The Disciplining Role of Leverage in Dutch Firms

In this study we investigate the role of leverage in disciplining overinvestment problems.We measure the relationships between leverage, Tobin s q and corporate governance characteristics for Dutch listed firms.Besides, our empirical analysis tests for determinants of leverage from tax and bankruptcy theories.Representing growth opportunities, q is expected to be an agency-based determinant of leverage.Simultaneously, q represents firm value, which is determined by leverage and governance structures.We test a structural equations model in which we deal with this simultaneous nature of the relation between leverage and q.Our results indicate that Dutch managers avoid the disciplining role of debt, when they are most likely to overinvest.Leverage is mainly determined by tax advantages and bankruptcy costs.In addition, we test the impact of leverage on excess investment.We do not find a difference in the influence of leverage on investment between potential overinvestors and other firms.This confirms that the disciplinary role of leverage in Dutch firms is absent.agency theory;corporate growth;capital structure;corporate governance;leverage

Person to Person in Japan

While still in the midst of their study abroad experiences, students at Linfield College write reflective essays. Their essays address issues of cultural similarity and difference, compare lifestyles, mores, norms, and habits between their host countries and home, and examine changes in perceptions about their host countries and the United States. In this essay, Stacey Strovink describes her observations during her study abroad program at Kanto Gakuin University in Yokohama, Japan

Determinants of Leverage and Agency problems

In this paper we empirically investigate the determinants of leverage and agency problems and we examine the relationships between leverage and agency problems. As in Titman and Wessels (1988) we use structural equations modeling with latent variables. In contrast to Titman and Wessels (1988), who employ data obtained from annual reports and capital markets, we use questionnaire data to measure firm characteristics. The questions concern the characteristics of the respondents’ firms, including the presence of agency problems. We estimate the relations between these characteristics. The results confirm that the trade-off between tax advantages and bankruptcy costs determines leverage. We also find free cash flow and corporate governance characteristics as determinants of overinvestment. Despite findings that agency problems are present, direct relationships between leverage and four agency problems are absent.capital structure;agency costs

Search for the magnetic field of the O7.5 III star xi Persei

Cyclical wind variability is an ubiquitous but as yet unexplained feature among OB stars. The O7.5 III(n)((f)) star xi Persei is the brightest representative of this class on the Northern hemisphere. As its prominent cyclical wind properties vary on a rotational time scale (2 or 4 days) the star has been already for a long time a serious magnetic candidate. As the cause of this enigmatic behavior non-radial pulsations and/or a surface magnetic field are suggested. We present a preliminary report on our attempts to detect a magnetic field in this star with high-resolution measurements obtained with the spectropolarimeter Narval at TBL, France during 2 observing runs of 5 nights in 2006 and 5 nights in 2007. Only upper limits could be obtained, even with the longest possible exposure times. If the star hosts a magnetic field, its surface strength should be less than about 300 G. This would still be enough to disturb the stellar wind significantly. From our new data it seems that the amplitude of the known non-radial pulsations has changed within less than a year, which needs further investigation.Comment: 2 pages, 6 figures, contributed poster at IAU Symposium 259 "Cosmic Magnetic Fields: from Planets, to Stars and Galaxies", Tenerife, Spain, November 3-7, 200

Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System

We present evidence on the efficiency of the resolution of financial distress in bankruptcy in The Netherlands. We employ a unique data set based on the files of the trustees and court offices, which includes the characteristics of the firms before and in the bankruptcy procedures, the details of the bankruptcy process and the outcomes. This data allows us to measure the costs and recovery rates in the Dutch liquidation-based bankruptcy system, and to investigate the determinants of these costs and recoveries. We find that direct costs are on average 16%. The costs are lower in larger firms and firms with more bank debt. Costs increase with the time it takes to sell assets and the number of disputes the trustee has to deal with. The firm recovery rate is on average 37%, while the bank recovers on average 80%. The firm recovery rate is influenced by the asset structure and the capital structure. Moreover, an opportunity to continue operations in bankruptcy is chosen by about half the firms and this has a positive effect on recoveries.Bankruptcy;Direct costs;Liquidation;Recovery rates

Investment and Internal Finance: Asymmetric Information or Managerial Discretion?

This paper examines the relation between cash-flow availability and investment spending in theNetherlands. In particular, we are interested whether managerial discretion and/or asymmetricinformation drive the positive relation between cash-flow and investment spending. This relation ispositive for both firms with low and high investment opportunities. It is however significantly larger forfirms with low investment opportunities suggesting that the managerial-discretion problem is mostimportant in the Dutch setting. Effective corporate-governance may reduce this agency problem.Specific to the Netherlands, firms with low shareholder influence posit a higher cash-flow-investmentsensitivity. The relevance of asymmetric information is confirmed as smaller firms and firms frominformation-sensitive industries show a larger cash-flow-investment sensitivity.The Netherlands;asymmetric information;Investment;financial constraints;managerial discretion

Investment Spending in the Netherlands: The Impact of Liquidity and Corporate Governance

This paper examines the relation between cash flow, corporate governance and fixed-investment spending. In perfect capital markets we expect no systematic relationship. However, Myers and Majluf's (1984) asymmetric information hypothesis and Jensen's (1986) managerial discretion hypothesis present imperfections and predict a positive impact of cash flow on investment in fixed assets. Aspects of corporate governance play an important role in both theories. We measure the impact of cash flow on investment for a set of Dutch firms and aim to distinguish between the asymmetric information hypothesis and the managerial discretion hypothesis. Our findings show that cash flow is an important determinant of investment expenditures. The impact of cash flow is largest for firms with low growth opportunities suggesting that the managerial discretion hypothesis is most at work in the Dutch setting. We also discern that the impact of governance characteristics on both investment and the cash flow-sensitivity of investment differ between firms having low and high growth opportunities. This implies that governance affects the managerial discretion and asymmetric information hypotheses differently.investment;corporate liquidity;cash flow;corporate governance

Multimedia information technology and the annotation of video

The state of the art in multimedia information technology has not progressed to the point where a single solution is available to meet all reasonable needs of documentalists and users of video archives. In general, we do not have an optimistic view of the usability of new technology in this domain, but digitization and digital power can be expected to cause a small revolution in the area of video archiving. The volume of data leads to two views of the future: on the pessimistic side, overload of data will cause lack of annotation capacity, and on the optimistic side, there will be enough data from which to learn selected concepts that can be deployed to support automatic annotation. At the threshold of this interesting era, we make an attempt to describe the state of the art in technology. We sample the progress in text, sound, and image processing, as well as in machine learning