverage constraints similar to those found in todays financial markets. In addition, and in sharp contrast to the theories above, we explain some qualitative differences that are observed in the price-volume relation on stock and on futures markets. We consider a continuous-time economy where agents maximize the integral of their discounted utility from consumption under both budget and leverage constraints. Building on the work by Vila and Zariphopoulou (1997), we find a closed form solution, up to a negative constant, for the equilibrium prices and demands in the region of the state space where the constraint is non-binding. We show that, at the equilibrium, stock holdings volatility as well as its ratio to stock price volatility are increasing functions of the stock price and interpret this finding in terms of the price-volume relation. Author Affiliation: (1) Universitat Pompeu Fabra and CEPR, Ramon Trias Fargas, 25--27, 08005 Barcelona, Spain (e-mail: jose.marin@econ.upf.es) , ES (2) HEC School of Management and CEPR, 1 Rue de la Liberation 78351 Jouy en Josas, France (e-mail: olivier@hec.fr) , FR Article note: We would like to thank the editor and two anonimous referees for valuable substantive comments. Our gratitude also to Franklin Allen, Kerry Back, Domenico Cuoco, Xavier Freixas, Sanford Grossman, Michel Habib, Lutz Hendricks, Richard Kihlstrom, Fernando Restoy, Mary Thomson, Jean-Luc Vila, participants to seminars at Birkbeck College, Carnegie-Mellon, Columbia, ESSEC, HEC, IAE, INSEAD, London Business School, London School of Economics, McGill, Michigan, National University of Singapore, Pompeu Fabra, North Carolina, Washington-St-Louis, Wharton, the Jornadas de Economia Financiera BBV, and the Meetings of the Society for Economic Dynamics and Control and the American Finance Association. Special thanks are due to Suleyman Basak for his enthusiastic support and many helpful suggestions. The usual disclaimer applies. We gratefully acknowledge the support of the BBV and Caja de Madrid Foundations and CREF (both authors) and of the Spanish Ministry of Education under DGICYT grant no. PB93-0388 (first author).

Byline: Elyas Elyasiani (1), Lin Guo (2), Liang Tang (3) Keywords: debt maturity; debt issuance; leverage; system-based models Abstract: We examine the determinants of corporate debt maturity while taking into account the interdependent relation between maturity and leverage. We do this by estimating a simultaneous-equations model on debt maturity and leverage for a sample of bond-issuing firms. To compare with previous studies, we also estimate a single-equation model on debt maturity using OLS. We define debt maturity as either the maturity of bonds at issuance (incremental approach), or the percentage of a firm's total debt that matures in more than three years (balance-sheet approach). Corroborating the findings of many previous studies, our single-equation OLS results support the underinvestment hypothesis purporting that firms with greater growth opportunities have shorter-term debt. However, under the simultaneous-equations model, the negative relation between a firm's debt maturity and its growth opportunities ceases to hold. Instead, it is the leverage decision that is influenced by growth opportunities. This suggests that existing models may overestimate the effect of growth opportunities on debt maturity. Author Affiliation: (1) Fox School of Business and Management, Temple University, Philadelphia, PA, 19122 (2) Department of Finance, Sawyer School of Management, Suffolk University, Boston, MA, 02108 (3) State Street Associates, Cambridge, MA, 02138 Article History: Registration Date: 13/10/2004

Abstract A modest amount of leverage enhances the performance of stock portfolios in the long run. However, higher amounts of leverage produce dramatic declines in long-run wealth. Using probability distributions [...]

Byline: Abe De Jong (1) Keywords: capital structure; agency problems; the Netherlands; corporate governance; growth opportunities Abstract: In this study we investigate the role of leverage indisciplining overinvestment problems. We measure the relationships between leverage, Tobin's qand corporate governance characteristics for Dutch listed firms. Besides, ourempirical analysis tests for determinants of leverage from tax and bankruptcy theories. Representinggrowth opportunities, q is expected to be an agency-based determinant of leverage.Simultaneously, q represents firm value, which is determined by leverage and governancestructures. We test a structural equations model in which we deal with this simultaneousnature of the relation between leverage and q. Our results indicate that Dutch managersavoid the disciplining role of debt, when they are most likely to overinvest. Leverage is mainlydetermined by tax advantages and bankruptcy costs. In addition, we test the impact ofleverage on excess investment. We do not find a difference in the influence of leverage oninvestment between potential overinvestors and other firms. This confirms that the disciplinary roleof leverage in Dutch firms is absent. Author Affiliation: (1) Department Financial Management, Erasmus University Rotterdam, Rotterdam, the Netherlands Article History: Registration Date: 10/10/2004

The author asserts that the amount of equity issues in aggregate new debt and equity issues is a strong predictor of American stock-exchange returns for the period between 1928 and 1997. Observations include that companies tend to issue less debt than equity just prior to periods marked by low market returns.

Shareholder value is not a new idea. But it entails a shift in control over businesses with far-reaching macroeconomic consequences. They are mostly apparent in the USA. The required financial return spurs a momentous equity price appreciation which discourages private saving. Meanwhile, the achievement of a financial profitability consistently above the economic rate of return on real capital induces a rising leverage cum share buybacks. The financial dynamic is highly procyclical and generates a financial fragility which questions the hypothetical advantage of private pension funds over pay-as-you-go retirement systems. Keywords: Shareholder value; corporate governance; growth regime; leverage; wealth accumulation.

Analysis of senior offerings that reduce junior securities suggests several points. These include that firms about which less information exists show greater stock returns than better-known firms, that stock returns will be significantly affected by premium announcement and adverse selection, and that lessening of systematic risk most often exists for lesser-known companies.