The choice between arm's-length and relationship debt: evidence from e-loans

Using a unique sample of comparable online and in-person loan transactions, we study the determinants of arm's-length and inside lending focusing on the differential information content across debt types. We find that soft private information primarily underlies relationship lending whereas hard public information drives arm's-length debt. The bank's relative reliance on public or private information in lending decisions then determines trade-offs between the availability and pricing of credit across loan types. Consistent with economic theory, relationship debt leads to informational capture and higher interest rates but is more readily available whereas the opposite holds true for transactional debt. In their choice of loan type, lender switching, and default behavior firms, however, anticipate the inside bank's strategic use of information and act accordingly.Loans ; Debt management

Relationship Banking and Competition under Differentiated Asymmetric Information

While competition constrains the ability of banks to extract informational rents from lending relationships, their informational monopoly also curtails competition through the threat of adverse selection. To analyze an intermediary's optimal strategic response to these opposing effects we specify a model where the severity of asymmetric information between banks and borrowers increases with informational distance. Intermediaries acquire expertise in a specific sector and exert effort in building lending relationship beyond their core business. They then compete with each other in transaction and relationship loan markets where they differentiate their loan offers in terms of informational location. As increased competition endogenously erodes informational rents intermediaries shift more resources to building relationships in their core markets. This retrenchment from peripheral loan segments permits banks to fend off the competitive threat to their captive market. Outside their core segment they offer transactional loans. In equilibrium, both forms of debt compete with each other but intermediaries specialize in a core market with relationship banking.

Contract risks and credit spread determinants in the international project bond market

International bond markets have become an increasingly important source of long-term capital for infrastructure projects in emerging market economies over the past decade. The Ras Laffan Liquified Natural Gas (Ras Gas) project represents a milestone in this respect: its $1.2 billion bond offering, completed in December 1996, has been the largest for any international project. The Ras Gas project has the right to extract, process, and sell liquefied natural gas (LNG) from a field off the shore of Qatar. The principal off-taker is the Korea Gas Corporation (Kogas), which resells most of the LNG to the Korea Electric Power Corporation (Kepco) for electricity generation. In this clinical study the authors analyze the determinants of credit spreads for the Ras Gas project in terms of its contractual structure, with a view to better understanding the role of contract design in facilitating access to the global project bond market. Market risk perceptions have long been recognized to be a function of firm-specific variables, particularly asset value as embodied in contracts. The authors therefore study the impact of three interlocking contracts on the credit spreads of the project's actively traded global bonds: the 25-year output sales and purchase agreement with Kogas-Kepco, the international bond covenant, and an output price-contingent debt service guarantee by Mobil to debt holders. Using a sample of daily data from January 1997 to March 2000, the authors find that the quality of the off-taker's credit-and, more important, the market's assessment of the off-taker's economic prospects-drive project bond credit spreads and pricing. In addition, seemingly unrelated events in emerging debt markets spill over to project bond markets and affect risk perceptions and prices in this segment. Judicious use of an output price-contingent debt service guarantee by shareholders can significantly reduce project risks, and markets reward issuers through tighter credit spreads. Bondholders and shareholders share residual risks over time, despite covenants meant to preempt risk shifting. This type of risk shifting originates from incomplete contracts and the nonrecourse nature of project finance. It does not necessarily result from a deliberate attempt by management to increase shareholder value at the expense of debt holders by pursuing high-risk, low-value activities, although project managers and shareholders could still exploit their informational advantages by leaving output supply contracts incomplete in ways beneficial to their private interests. The results hold important lessons for global project finance. Projects incorporating certain design features can reap significant financial gains through lower borrowing costs and longer debt maturities: Judicious guarantees by parents that enjoy a particular hedging advantage enhance a project's appeal, as reflected in favorable pricing. Pledging receivables rather than physical assets as collateral and administering investor cash flows through an off-shore account offers additional security to debt holders. Projects should use their liability structure to create an implicit option on future private debt financing that matches the real option of a project expansion. The finding that bondholders bear residual risks means that shareholders can reduce their risks arising from bilateral monopolies and buy insurance against unforeseen and unforeseeable events.Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Financial Intermediation,Environmental Economics&Policies,Banks&Banking Reform,Financial Intermediation,Economic Theory&Research,Environmental Economics&Policies,Housing Finance

The emerging project bond market - covenant provisions and credit spreads

The emergence in the 1990s of a nascent project bond market to fund long-term infrastructure projects in developing countries merits attention. The authors compile detailed information on a sample of 105 bonds issued between January 1993 and March 2002 for financing infrastructure projects in developing countries, document their contractual covenants, and analyze their pricing determinants. They find that on average, project bonds are issued at approximately 300 basis points above U.S. Treasury securities, have a surprisingly high issue size of US$278 million, a maturity of slightly under 12 years, and are rated slightly below investment grade. In terms of geographic origin, projects in Asia and Latin America have issued more bonds than those located in other regions. Much of the recent work relating to the role of contractual covenants to the determination of bond prices has focused on the U.S. corporate bond market with its unique bankruptcy code - Chapter 11 - and well developed legal framework, recognizing the bond contract as the sole instrument of defining the rights and duties of various parties. In circumstances in which the underpinning legal and institutional frameworks governing contract formation and enforcement are not well developed, the link between bond pricing and legal framework becomes important. This finding is confirmed by the authors'econometric analysis of project bond pricing model. So, investors take into account the quality of the host country's legal framework and reward projects located in countries that adhere to the rule of law with tighter credit spreads and lower funding costs.Banks&Banking Reform,International Terrorism&Counterterrorism,Financial Intermediation,Payment Systems&Infrastructure,Public Sector Economics&Finance,Banks&Banking Reform,Housing Finance,Public Sector Economics&Finance,Economic Theory&Research,Financial Intermediation

Ownership and control in joint ventures: theory and evidence

Joint ventures, a particularly popular form of corporate cooperation, exhibit ownership patterns that are clustered around equal shareholdings for a wide variety of parent firms. In this paper, we investigate why 50-50 or "50 plus one share" equity allocations should be so prevalent. In our model, parent firms trade off control benefits and costs with incentives for resource contributions in the presence of asset complementarities. We show that strict resource complementarity eliminates moral hazard in parent contributions so that ownership provides sufficient incentives for optimal investments. However, the potential for extraction of residual control benefits by the majority owner creates a discontinuity in contribution incentives at 50% equity stakes that explains the optimal clustering of ownership around 50-50 shareholdings. Using data from 1,248 US joint ventures announced between 1985 and 2000, we empirically analyze the determinants of their ownership allocations and conduct tests of model predictions that offer strong support for our theory.joint ventures; partnerships; ownership; asset complementarity; buyout options

Risk shifting and long-term contracts : evidence from the Ras Gas Project

Risk shifting and incomplete contracting lie at the heart of the agency relationship inherent in the procurement and financing of large-scale projects such as power plants, oil and gas pipelines, and liquefied natural gas (LNG) facilities. Resolving this agency problem is critical in structuring the nexus of long-term contracts--construction, operating, output sale, and financial contracts--commensurate with the project's underlying tehcnological and market organization. By investigating the Ras Gas bonds--the largest and most liquid global project bonds ever issued in an emerging market economy--the authors provide empirical evidence of the risk-shifting consequences of contractual incompleteness. They relate the credit spreads of Ras Gas bonds to the bond spreads of the Korea Electric Power Company (Kepco), the major customer, in the context of a 25-year supply agreement, the oil price index used to price the LNG, emerging debt market returns, and various systematic and unsystematic risk variables. Consistent with theoretical predictions, they find that the risk factors affecting the sales and purchase agreements drive perceptions of market risk for Ras Gas bonds. In particular, Ras Gas yield spreads reflect the market's risk assessment of Kepco. Other priced risks are energy price and foreign currency exposure (which influence Ras Gas credit spreads through their impact on Kepco), Korean economic variables, and spillovers from turbulence in European and Latin American emerging debt markets. The authors'analysis shows that the design of each contractual arrangement is not independent, because risk factors relevant to one contract determine the price and risk premium of the other. Despite heavy capitalization and partial guarantees by the parent companies of Ras Gas, the off-take agreement essentially determines the riskiness of the bonds. The authors interpret this as evidence of the nexus-of-contracts view of the firm in the presence of contractual incompleteness: Investors bear all residual risks and price their financial claims accordingly.Environmental Economics&Policies,Water and Industry,Banks&Banking Reform,Financial Intermediation,Energy and Environment

Zu einer allgemeinen Ontologie sozialer Pluralitäten

Der Beitrag skizziert die Struktur einer allgemeinen Typologie sozialer Pluralitäten. Es werden drei Haupttypen unterschieden und im Rahmen einer kategorialen Ontologie verortet: Kollektive, die als plurale Individuen interpretiert werden, Klassen, die die extensionalen Korrelate von Universalien darstellen, und Mengen. In Bezug auf Kollektive diskutiere ich die Unterscheidung zwischen summativen und integrierten Ganzheiten sowie den gruppentheoretischen Intentionalismus, im Zusammenhang mit Klassen gehe ich auf die Begriffe „natural kinds“ und „human kinds“ ein

Search for Heavy Neutral Higgs Bosons in the tau+tau- Final State in LHC Proton-Proton Collisions at sqrt{s}=13 TeV with the ATLAS Detector

There are experimental and theoretical indications that the Standard Model of particle physics, although tremendously successful, is not sufficient to describe the universe, even at energies well below the Planck scale. One of the most promising new theories to resolve major open questions, the Minimal Supersymmetric Standard Model, predicts additional neutral and charged Higgs bosons, among other new particles. For the search of the new heavy neutral bosons, the decay into two hadronically decaying tau leptons is especially interesting, as in large parts of the search parameter space it has the second largest branching ratio while allowing for a considerably better background rejection than the leading decay into b-quark pairs. This search, based on proton-proton collisions recorded at sqrt(s) = 13 TeV in 2015 and early 2016 by the ATLAS experiment at the Large Hadron Collider at CERN, is presented in this thesis. No significant deviation from the Standard Model expectation is observed and CLs exclusion limits are determined, both model-independent and in various MSSM benchmark scenarios. The MSSM exclusion limits are significantly stronger compared to previous searches, due to the increased collision energy and improvements of the event selection and background estimation techniques. The upper limit on tan beta at 95% confidence level in the mhmod+ MSSM benchmark scenario ranges from 10 at mA = 300 GeV to 48 at mA = 1.2 TeV

Life history and convervation of Elliptio crassidens from the Blue River, Indiana.

This study assessed life history components for the elephantear freshwater mussel, Elliptio crassidens (Lamarck, 1819). The main focus of this study was to determine the suitability of various fish species as a host for E. crassidens and to determine the population status in terms of age structure, recruitment and reproduction of E. crassidens from the Blue River drainage of south-central Indiana. General observations on the life history of E. crassidens were made: brooding conditions for release of larvae, larval behavior, and larval shell dimensions. Ages of E. crassidens shells from the Blue River were also determined. A Geographic Information System (GIS) analysis compared overlap in distribution between E. crassidens and potential fish hosts. This analysis demonstrated that percentage overlap between the ranges of E. crassidens and potential fish hosts was not a sound indicator of host fish suitability. However, several potential host species were identified and others were eliminated from consideration