Debt and Taxes: Evidence from bank-financed unlisted firms

This paper analyzes the capital structure decision of non-listed bank-financed firms using a rich and unique new data set of Portuguese firms. These firms are rarely studied in capital structure contexts and differ from large listed firms in terms of agency and asymmetric information problems and funding sources. It is argued that the solution of agency and asymmetric information problems for large firms shows up on the balance sheet (as restrictions on debt) whereas for small firms these problems are solved by financial institutions and are therefore less apparent on the balance sheet. This makes it easier for small firms to exploit tax advantages of debt. The empirical analysis shows that debt tax shields and provisions for tax loss carry-forwards have an important impact on the capital structure of small firms. It is also found that the balance sheet variables used for large listed firms in different countries to model agency costs and asymmetric information do not work well for small non-listed firms. The only significant variables (besides tax variables) for small firms are bankruptcy (collateral) variablesCapital Structure; Debt; Marginal Tax Rate; Trade-off Theory;

Conducting event studies on a small stock exchange

This paper analyses whether it is possible to perform an event study on a small stock exchange with thinly trade stocks. The main conclusion is that event studies can be performed provided that certain adjustments are made. First, a minimum of 25 events appears necessary to obtain acceptable size and power in statistical tests. Second, trade to trade returns should be used. Third, one should not expect to consistently detect abnormal performance of less than about 1% (or perhaps even 2%), unless the sample contains primarily thickly traded stocks. Fourth, nonparametric tests are generally preferable to parametric tests of abnormal performance. Fifth, researchers should present separate results for thickly and thinly traded stock groups. Finally, when nonnormality, event induced variance, unknown event day, and problems of very thin trading are all considered simultaneously, no one test statistic or type of test statistic dominates the othersEvent studies; Thin trading

Financing of SME's: an asset side story

The main sources of financing for small and medium sized enterprises (SMEs) are equity (internally generated cash), trade credit paid on time, long and short term bank credits, delayed payment on trade credit and other debt. The marginal costs of each financing instrument are driven by asymmetric information (cost of gathering and analysing information) and transactions costs associated with non-payment (costs of collecting and selling collateral). According to the Pecking Order Theory, firms will choose the cheapest source in terms of cost. In the case of the static trade-off theory, firms choose finance so that the marginal costs across financing sources are all equal, thus an additional Euro of financing is obtained from all the sources whereas under the Pecking Order Theory the source is determined by how far down the Pecking Order the firm is presently located. In this paper, we argue that both of these theories miss the point that the marginal costs are dependent of the use of the funds, and the asset side of the balance sheet primarily determines the financing source for an additional Euro. An empirical analysis on a unique dataset of Portuguese SME's confirms that the composition of the asset side of the balance sheet has an impact of the type of financing used and the Pecking Order Theory and the traditional Static Trade-off theory are rejected

Deposit Insurance and the Stock Market: Evidence from Denmark

Previous studies of the relationship between deposit insurance and bank market values have usually been limited to consideration of minor changes in bank regulations but the 1987 initiation of deposit insurance in Denmark permits examination of a potentially major policy shift. We find that the market values of large Danish banks exhibited a modest positive reaction to the announcement of insurance but that small risky banks responded negatively. These results partially contrast with those previously found for the United States an outcome that seems likely to reflect the interaction of deposit insurance with the particular characteristics of the pre-existing Danish regulatory system

Deposit Insurance and the Stock Market: Evidence from Denmark

Previous studies of the relationship between deposit insurance and bank market values have usually been limited to consideration of minor changes in bank regulations but the 1987 initiation of deposit insurance in Denmark permits examination of a potentially major policy shift. We find that the market values of large Danish banks exhibited a modest positive reaction to the announcement of insurance but that small risky banks responded negatively. These results partially contrast with those previously found for the United States an outcome that seems likely to reflect the interaction of deposit insurance with the particular characteristics of the pre-existing Danish regulatory system

CD70/CD27 signaling promotes blast stemness and is a viable therapeutic target in acute myeloid leukemia.

Aberrant proliferation, symmetric self-renewal, increased survival, and defective differentiation of malignant blasts are key oncogenic drivers in acute myeloid leukemia (AML). Stem cell gene signatures predict poor prognosis in AML patients; however, with few exceptions, these deregulated molecular pathways cannot be targeted therapeutically. In this study, we demonstrate that the TNF superfamily ligand-receptor pair CD70/CD27 is expressed on AML blasts and AML stem/progenitor cells. CD70/CD27 signaling in AML cells activates stem cell gene expression programs, including the Wnt pathway, and promotes symmetric cell divisions and proliferation. Soluble CD27, reflecting the extent of CD70/CD27 interactions in vivo, was significantly elevated in the sera of newly diagnosed AML patients and is a strong independent negative prognostic biomarker for overall survival. Blocking the CD70/CD27 interaction by mAb-induced asymmetric cell divisions and differentiation in AML blasts and AML stem/progenitor cells inhibited cell growth and colony formation and significantly prolonged survival in murine AML xenografts. Importantly, hematopoietic stem/progenitor cells from healthy BM donors express neither CD70 nor CD27 and were unaffected by blocking mAb treatment. Therefore, targeting CD70/CD27 signaling represents a promising therapeutic strategy for AML

Taxes and corporate debt policy: evidence for unlisted firms of sixteen European countries

This paper investigates the capital structure choices for a sample of 19,752 unlisted firms for the period 1994-2004 using a rich data set of unlisted Western European firms. It is to the best of our knowledge the first large sample study to examine how a firm's characteristics and institutional factors affect corporate debt policy in small and medium sized enterprises (SMEs). We address the following questions. Is the capital structure of SMEs and large listed firms driven by similar factors? Can the existing knowledge in relation to large listed firms be used to describe SME behaviour? Alternatively, are these types of firm so different that we have to build a new theory to understand their behaviour of SMEs? The results demonstrate that the traditional financing theories, developed to apply to large listed firms, appear to hold for SMEs in an international setting. In addition, country specific factors help to explain leverage choice