Effect of rollover risk on default risk: evidence from bank financing

We study the effect of rollover risk on the risk of default using a comprehensive database of U.S. industrial firms during 1986–2013. Dependence on bank financing is the key driver of the impact of rollover risk on default risk. Default risk and rollover risk present a significant positive relation in firms dependent on bank financing. In contrast, rollover risk is uncorrelated with default probability in the case of firms that do not rely on bank financing. Our measure of rollover risk is the amount of long-term debt maturing in one year, weighted by total assets. In the case of a firm that depends on bank financing, an increase of one standard deviation in this measure leads to a significant increase of 3.2% in its default probability within one year. Other drivers affecting the interaction between rollover risk and default risk are whether a firm suffers from declining profitability and has poor credit. Additionally, rollover risk's impact on default probability is stronger during periods when credit market conditions are tighter

The Effects of Corporate Finance on Firm Risk-taking and Performance: Theory and Evidence

Some firms may exhibit better operating performance than others because they undertake riskier projects: risk-return tradeoff. We develop a model to examine the effects of financial contracts on a firmfs choice between safer (lower risk, lower return) and riskier (higher risk, higher return) projects. The model shows that, assuming a competitive capital market (i.e., financiers with no monopoly power), three types of financial contracts (rollover loans, non-rollover loans, and new share issues) can each be an equilibrium contract, depending on conditions. While firms undertake griskierh projects when using non-rollover loans or new share issues, firms undertake gsaferh projects when using rollover loans. The model emphasizes the role of rollover loans (with passive monitoring) as a potential disciplinary device to suppress a firmfs risk-taking. The model generates several predictions about the determinants of a firmfs risk-taking and its performance. One key prediction of the model is that (risk-neutral) firms with closer bank relationships are more likely to use rollover loans and undertake gsaferh projects, even with a contestable capital market. We find novel empirical support for the modelfs predictions.corporate finance, corporate governance, firm risk-taking, firm performance, loan rollover

Modelling commercial vehicle handling and rolling stability

YesThis paper presents a multi-degrees-of-freedom non-linear multibody dynamic model of a three-axle heavy commercial vehicle tractor unit, comprising a subchassis, front and rear leaf spring suspensions, steering system, and ten wheels/tyres, with a semi-trailer comprising two axles and eight wheels/tyres. The investigation is mainly concerned with the rollover stability of the articulated vehicle. The models incorporate all sources of compliance, stiffness, and damping, all with non-linear characteristics, and are constructed and simulated using automatic dynamic analysis of mechanical systems formulation. A constant radius turn test and a single lane change test (according to the ISO Standard) are simulated. The constant radius turn test shows the understeer behaviour of the vehicle, and the single lane change manoeuvre was conducted to show the transient behaviour of the vehicle. Non-stable roll and yaw behaviour of the vehicle is predicted at test speeds .90 km/h. Rollover stability of the vehicle is also investigated using a constant radius turn test with increasing speed. The articulated laden vehicle model predicted increased understeer behaviour, due to higher load acting on the wheels of the middle and rear axles of the tractor and the influence of the semi-trailer, as shown by the reduced yaw rate and the steering angle variation during the constant radius turn. The rollover test predicted a critical lateral acceleration value where complete rollover occurs. Unstable behaviour of the articulated vehicle is also predicted in the single lane change manoeuvre

The Impact of “Rollover” Contracts on Switching Costs in the UK Voice Market : Evidence from Disaggregate Customer Billing Data

In February 2008, British Telecommunications (BT) introduced automatically renewing, or “rollover”, contracts into the UK market for fixed-voice telephone service. These contracts included a 12-month Minimum Contract Period (MCP) with associated Early Termination Charges (ETCs). Unless customers opted out, at the end of the 12 months they would automatically be rolled over into a new MCP and face new ETCs if they later wished to leave BT. Using a unique, disaggregate, customer billing dataset, we measure the impact of rollover contracts on BT customers’ decision to switch to another provider. We find that, controlling for the effects of tenure, broadband purchase, price discounts, and self-selection, rollover households switch after their first MCP 34.8% (54.8%) less than comparable customers on standard plans (fixed-term contracts). These imply rollover contracts induce switching costs on the order of 33.0% of the monthly price of the average BT fixed-voice telephone service. This raises significant concerns about the competitive effects of such contracts n media and telecommunications markets.

Energy-Momentum Tensor of Cosmological Fluctuations during Inflation

We study the renormalized energy-momentum tensor (EMT) of cosmological scalar fluctuations during the slow-rollover regime for chaotic inflation with a quadratic potential and find that it is characterized by a negative energy density which grows during slow-rollover. We also approach the back-reaction problem as a second-order calculation in perturbation theory finding no evidence that the back-reaction of cosmological fluctuations is a gauge artifact. In agreement with the results on the EMT, the average expansion rate is decreased by the back-reaction of cosmological fluctuations.Comment: 19 pages, no figures.An appendix and references added, conclusions unchanged, version accepted for publication in PR

Rollover Preventive Force Synthesis at Active Suspensions in a Vehicle Performing a Severe Maneuver with Wheels Lifted off

Among the intelligent safety technologies for road vehicles, active suspensions controlled by embedded computing elements for preventing rollover have received a lot of attention. The existing models for synthesizing and allocating forces in such suspensions are conservatively based on the constraint that no wheels lift off the ground. However, in practice, smart/active suspensions are more necessary in the situation where the wheels have just lifted off the ground. The difficulty in computing control in the last situation is that the problem requires satisfying disjunctive constraints on the dynamics. To the authors',knowledge, no efficient solution method is available for the simulation of dynamics with disjunctive constraints and thus hardware realizable and accurate force allocation in an active suspension tends to be a difficulty. In this work we give an algorithm for and simulate numerical solutions of the force allocation problem as an optimal control problem constrained by dynamics with disjunctive constraints. In particular we study the allocation and synthesis of time-dependent active suspension forces in terms of sensor output data in order to stabilize the roll motion of the road vehicle. An equivalent constraint in the form of a convex combination (hull) is proposed to satisfy the disjunctive constraints. The validated numerical simulations show that it is possible to allocate and synthesize control forces at the active suspensions from sensor output data such that the forces stabilize the roll moment of the vehicle with its wheels just lifted off the ground during arbitrary fish-hook maneuvers

MANAGING PRICE RISK IN COTTON PRODUCTION USING STRATEGIC ROLLOVER HEDGING

Research on rollover hedging for agricultural commodities has focused on the consequences of using existing contracts to substitute for missing long-term contracts. It appears that some grains are candidates for rollover hedging while livestock is not. Cotton was analyzed to evaluate the effectiveness of rollover hedging from 1982 to 1999. This paper demonstrates that strategic rollover hedging can be used as a substitute for missing long-term futures market and increase expected returns in cotton production. The estimated results reported average returns of 62.22, 65.36, 75.80, 79.09, and 69.14 cents per pound for cash sale, single-year hedge, 5, 2.5, and 1% three-year strategic rollover hedging strategies, respectively. Thus, it appears returns for three-year strategic rollover hedging were about 20% higher than under the other two strategies.Crop Production/Industries, Marketing, Risk and Uncertainty,

Does strengthening Collective Action Clauses (CACs) help?

Does improving creditor coordination by strengthening CACs lead to efficiency gains in the functioning of sovereign bond markets? We address this question in a model featuring both debtor moral hazard and creditor coordination under incomplete information. Conditional on default, we characterize the interim effi cient CAC threshold and show that strengthening CACs away from unanimity results in interim welfare gains. However, once the impact of strengthening CACs on debtor's incentives are taken into account, we demonstrate the robust possibility of a conflict between ex ante and interim effi ciency. We calibrate our model to quantify such a welfare trade-off and discuss the policy implications of our results

A new solution for inflation

Many pedagogical introductions of cosmological inflation are effective due to the simplicity of the relevant equations. Here an analytic solution of the cosmological equations is presented and used as an example to discuss fundamental aspects of the inflationary paradigm.Comment: 14 pages, LaTeX, to appear in Am. J. Phy