The impact of liquidity on the capital structure: a case study of Croatian firms

Background: Previous studies have shown that in some countries, liquid assets increased leverage while in other countries liquid firms were more frequently financed by their own capital and therefore were less leveraged. Objectives: The aim of this paper is to investigate the impact of liquidity on the capital structure of Croatian firms. Methods/Approach: Pearson correlation coefficient is applied to the test on the relationship between liquidity ratios and debt ratios, the share of retained earnings to capital and liquidity ratios and the relationship between the structure of current assets and leverage. Results: A survey has been conducted on a sample of 1058 Croatian firms. There are statistically significant correlations between liquidity ratios and leverage ratios. Also, there are statistically significant correlations between leverage ratios and the structure of current assets. The relationship between liquidity ratios and the short-term leverage is stronger than between liquidity ratios and the long-term leverage. Conclusions: The more liquid assets firms have, the less they are leveraged. Longterm leveraged firms are more liquid. Increasing inventory levels leads to an increase in leverage. Furthermore, increasing the cash in current assets leads to a reduction in the short-term and the longterm leverage

Comparative study of deuterium retention and vacancy content of self-ion irradiated tungsten

Self-ion irradiation of pure tungsten with 2 MeV W ions provides a way of simulating microstructures generated by neutron irradiation in tungsten components of a fusion reactor. Transmission electron microscopy (TEM) has been used to characterize defects formed in tungsten samples by ion irradiation. It was found that tungsten irradiated to 0.85 dpa at relatively low temperatures develops a characteristic microstructure dominated by dislocation loops and black dots. The density and size distribution of these defects were estimated. Some of the samples exposed to self-ion irradiation were then implanted with deuterium. Thermal Desorption Spectrometry (TDS) analysis was performed to estimate the deuterium inventory as a function of irradiation damage and deuterium release as a function of temperature. Increase of inventory with increasing irradiation dose followed by slight decrease above 0.1 dpa was found. Application of Positron Annihilation Spectroscopy (PAS) to self-irradiated but not deuterium implanted samples enabled an assessment of the density of irradiation defects as a function of exposure to highenergy ions. The PAS results show that the density of defects saturates at doses in the interval from 0.085 to 0.425 displacements per atom (dpa). These results are discussed in the context of recent theoretical simulations exhibiting the saturation of defect microstructure in the high irradiation exposure limit. The saturation of damage found in PAS agrees with the simulation data described in the paper. (c) 2021 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license ( http://creativecommons.org/licenses/by-nc-nd/4.0/ )Peer reviewe

Debt Maturity Choices, Multi-stage Investments and Financing Constraints

We develop a dynamic investment options framework with optimal capital structure and analyze the effect of debt maturity. We find that in the absence of financing constraints short-term debt maximizes firm value. In contrast with most literature results, in the absence of constraints, higher volatility may increase initial debt for firms with low initial revenues, issuing long term debt that expires after the investment option maturity. This effect, which is due to the option value of receiving the value of assets and remaining tax savings, does not hold for short term debt and firms with high profitability, where an increase in volatility reduces the firm value. The importance of short-term debt is reduced in the presence of non-negative equity net worth or debt financing constraints and firms behave more conservatively in the use of initial debt. With non-negative equity net worth, higher volatility has adverse effects on the firm value, while with debt financing constraints higher volatility may enhance firm value for firms with relatively low revenue that have out-of-the-money investment options

Financing and Takeovers

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a commitment device, and determines the outcome of the acquisition contest. We demonstrate that there exists an asymmetric equilibrium in financing policies with endogenous leverage, bankruptcy, and takeover terms, in which the bidder with the lowest leverage wins the takeover contest. Based on the resulting equilibrium, the model generates a number of new predictions. In particular, the model predicts that the leverage of the winning bidder is below the industry average and that acquirers should lever up after the takeover consummation. The model also relates the dispersion in leverage ratios to various industry characteristics, such as cash flow volatility or bankruptcy costs

The dynamics of mergers and acquisitions

This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The implications of the model for returns to stockholders are consistent with the available evidence. In addition, the model generates new predictions relating these returns to the drift, volatility and correlation coefficient of the bidder and the target stock returns and to the dispersion of beliefs regarding the benefits of the takeover