testing capital structure models on philippine listed firms this study examines the ability of the trade off to model and the pecking order po model to explain the financing behaviour of philippine listed firms from 1990 to 2001 using panel data regression techniques the firms leverage ratios move towards their optimal level holding up the to model the results however show better support for the po model as leverage and profitability are negatively related while financing deficit mostly explains the annual change in total liabilities furthermore in joint tests only the fitted values from the po model equation continue to have additional explanatory power over fitted values from the to model firms issued more equity than debt from 1990 to 1996 when stock market prices were increasing rapidly but this still fits the more complex version of the po model

cannabis prices on the dark web this paper examines prices of cannabis sold over the anonymous internet marketplace alphabay we analyze cannabis prices of 500 listings from about 140 sellers originating from 18 countries we find that both listing characteristics and country characteristics matter cannabis prices are lower if sold in larger quantities so there is a clear quantity discount cannabis prices increase with perceived quality cannabis prices are also higher when the seller is from a country with a higher gdp per capita or higher electricity prices the internet based cannabis market seems to be characterized by monopolistic competition where many sellers offer differentiated products with quality variation causing a dispersion of cannabis prices and sellers have some control over the cannabis prices

corporate finance in developing countries new evidence for india abstract recent work by singh and hamid 1992 corporate financial structures in developing countries and singh 1995 corporate financial patterns in industrializing economies a comparative international study has suggested that large firms in a number of developing countries including india use much more external finance in general and equity finance in particular than those in developed countries however the contrast is in part a product of methodological differences and india is much less different from countries such as france and italy the singh results are not due merely to bias arising from the focus on the largest companies since the rest of the indian corporate sector also issues large amounts of equity via informal networks rather than organized stock exchanges the importance of such issues suggests the need for further research before policy conclusions can be drawn

currency premia and global imbalances we show that a global imbalance risk factor that captures the spread in countries external imbalances and their propensity to issue external liabilities in foreign currency explains the cross sectional variation in currency excess returns the economic intuition is simple net debtor countries offer a currency risk premium to compensate investors willing to finance negative external imbalances because their currencies depreciate in bad times this mechanism is consistent with exchange rate theory based on capital flows in imperfect financial markets we also find that the global imbalance factor is priced in cross sections of other major asset markets

pricing and packaging the case of marijuana in many markets unit prices decline as the quantity purchased rises a phenomenon that can be considered part of the economics of packaging this article reviews the economic foundations of quantity discounts and proposes new ways of measuring and analyzing them these ideas are implemented with the prices of marijuana a product that is shown to be priced in a manner not too different from that used for groceries as well as some other illicit drugs in broad terms the results support the following pricing rule the unit price falls by 2 5 when the package size increases by 10

marijuana on main street estimating demand in markets with limited access abstract marijuana is the most common illicit drug with vocal advocates for legalization among other things legalization would increase access and remove the stigma of illegality our model disentangles the role of access from preferences and shows that selection into access is not random we find that traditional demand estimates are biased resulting in incorrect policy conclusions if marijuana were legalized those under 30 would see modest increases in use of 28 percent while on average use would increase by 48 percent to 19 4 percent tax policies are effective at curbing use where australia could raise au 1 billion and the united states us 12 billion jel d12 h25 k14 k42

a new measure of financial development theory leads measurement abstract this study presents a new measure of financial development that is directly derived from theory our measure the marginal utilization of debt hereafter mud comes from the seminal work of myers 1984 myers and majluf 1984 and shyam sunder and myers 1999 further it is directly related to the development facts of gurley and shaw 1955 mud is a global measure that reflects conditions in both debt and equity markets it varies enormously across nations from 0 23 in australia at one extreme to 0 96 in turkey at the other cross country variations in mud are not random they are related to special purpose measures of debt and equity market advancement from the financial development literature richer more advanced nations have smaller average muds we argue that the mud may be useful for a variety of purposes and provide three example applications

the effects of china s split share reform on firms capital structure choice abstractchina s split share structure reform in 2005 2006 mitigates agency conflicts between controlling shareholders and minority shareholders and thus may bring substantial changes to corporate financing behaviour this article examines the impact of that reform on the capital structure decisions of firms by applying a variety of trade off and pecking order models using data from 1176 non financial chinese listed firms during the period 2000 2012 we present empirical evidence indicating that equity tracks the financing deficit better than debt in chinese firms a finding which is not consistent with pecking order theory this phenomenon is more prominent after 2006 as share reform increases trading activity in the secondary stock market and improves the transparency of financial markets in addition chinese firms have an optimal leverage ratio and they adjust below target leverage ratios faster than above target leverage ratios after the implementation of share structure reform although they make sy

lessons from the evolution of foreign exchange trading strategies abstract the adaptive markets hypothesis posits that trading strategies evolve as traders adapt their behavior to changing circumstances this paper studies the evolution of trading strategies for a hypothetical trader who chooses portfolios from foreign exchange forex technical rules in major and emerging markets the carry trade and us equities the results show that a backtesting procedure to choose optimal portfolios improves upon the performance of nonadaptive rules we also find that forex trading alone dramatically outperforms the s p 500 with much larger sharpe ratios over the whole sample but there is little gain to coordinating forex and equity strategies which explains why practitioners consider these tools separately forex trading returns dip significantly in the 1990s but recover by the end of the decade and have been markedly superior to an equity position since 1998 overall trading rule returns still exist in forex markets with substantial stability in the types of rules though they have migrated to emerging markets to a considerable degree

debt and the marginal tax rate abstract do taxes affect corporate debt policy this paper tests whether the incremental use of debt is positively related to simulated firm specific marginal tax rates that account for net operating losses investment tax credits and the alternative minimum tax the simulated marginal tax rates exhibit substantial variation due to the dynamics of the tax code tax regime shifts business cycle effects and the progressive nature of the statutory tax schedule using annual data from more than 10 000 firms for the years 1980 1992 i provide evidence which indicates that high tax rate firms issue more debt than their low tax rate counterparts

the pecking order debt capacity and information asymmetry abstract we quantify the empirical relevance of the pecking order hypothesis using a novel empirical model and testing strategy that addresses statistical power concerns with previous tests while the classificatory ability of the pecking order varies significantly depending on whether one interprets the hypothesis in a strict or liberal e g modified pecking order manner the pecking order is never able to accurately classify more than half of the observed financing decisions however when we expand the model to incorporate factors typically attributed to alternative theories the predictive accuracy of the model increases dramatically accurately classifying over 80 of the observed debt and equity issuances finally we show that what little pecking order behavior can be found in the data is driven more by incentive conflicts as opposed to information asymmetry

equity issues and temporal variation in information asymmetry abstract we investigate the intertemporal relation between information asymmetry and equity issues and particularly focus on which firms drive this relation we find that when information asymmetry for a particular firm is low compared to the recent past the firm is more likely to issue equity as opposed to debt importantly this intertemporal association is driven by firms with high levels of information asymmetry these firms are more prone to adverse selection costs and thus have more to gain by issuing equity after a narrowing of the information gap between managers and investors our findings are robust to various firm specific proxies for information asymmetry

economic momentum and currency returns abstract past trends in fundamentals linked to economic activity and inflation predict currency returns we find that a trading strategy that goes long currencies with strong economic momentum and short currencies with weak economic momentum exhibits an annualized sharpe ratio of 0 70 and yields a significant alpha when controlling for standard carry momentum and value strategies the economic momentum strategy subsumes the alpha of carry trades suggesting that differences in past economic trends capture cross country differences in carry

dynamic recapitalization policies and the role of call premia and issue discounts in a dynamic framework the advantage of leverage depends upon the firm s recapitalization policy we show that if bonds are callable at par then equityholders have an incentive to recapitalize too early call premia and issue discounts however mitigate the agency problem of early recapitalization the model provides the optimal call premium and issue discount as a function of firm specific characteristics an analysis of a bond sample supports the model s prediction that the optimal call premium is positively related to firm risk

unemployment fluctuations and the predictability of currency returns abstract we investigate whether unemployment fluctuations generate predictability in the cross section of currency excess returns we find that currencies with lower growth in the unemployment rate appreciate while currencies with higher growth in the unemployment rate depreciate as a result an investment strategy that involves investing in the former and short selling of the latter produces positive and sizable excess returns asset pricing tests show that the predictability is not driven by exposure to traditional risk factors such as global equity risk global foreign exchange volatility risk and downside risk but is related instead to an idiosyncratic unemployment risk

testing theories of capital structure and estimating the speed of adjustment this paper examines time series patterns of external financing decisions and shows that publicly traded u s firms fund a much larger proportion of their financing deficit with external equity when the cost of equity capital is low the historical values of the cost of equity capital have long lasting effects on firms capital structures through their influence on firms historical financing decisions we also introduce a new econometric technique to deal with biases in estimates of the speed of adjustment toward target leverage we find that firms adjust toward target leverage at a moderate speed with a half life of 3 7 years for book leverage even after controlling for the traditional determinants of capital structure and firm fixed effects

is there a pecking order evidence from a panel of ipo firms abstract we test the pecking order model of capital structure by examining the financing of firms that went public in 1983 we estimate a logit to predict external financing and a multinomial logit to predict the type of financing using data on the ipo firms security offerings during 1984 1992 our results indicate that the probability of obtaining external funds is unrelated to the shortfall in internally generated funds although firms with cash surpluses avoid external financing firms that access the capital markets do not follow the pecking order when choosing the type of security to offer

the trade off model with mean reverting earnings theory and empirical tests the trade off theory of capital structure predicts a positive relationship between earnings and leverage contradictory to well established empirical evidence since corporate earnings are known to be mean reverting we reformulate the trade off model with mean reverting earnings we show that with mean reverting earnings there should be a negative relationship between optimal leverage and the current earnings level the model also illustrates the importance of the earnings reversion parameter in the determination of capital structure the major implications of the model are supported by empirical tests carried out with a sample of firms in the s p 500 index

determinants of corporate capital structure evidence from hungarian firms this paper investigates the capital structure of hungarian firms using a cross section and a panel data approach the data set is composed of balance sheet data and information on market structure for 1100 firms from 1992 to 1996 evidence is found of imperfections that constrain firms in the achievement of their optimal capital structure but also some positive indications there are no distortions typical of the planned system and no signs of the presence of soft budget constraints

pecking order or trade off hypothesis evidence on the capital structure of chinese companies this study tests the pecking order and trade off hypotheses of corporate financing decisions using a cross section of the largest chinese listed companies the study is built on allen 1993 baskin 1989 and adedeji 1998 to set up three models in which trade off and pecking order theories give distinctively different predictions 1 the determinants of leverage 2 the relationship between leverage and dividends and 3 the determinants of corporate investment in model 1 a significant negative correlation is found between leverage and profitability in model 2 a significant positive correlation between current leverage and past dividends is found these results broadly support the pecking order hypothesis over trade off theory however model 3 is inconclusive overall the results provide tentative support for the pecking order hypothesis and demonstrate that a conventional model of corporate capital structure can explain the financing behaviour of chinese companies

efficiency of purchasing and selling agents in markets with quality uncertainty the case of illicit drug transactions abstract since akerlof s theory of lemons economists have viewed quality uncertainty as an informational advantage for sellers drawing on frontier techniques we propose in this paper a simple method for measuring inefficiency of both sellers and buyers in markets for goods with different levels of quality we apply a non parametric robust double frontier framework to the case of illicit substance markets which suffer from imperfect information about drug quality for purchasers and to a lesser extent for sellers we use unique data on cannabis and cocaine transactions collected in france that include information about price quantity exchanged and purity we find that transactional inefficiency does not really benefit either dealers or purchasers furthermore information influences the performance of agents during market transactions

financing technology based small firms in europe what do we know this paper reviews the evidence on financing technology based small firms tbsfs in europe european tbsfs finance new investments by relying primarily on internal funds due to capital market failures induced by asymmetric information european venture capital has caught up with us venture capital but this is mainly because of the growth in uk venture investments it is unclear whether european venture capital has been able to certify the quality and enhance the growth of funded companies compared with the nasdaq there is little development of trading in high tech stocks in europe the so called new markets established in the 1990s collapsed in the wake of the internet bubble crash public venture capital and research and development r d tax incentives seem to have positively affected high tech firms

book rate of return and prediction of earnings changes an empirical investigation over the years there has developed a fairly substantial body of research on the time series of earnings as a whole this literature concludes that changes in annual accounting earnings are unpredictable that is earnings follow a random walk 1 based on this result some inferences of economic substance policy have been claimed 2 in this paper we reconsider empirical issues which at least to some extent have been obscured by this conclusion we argue that the above result is only true in a limited sense since a modest enlargement of the predictive information set should allow for a rejection of the hypothesis that earnings changes are

testing static tradeoff against pecking order models of capital structure a critical comment abstract in a recent paper shyam sunder and myers 1999 introduce a new test of the pecking order model this comment shows that their elegantly simple test generates misleading inferences when evaluating plausible patterns of external financing our results coupled with the power problem with the static tradeoff model documented by shyam sunder and myers indicate that their empirical evidence can evaluate neither the pecking order nor static tradeoff models alternative tests are needed that can identify the determinants of capital structure and can discriminate among competing hypotheses

does fomc news increase global fx trading does global currency volume increase on federal open market committee fomc days to test hypotheses of abnormal currency volume on fomc days a new data set from the continuous linked settlement cls bank is used the cls measure captures more than half of the global trading volume in foreign exchange fx markets the evidence shows that fx trading volume increases about 5 in the spot and the spot next market following fomc deliberations the novelty of this result is that the aggregated cls data controls for responses in various derivatives markets a feature that existing studies based on intradaily data for specific trading platforms do not consider