The Determinants of Zero Leverage: Evidence from Multinational Firms

There is an ongoing debate in the capital structure literature as to the direction of the effects of internationalisation on firm debt. Despite the increasing attention on the role of internationalization in firms’ capital structure decisions, and the increasing adoption of zero leverage policies by multinationals, no study attempts to explain the effect of multi-nationality on the zero leverage decision. This study explores the relationship between the level of internationalization and zero leverage using a large panel of UK companies, while controlling for various company-related factors. We find strong evidence that multi-nationality affects the propensity of firms to have zero leverage and that this decision is affected by industry specificities

Wealth and risk implications of the Dodd-Frank Act on the U.S. financial intermediaries

We contribute to the current regulatory debate by examining the wealth and risk effects of the Dodd- Frank Act on U.S. financial institutions. We measure the effects of key legislative events of the Act by means of a multivariate regression model using the seemingly unrelated regression (SUR) framework. Our results indicate a mixed reaction by financial institutions during the various stages of the Act’s legislative process. Further tests reveal that any positive reactions are driven by small and/or low risk institutions, while negative ones are consistent across subsets; except for investment banks. We also find market risk increases for most financial institutions that are dominated by small and/or low risk firms. The cross-section results reveal that large institutions fare better than their smaller counterparts and that large investment banks gain value at the expense of others. Overall, the Dodd-Frank Act may have redistributed value among financial institutions, while not necessarily reducing the industry’s riskiness

Does the stock market compensate banks for diversifying into the insurance business?

This paper explores a wide range of corporate restructurings, all available deals from wire services, in the banking and insurance sectors that led to bancassurance ventures. An event study methodology is employed to calculate excess returns on and around the deals’ announcement date. Using both univariate and multivariate analysis the paper finds bank driven mergers, deal's size and regional categorization all triggering positive and significant market reactions. Unlike the univariate framework, multivariate analysis shows that geographic focus and language are not significant factors. The results also indicate that markets are indifferent with respect to bank withdrawals from the bank-insurance operations. Finally, Canadian, U.S. and European bank-insurance deals produce positive results, while Australasian bidders offer statistically insignificant equity returns

A multi-country analysis of the 2007–2009 financial crisis: empirical results from discrete and continuous time models

In this article, we provide empirical evidence of the recent financial crisis over 2007–2009 using discrete time multivariate GARCH (MGARCH) models and continuous time modelling approaches. Using daily data for 14 countries, we investigate the return and volatility spillovers among the US and other international markets. The MGARCH results reveal positive return spillovers from the US to a number of markets, and volatility transmission is verified. The US market is prone to return and volatility transmission from a limited number of markets. The continuous time analysis finds evidence of feedback effects in some cases. Evidence shows that spillover effects intensified during the financial crisis

Continuous and discrete time modelling of spillovers in equity and bond markets

In this paper we investigate the return and volatility spillovers among equity and bond markets in the UK, USA, Germany and Japan, using continuous time models and discrete time multivariate GARCH modelling methods. Using weekly data over the period 2001 to 2011, empirical evidence of uni- and/or bi-directional return and volatility spillovers is provided. The continuous time analysis finds evidence of feedback effects in some cases. The discrete time results provide weak evidence of return spillovers, while volatility transmission among the majority of equity and fixed income markets is verified. Evidence shows that some of these relationships change in the post-crisis period

Are there return and volatility spillovers from major bank stocks to the national stock market in the UK?

We investigate the return and volatility spillovers from major UK banks to Financial Times Stock Exchange 100 (FTSE 100) index using Gaussian estimation and continuous time models as well as discrete time multivariate GARCH (MGARCH) modelling approaches. Using daily, weekly and monthly data over the period December 1999–December 2010, which includes the recent 2007–2009 global financial crisis, empirical estimates of uni- and/or bi-directional return and volatility spillovers are provided. The bivariate MGARCH results reveal strong return spillovers from the FTSE to the banks, and no return spillover from the latter to the FTSE. Nevertheless, strong bi-directional volatility transmission is verified. The continuous time analysis provides mixed evidence of feedback effects over the different models

Internationalization and Zero Leverage

Despite growing attention on the role of internationalization in capital structure and the increasing adoption of zero-leverage policies by multinationals (MNC), no study examines the effect of internationalization on zero leverage. Using data from the United Kingdom (UK), we present the first empirical evidence of a positive and significant relationship that increases in the level of internationalization both statistically and economically. We find that the motivation for zero leverage differs between MNC and domestic firms (DOM). Whilst the major driving factor for MNC is the maintenance of financial flexibility, financial constraints motivate DOM