Financial crises in East Asia, Russia, and Latin America have caused some to wonder if there is something inherently unstable about financial markets that thwarts their ability to allocate capital appropriate^- and ultimately causes these crises. I build a multi-period, industry-level credit model in which debt-financed entrepreneurs develop homogeneous projects with long gestation periods, sequential investment requirements, and no intermediate cash flows. Entrepreneurs accumulate private signals about terminal demand, and if the signals are bad enough, may decide to halt project development before completion. The prevalence of project suspensions aggregates information and permits the industry size to adjust to the true state of terminal demand. Debt contracts depend upon the pricing power of the creditor; these contracts impact the size of the industry and the timing of the information aggregation. When demand realisations are poor, some investors will be disappointed ex post; aggregate disappointment will depend upon how long the investment behaviour has carried on before suspensions occur, and how large the industry is. I interpret situations of substantial aggregate disappointment as a 'crisis'. Principal results relate to the impact of debt finance on the timing and likelihood of project suspensions. With all equity (self) financing, suspensions will typically be observed, but they may occur relatively late in the game. In contrast, debt finance may lead to very rapid suspensions, depending upon the tools allocated to the creditor. When creditors exercise monopoly control over credit allocation and pricing, profit-maximising creditors can and will force suspensions. This may involve reducing the entrepreneurs' equity contribution and / or subsidizing credit in order to ensure entrepreneurial participation. When credit markets are competitive, creditors lack the pricing power that can be used to structure credit policies that force early suspensions. As debt accumulates and the entrepreneurs' share of liquidation proceeds dwindles, entrepreneurs may not voluntarily suspend operations as this will lead to loss of private benefits. Therefore, there may be no suspensions observed in equilibrium. This problem will be particularly acute when the entrepreneurs' initial equit)' stake is small. / Business, Sauder School of / Finance, Division of / Graduate

A Research Report submitted to the Facultv of Commerce, University of the Witwatersrand, Johannesburg in partial fulfilment of the requirements for the Degree of Master of Commerce. / This Research Report examines the determinants of South African industrial firms' capital structures. The report attempts to evaluate if a firm's preference for equity or debt capital can be attributed to specific variables which may reflect its industry profile or operating structure. A literature review, discussing both perfect and imperfect capital market conditions, is included in order to determine if the premise of "variable influence" has academic support. The variables found to have an influence on (non South African company) capital structure by authors examined in the review, are / Andrew Chakane 2018

This dissertation examines several research questions relating to securitization by non-financial firms. Finance theories suggest securitization is most beneficial when there is high demand for liquidity. On the other hand, empirical studies have shown that firms engage in securitization to manage earnings. I find that liquidity demand, not the incentive for earnings management motivates securitization transactions by non-financial firms. I also evaluate whether earnings management in securitization is indeed undesirable from a shareholder's perspective by examining the economic consequences of the practice. Because securitization creates a large infusion of cash, one way to evaluate the economic consequences of earnings management is to examine whether securitization proceeds encourage overinvestment. I find that earnings management in securitization (i.e., recording non-zero securitization income) is unrelated to firms' suboptimal) overinvestment in the post-securitization period. Thus, it appears that earning management in securitization has no negative economic consequence in terms of generating excess securitization proceeds that encourage overinvestment. I also examine the market's valuation of securitizable assets in the accrual components of earnings and the use of securitization proceeds. Because securitizable assets can be converted into cash through securitization, I test whether the market valuation reflects the source of liquidity in securitizable assets that is similar to the cash component of earnings. I find that, for securitization firms, the market valuation of securitizable assets is similar to that of the cash component of earnings. / Lastly, I find some evidence supporting the assertion that firms' liquidity prior to securitization influences the market valuation on securitization proceeds retained on the balance sheet, in that the market assigns a discount to retained proceeds for firms with excess liquidity prior to securitiaztion. / by Qianyun Huang. / Thesis (Ph.D.)--Florida Atlantic University, 2011. / Includes bibliography. / Electronic reproduction. Boca Raton, Fla., 2011. Mode of access: World Wide Web.

This thesis presents various dynamic models of corporate decisions to address two main issues: investment distortions caused by debt financing and cash flow sensitivities. In the first chapter, four measures of investment distortion are computed. First, the effect of financing frictions is examined. The tax benefit of debt induces firms to increase their debt capacity and to invest beyond the first-best level on average. The cost of this investment distortion outweighs the tax benefit of debt. Second, Myers's (1977) debt overhang problem is examined in a dynamic framework. Debt overhang obtains on average, but not in low technology states. Third, there is no debt overhang problem in all technology states when debt is optimally put in place prior to the investment decision. Finally, the cost of choosing investment after the debt policy is examined. Equity claimants lose value by choosing to invest after their debt is optimally put in place because they do not consider the interaction between their investment choice and the debt financing conditions. The second chapter explores the impact of financial constraints on firms' cash flow sensitivities. In contrast to Fazzari, Hubbard, and Petersen (1988), cash flow sensitivities are found to be larger, rather than smaller, for unconstrained firms than for constrained firms. Then, why is investment sensitive to cash flow? In the two models examined in the second chapter, the underlying source of investment opportunities is highly correlated with cash flows. Investment may be sensitive to cash flow fluctuations simply because cash flows proxy for investment opportunities. This leaves two important questions. Can this chapter suggest a better measure of investment opportunities than Tobin's Q? Not a single measure for both the unconstrained and constrained firm models. Can this chapter suggest an easily observable measure of financial constraint? Yes: large and volatile dividend-to-income ratios.

This thesis presents various dynamic models of corporate decisions to address two main issues: investment distortions caused by debt financing and cash flow sensitivities. In the first chapter, four measures of investment distortion are computed. First, the effect of financing frictions is examined. The tax benefit of debt induces firms to increase their debt capacity and to invest beyond the first-best level on average. The cost of this investment distortion outweighs the tax benefit of debt. Second, Myers's (1977) debt overhang problem is examined in a dynamic framework. Debt overhang obtains on average, but not in low technology states. Third, there is no debt overhang problem in all technology states when debt is optimally put in place prior to the investment decision. Finally, the cost of choosing investment after the debt policy is examined. Equity claimants lose value by choosing to invest after their debt is optimally put in place because they do not consider the interaction between their investment choice and the debt financing conditions. The second chapter explores the impact of financial constraints on firms' cash flow sensitivities. In contrast to Fazzari, Hubbard, and Petersen (1988), cash flow sensitivities are found to be larger, rather than smaller, for unconstrained firms than for constrained firms. Then, why is investment sensitive to cash flow? In the two models examined in the second chapter, the underlying source of investment opportunities is highly correlated with cash flows. Investment may be sensitive to cash flow fluctuations simply because cash flows proxy for investment opportunities. This leaves two important questions. Can this chapter suggest a better measure of investment opportunities than Tobin's Q? Not a single measure for both the unconstrained and constrained firm models. Can this chapter suggest an easily observable measure of financial constraint? Yes: large and volatile dividend-to-income ratios. / Business, Sauder School of / Graduate

A research report submitted to the Faculty of Commerce, Law and Management in partial fulfilment of the requirements for the degree of Master of Commerce (specialising in Taxation) / The popularity of hybrid instruments as a tax planning technique has grown over the years. There is an increasing global awareness on the use of these instruments and on addressing the tax gaps created by these instruments. South Africa introduced significant amendments to the legislation on hybrid debt instruments, ahead of many countries around the globe. This research report examines hybrid debt instruments and the tax concerns which have created the need for specific tax legislation addressing such instruments. It considers tax policies proposed by the international tax fraternity, global trends in changes to tax policies and South Africa‘s stance on such tax policies. The amended section 8F and new section 8FA of the Income Tax Act are included in this consideration. Key words: arrangement, debt, deductible, dividend, equity, host country, interest, hybrid debt instrument, hybrid interest, home country, tax / MT2017

Presented to the School of Accountancy University of the Witwatersrand, Johannesburg This research report is submitted to the faculty of Commerce, Law and Management in partial fulfilment of the requirements for the Degree of Master of Commerce (specialising in Taxation) Date: 31 March 2016 / This research focuses on large corporate transactions and acknowledges that they play a significant role in the allocation of resources in society. For this reason (1) the composition of firms’ capital structure and (2) how they choose to fund their investments are important. The South African income tax system has a bias towards debt and this bias (1) distorts the financing and investment decisions of firms; and (2) creates international tax arbitrage opportunities. These circumstances are not exclusive to South Africa. In order to address these distortions and loopholes the National Treasury and the SARS Commissioner have introduced complicated interest deduction limitations. This research critically analyses (1) the new adjusted tax rules concerning interest deduction limitations in finance transactions and (2) whether these new rules encourage investment. To assist with this critical analysis we use corporate finance theory to examine debt push-down transactions/structures because these structures are seen as highly tax-efficient for investors (both foreign and local). This research demonstrates that there are many different ways to finance a transaction but ultimately the choice of finance lies along the continuum between the issue of debt or equity. From an economic perspective this research confirms that there is no material reason for the disparate treatment between debt and equity. However from a legal perspective debt and equity instruments are materially distinct and thus tax considerations are influential in selecting the form of finance used in a transaction. This research not only concludes that leverage transactions utilising excessive debt pose a risk to tax revenues, tax sovereignty and tax fairness but also that the artificial statutory treatment of interest deductions on leverage transactions and working capital facilities means that (1) firms’ ability to finance their operations is reduced, (2) the value of firms is reduced and (3) the incentive for investors to invest in South Africa is also reduced. / MT2017

Thesis (Ph. D. in Management)--Vanderbilt University, Dec. 2005. / Title from title screen. Includes bibliographical references.