Testing for inconsistencies in the estimation of UK capital structure determinants

This article analyses the determinants of the capital structure of 1054 UK companies from 1991 to 1997, and the extent to which the influence of these determinants are affected by time-invariant firm-specific heterogeneity. Comparing the results of pooled OLS and fixed effects panel estimation, significant differences in the results are found. While the OLS results are generally consistent with prior literature, the results of our fixed effects panel estimation contradict many of the traditional theories of the determinants of corporate financial structure. This suggests that results of traditional studies may be biased owing to a failure to control for firm-specific, time-invariant heterogeneity. The results of the fixed effects panel estimation find larger companies to have higher levels of both long-term and short-term debt than do smaller firms, profitability to be negatively correlated with the level of gearing, although profitable firms tend to have more short-term bank borrowing than less profitable firms, and tangibility to positively influence the level of short-term bank borrowing, as well as all long-term debt elements. However, the level of growth opportunities appears to have little influence on the level of gearing, other than short-term bank borrowing, where a significant negative relationship is observed

Capital structure and its determinants in the United Kingdom – a decompositional analysis

Prior research on capital structure by Rajan and Zingales (1995) suggests that the level of gearing in UK companies is positively related to size and tangibility, and negatively correlated with profitability and the level of growth opportunities. However, as argued by Harris and Raviv (1991), 'The interpretation of results must be tempered by an awareness of the difficulties involved in measuring both leverage and the explanatory variables of interest'. In this study the focus is on the difficulties of measuring gearing, and the sensitivity of Rajan and Zingales' results to variations in gearing measures are tested. Based on an analysis of the capital structure of 822 UK companies, Rajan and Zingales' results are found to be highly definitional-dependent. The determinants of gearing appear to vary significantly, depending upon which component of debt is being analysed. In particular, significant differences are found in the determinants of long- and short-term forms of debt. Given that trade credit and equivalent, on average, accounts for more than 62% of total debt, the results are particularly sensitive to whether such debt is included in the gearing measure. It is argued, therefore, that analysis of capital structure is incomplete without a detailed examination of all forms of corporate debt

Cross-border acquisitions and financial leverage of UK acquirers

Based on a sample of 782 acquisitions by UK firms during 1982-2009, this paper examines the impact of cross-border acquisitions on financial leverage. The paper shows that cross-border acquisitions have a negative impact on the financial leverage of acquiring firms. However, the negative impact of cross-border acquisitions disappears when acquirers choose targets from developed countries, and also when the acquisitions are undertaken by multinational firms. Collectively, the findings imply that exposure to foreign markets reduces the borrowing ability of acquiring firms especially when they choose targets from developing countries, and when they have no previous experience in foreign markets

Making SPIFFI SPIFFIER: Upgrade of the SPIFFI instrument for use in ERIS and performance analysis from re-commissioning

SPIFFI is an AO-fed integral field spectrograph operating as part of SINFONI on the VLT, which will be upgraded and reused as SPIFFIER in the new VLT instrument ERIS. In January 2016, we used new technology developments to perform an early upgrade to optical subsystems in the SPIFFI instrument so ongoing scientific programs can make use of enhanced performance before ERIS arrives in 2020. We report on the upgraded components and the performance of SPIFFI after the upgrade, including gains in throughput and spatial and spectral resolution. We show results from re-commissioning, highlighting the potential for scientific programs to use the capabilities of the upgraded SPIFFI. Finally, we discuss the additional upgrades for SPIFFIER which will be implemented before it is integrated into ERIS.Comment: 20 pages, 12 figures. Proceedings from SPIE Astronomical Telescopes and Instrumentation 201

Corporate financing decisions: UK survey evidence

Despite theoretical developments in recent years, our understanding of corporate capital structure remains incomplete. Prior empirical research has been dominated by archival regression studies which are limited in their ability to fully reflect the diversity found in practice. The present paper reports on a comprehensive survey of corporate financing decision-making in UK listed companies. A key finding is that firms are heterogeneous in their capital structure policies. About half of the firms seek to maintain a target debt level, consistent with trade-off theory, but 60 per cent claim to follow a financing hierarchy, consistent with pecking order theory. These two theories are not viewed by respondents as either mutually exclusive or exhaustive. Many of the theoretical determinants of debt levels are widely accepted by respondents, in particular the importance of interest tax shield, financial distress, agency costs and also, at least implicitly, information asymmetry. Results also indicate that cross-country institutional differences have a significant impact on financial decisions

Understanding the Recent Growth in Consumer Loans and Credit Cards in Emerging Markets:Evidence from Turkey

In recent years, the surge in household indebtedness to historical heights has become a significant concern for developed economies. A similar trend has been witnessed in emerging market countries including Turkey. Our objective is to help further understand the dynamics of the recent growth in consumer loans and credit cards (CLCC) in Turkey. For this purpose, we investigate the long-term equilibrating relationships and short-term deviations from the equilibrium, and explore the determinants, directions, and strengths of causality relationships between CLCC and the selected macroeconomic variables, and analyze the dynamic interactions among the variables in the post-sample period by analyzing how CLCC responds to the shocks given to other macroeconomic variables and the contribution of each variable on the forecast variability of CLCC. We use monthly data for the period of January 2004—December 2013 of seven macroeconomic variables of money supply, interest rate, income, consumer confidence, inflation, stock market, and consumer goods imports. On empirical findings, we make suggestions about which policy tools should be used to influence, and if necessary to manage, the growth in CLCC. Copyright © Taylor & Francis Group, LLC

The short term debt vs. long term debt puzzle: a model for the optimal mix

This paper argues that the existing finance literature is inadequate with respect to its coverage of capital structure of small and medium sized enterprises (SMEs). In particular it is argued that the cost of equity (being both conceptually ill defined and empirically non quantifiable) is not applicable to the capital structure decisions for a large proportion of SMEs and the optimal capital structure depends only on the mix of short and long term debt. The paper then presents a model, developed by practitioners for optimising the debt mix and demonstrates its practical application using an Italian firm's debt structure as a case study

How does subjective well-being evolve with age? A literature review

This literature review provides an overview of the theoretical and empirical research in several disciplines on the relation between ageing and subjective well-being, i.e., how subjective well-being evolves across the lifespan. Because of the different methodologies, data sets and samples used, comparison among disciplines and studies is difficult. However, extant studies do show either a U-shaped, inverted U-shaped or linear relation between ageing and subjective well-being

Three-dimensional distribution of ejecta in Supernova 1987A at 10 000 days

Due to its proximity, SN 1987A offers a unique opportunity to directly observe the geometry of a stellar explosion as it unfolds. Here we present spectral and imaging observations of SN 1987A obtained ~10,000 days after the explosion with HST/STIS and VLT/SINFONI at optical and near-infrared wavelengths. These observations allow us to produce the most detailed 3D map of H-alpha to date, the first 3D maps for [Ca II] \lambda \lambda 7292, 7324, [O I] \lambda \lambda 6300, 6364 and Mg II \lambda \lambda 9218, 9244, as well as new maps for [Si I]+[Fe II] 1.644 \mu m and He I 2.058 \mu m. A comparison with previous observations shows that the [Si I]+[Fe II] flux and morphology have not changed significantly during the past ten years, providing evidence that it is powered by 44Ti. The time-evolution of H-alpha shows that it is predominantly powered by X-rays from the ring, in agreement with previous findings. All lines that have sufficient signal show a similar large-scale 3D structure, with a north-south asymmetry that resembles a broken dipole. This structure correlates with early observations of asymmetries, showing that there is a global asymmetry that extends from the inner core to the outer envelope. On smaller scales, the two brightest lines, H-alpha and [Si I]+[Fe II] 1.644 \mu m, show substructures at the level of ~ 200 - 1000 km/s and clear differences in their 3D geometries. We discuss these results in the context of explosion models and the properties of dust in the ejecta.Comment: Accepted for publication in Ap