The paper empirically tests the relationship between earnings volatility and cost of debt with a sample of more than 77,000 Swedish limited companies over the period 2006 to 2013 observing more than 677,000 firm years. As called upon by many researchers recently that there is very limited evidence of the association between earnings volatility and cost of debt this paper contributes greatly to the existing literature of earnings quality and debt contracts, especially on the consequence of earnings quality in the debt market. Earnings volatility is a proxy used for earnings quality while cost of debt is a component of debt contract. After controlling for firms’ profitability, liquidity, solvency, cashflow volatility, accruals volatility, sales volatility, business risk, financial risk and size this paper studies the effect of earnings volatility measured by standard deviation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on Cost of Debt. Overall finding suggests that lenders in Sweden does take earnings volatility into consideration while determining cost of debt for borrowers. But a deeper analysis of various industries suggest earnings volatility is not consistently used by lenders across all the industries. Lenders in Sweden are rather more sensitive to borrowers’ financial risk across all the industries. It may also be stated that larger borrowers tend to secure loans at a lower interest rate, the results are consistent with majority of the industries. Swedish debt market appears to be well prepared for financial crises as the debt crisis seems to have no or little adverse effect borrowers’ cost of capital. This study is the only empirical evidence to study the association between earnings volatility and cost of debt. Prior indirect research suggests earnings volatility has a negative effect on cost debt (i.e. an increase in earnings volatility will increase firm’s cost of debt). Our direct evidence from the Swedish debt market is consistent for some industries including media, real estate activities, transportation & warehousing, and other consumer services.

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Why has the once fallen star of income bonds started to rise after spending over seventy years below the financial horizon? Is it because income bonds provide many of the advantages of debt financing with the non-fixed payments feature of equity financing? Could it be caused by the high yields they carry considering the risk involved? Is it the result of the large tax savings created in many cases? All of these questions are important. Eighteen years ago income bonds were one of the least respected and most disliked types of securities that a company could issue. Today they have a limited but growing use and an ever increasing acceptance. This study is an attempt to determine and give reasons for the development and use of income bonds in the past, present, and future. It traces the development of income bonds, explains the advantages and disadvantages associated with them, and prognosticates about their future.

Thesis advisor: Vladimir Bandera / The purpose of this dissertation is to analyze the balance-of-payments problems of a particular debtor country by focusing on the effects of rapid external debt accumulation and of expanding debt servicing obligations on external balance. Brazil from 1948 to 1963 Is a logical choice for a study of this type since severe debt servicing problems were experienced throughout this period, particularly between 1955 and 1963. The Intention is not to portray Brazil as a typical debtor country since its problems were more intense and more immediate than related problems in most other debtor countries in the process of development. / Thesis (PhD) — Boston College, 1967. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Ling Nie Bun. / Summary in Chinese. / Thesis (M.B.A.)--Chinese University of Hong Kong. / Bibliography: leaves 97-100.

The three chapters of my dissertation study the effect of access to credit on economic volatility and welfare, and the implications for policy. Chapter 1 presents a unified framework to analyze debt relief and macroprudential policies in a liquidity trap when households have private information. I develop a model with a deleveraging-driven recession and a liquidity trap in which households differ in their impatience, which is unobservable. Ex post debt relief stimulates the economy, but anticipated debt relief encourages overborrowing ex ante, making savers worse off. Macroprudential taxes and debt limits prevent the recession, but can harm impatient households, since the planner cannot directly identify and compensate them. I solve for optimal policy, subject to the incentive constraints imposed by private information. Optimal allocations can be implemented either by providing debt relief to moderate borrowers up to a maximum level, combined with a marginal tax on debt above the cap, or with ex ante macroprudential policy - a targeted loan support program, combined with a tax on excessive borrowing. These policies are ex ante Pareto improving in a liquidity trap; in normal times, however, they are purely redistributive. These results extend to economies with aggregate uncertainty, alternative sources of heterogeneity, and endogenous labor supply. The second chapter of my dissertation presents a theoretical framework to understand sovereign debt crises in a monetary union and the optimal policy response to these crises. The risk of default encourages indebted countries to pay down their short term debt, depressing consumption demand throughout the union. This fall in demand can cause the monetary union to hit the zero lower bound on nominal interest rates, leading to a union-wide recession. I evaluate three policies to prevent such a recession: debt relief, which writes off a portion of short term debt; lending policy, which allows indebted countries to issue new debt at above-market prices; and debt postponement, which converts short into long term debt. I show that if countries can be prevented from retrading in secondary markets after debt restructuring, all three policies are equivalent, and are welfare improving. If retrading is possible, lending policy and debt postponement are superior to debt relief. The final chapter of my dissertation evaluates the impact of increased income uncertainty and financial liberalization in the US on consumption volatility and welfare at the household level. In this joint work with Olga Gorbachev, we estimate Euler equations using consumption data from the Panel Study of Income Dynamics, and measure the volatility of unpredictable changes in consumption as the squared residuals. We directly control for liquidity constraints using data on access to credit from the Survey of Consumer Finances, and document that despite the increase in household debt between 1983 and 2007, there was no decline in the proportion of liquidity constrained households. Consumption volatility increased significantly over this period, especially for liquidity constrained households, indicating substantial welfare losses.

Thesis (M.Com (Economics)) --University of Limpopo, 2018 / The burden of public debt is an economic issue, dominating debates in different sectors of our society. The post financial crisis era has been marked with an increasing level of public debt at international, national and sub-national level. The study investigates if public debt can affect economic growth in South Africa, for the period 1995 to 2016. The results for Johansen test of cointegration signposted the existence of cointegration among variables observed in this study. The trace statistic and max-eigen value complimented each other to confirm the cointegration, thus, showing a long run relationship. Furthermore, the Vector Error Correction Model (VECM) is applied to achieve the objectives of the study, complemented by other econometric tests such as, Granger causality, impulse response function and variance decomposition. The VECM results revealed the existence of a short run relationship between public debt and economic growth. Granger causality results have shown that public debt can Granger cause economic growth, and there is bi-direction relationship between the two variables. The results for Variance Decomposition indicate that, a shock to public debt causes 1.509115 % fluctuation in economic growth in the second quarter. In the fourth quarter, a shock to public debt account for 16.39628 % fluctuations in economic growth. This shows that, as time goes on, a shock to public debt account for a high percent of fluctuation in economic growth. The Impulse Response Function has shown that, the period of ten quarters marks a negative response of economic growth to public debt. Thus, one standard deviation shock in public debt will inversely affect economic growth. The diagnostic tests such as serial correlation and heteroskedasticity bode well for the model because, neither serial correlation nor heteroskedasticity has been found. Moreover, the model has shown that the residuals are normally distributed, and also the stability of the model has been confirmed. The study recommends that, since South Africa is a capital scarce country, it is encouraged to borrow so that there is an increase in the accumulation of capital. However, the later stage of borrowing marked with high debt will lead to subdued economic growth. / SETA