Debt Profile Research Articles

Households Debt Restructuring: The Re-default Effects of a Debt Suspension

When facing financial distress, French households can file a case to a “households’ over-indebtedness commission” (HDC). The HDC can order an immediate repayment or grant a debt suspension. Exploiting the random assignment of bankruptcy filings to managers, we show that a debt suspension has a very significant and negative effect on the likelihood to re-default but that this impact is only short-lived. The effect depends not only on the characteristics of the households but also on the nature of their indebtedness. Our results imply that rather than focusing on a specific debt profile, above all a deeper restructuring of the expenditure side is necessary to make the plan sustainable in case of an uniform increase of the HDC severity. They also single out specific banks lending to particular fragile households. They indicate the importance of policy actions on budget counseling, as well as the importance of regulation of credit distribution to avoid both entering into bankruptcy and re-filing for bankruptcy.

The role of debt profile vulnerabilities in sovereign distress

ABSTRACTSovereign debt distress has raised difficult issues in terms of debt sustainability in the past, but it has been associated not only with medium-term debt dynamics, but also with various dimensions of the debt profile that have typically built vulnerabilities over time. Vulnerabilities associated with the public debt structure and liquidity may play an important role in derailing a stable debt trajectory and thus contribute to debt distress. Financial developments may also contribute to the building in sovereign debt vulnerabilities, as deterioration in financial stability indicators can affect the balance sheet of the national treasury. Based on the experience during 37 debt distress events in countries with market access between 1993 and 2010, this article identifies early warning indicators of sovereign debt distress and defines thresholds – for the whole sample and for different regions – at which these latter have been associated with distress in the past. This approach allows us to assess indicators on an individual basis, and to develop a composite indicator of debt vulnerabilities as well.

Capital structure management differences in Latin American and US firms after 2008 crisis

PurposeThis paper aims to analyse the capital structure determining factors of Latin American and US corporations after the crisis of 2008, as a means of comparing theoretical assumptions and empirical results in markets of different efficiency levels.Design/methodology/approachThe study sample comprises 1,091 companies belonging to the six largest economies in Latin America plus the USA, in the years 2009 to 2013. The authors performed a regression with data from a balanced overview, which were obtained by using the criterion of minimum weighted square.FindingsThe results demonstrated differences in determining factors of capital structure between companies from Latin America and from the USA. The pecking order theory was mostly observed in Latin American companies and the trade-off theory greater was closely aligned with US firms.Originality/valueThis research brings new contributions to the issue, once the differences and determinative of the debt profile in companies from different economic contexts are compared.

Debt Profiles of Model Students: The Projected Debt of Highly Productive Students and Its Economic Impact

A common misperception suggests that a high-achieving student can easily complete a degree with very limited debt, and that students with high levels of debt are thus underachievers. This assumption is supported by memories of previous decades when it was realistically possible for most students to work their way through college. This view, however, ignores the current financial realities faced by students with limited family support. The financial experience and circumstances of current, high-performing students is markedly different from similarly dedicated students in the past. Current students are now more likely to g raduate with high debt burdens that negatively impact their ability to contribute to the economy and society. This paper examines and describes the likely debt burdens now being incurred by highly productive students in common financial circumstances and projects the likely economic and societal impact of this debt. Using national data sources and theoretical perspectives based in the fields of cost accounting and economics, this study finds that students who enroll with a clear community college-to-university path are more likely to g raduate with lower debt levels. More rapid program completion likewise reduces debt levels. In addition, parental support at half of the cost of attendance reduces debt more than a full Federal Pell Grant. The results point to recommendations to policymakers at the federal, state, and institutional level to focus on providing for efficient transfer between schools, encouraging timing program completion, limiting developmental education requirements, and targeting sufficient funding to public institutions to produce optimal college prices.

Staples LBO: Meet You on the Mezzanine

In this case, two friends, a managing director with an investment banking group and a partner at Cavalier Capital LLC have submitted a bit for a leveraged buyout (LBO) of retail giant Staples Inc. Staples seemed like an ideal LBO candidate: it was a large, stable company; it was a market leader with highly predictable cash flows; and, most important, its shareholders were unhappy. Markets also looked friendly for a new wave of LBOs: valuations were down, and banks were once again flush with cash and ready to lend.The two friends know they need to sweeten their 6.12× EBITDA bid, invest more in due diligence, and talk to management and the board of directors. They also know from experience that competition would inevitably draw bids in a relatively narrow range. They are considering expanding the debt profile through the judicious use of mezzanine financing. Prior to the global economic downturn, mezzanine had all but disappeared from view. Now that banks had grown more conservative in the amount of debt they were willing to provide, mezzanine financing was once again a crucial ingredient in ensuring a winning bid. There were many different combinations of debt packages that could be used to finance the LBO. Both friends had to make sure that the financing structure and the final bid were best suited not only for equity and mezzanine investors, but also for Staples. Excerpt UVA-F-1721 Aug. 23, 2017 Staples LBO: Meet You on the Mezzanine “I met with Phelps briefly this morning, and the news is good,” reported Lyle Cunningham, a managing director with Jefferson Capital's investment banking group, to Bob Palmer, a partner at Cavalier Capital LLC and an old friend from business school, with whom he was having lunch. Cunningham was referring to Miles Phelps, the iconic New York investment banker. It was January 2013; a month earlier, Phelps had announced the sale of Staples Inc., the Boston-based retail giant, and had begun soliciting leveraged buyout (LBO) bids on its behalf. Cunningham and Palmer had submitted one such bid. “We've made it past the first round. Now it's time to actually talk to some folks up in Boston, refine our estimates, and increase the odds in our favor,” Cunningham said, obviously excited. Palmer smiled wryly. “Careful what you wish for,” he replied. “There's no Easy Button here.” Everything about this deal looked exceptionally attractive. Staples seemed like an ideal LBO candidate: it was a large, stable company; it was a market leader with highly predictable cash flows; and, most important, its shareholders were unhappy. Markets also looked friendly for a new wave of LBOs: valuations were down, and banks were once again flush with cash and ready to lend. Staples was ripe for an LBO, so it did not surprise too many people on Wall Street when Phelps announced an auction. . . .

Poverty Levels and Debt Indicators Among Low-Income Households Before and After the Great Recession

This study analyzed the debt profile of low-income households before and after the Great Recession using the 2007, 2010, and 2013 Survey of Consumer Finances (SCF). We used Heckman selection models to investigate three debt characteristics: (a) the amount of debt, (b) debt-to-income ratio, and (c) debt delinquency. Before and after the Great Recession, results from the selection stage showed the probability of holding debt for households increased as their income level increased (moving into less severe poverty categories); results from the outcome stage indicated households in the most severe poverty category (below 100% of poverty threshold) were less likely to meet debt-to-income ratio guidelines. Following the Great Recession, these lowest income households were more likely to have higher debt and debt delinquency problems.

Fifty Years of Consumer Issues inThe Journal of Consumer Affairs

This article is the Guest Editor's introduction to the virtual issue to celebrate the 50th anniversary ofJournal of Consumer Affairs(JCA) published on the journal website in the summer of 2016. The virtual issue highlights the research published duringJCA's first 50 years and includes 20 articles that reported on consumer issues which are still relevant today. The evolution of research topics over the 50 years shows that consumer issues have evolved from handling and resolving complaints to information search, decision making, consumer fraud, debt profiles, a hierarchy of saving needs, welfare reform, diffusion of innovations, identity theft, financial literacy, and health care reform. The 2010 creation of the Consumer Financial Protection Bureau can be seen as a capstone for the consumer movement. What will the next 50 years bring? We can assume thatJCAwill continue to be a leader in providing research on consumers and their issues.

Strategic Debt Accumulation as a Political Tool: Evidence from Democratic Regimes in Nigeria

Under a Ponzi-game, a policy maker can issue debt and roll it over forever; issuing new debts to pay off debts when it becomes due. This will enable a present value of consumption that exceeds the value of available resources. Through such strategic debt accumulation, current policymaker can restrain future policymaker’s spending. This study seeks to determine whether this strong political weapon has been utilised by the three democratic regimes in Nigeria. Using descriptive analysis and percentile figures, this study carried out trend analysis of debt profile from 1999-2014. Total debt profile has been on the increase up till 2004, after which there was a decline up till 2006; it rose again in 2007, fell in 2008 and rising since 2009. External debt as a proportion of total debt ranges between 63.85% and 78.11% up till 2005; thereafter domestic debt became dominant accounting for between 82.47% and 90.54% from 2006 to 2014. There has been a shift of Nigerian debt profile from foreign to domestic dominance; made possible by listing on the Nigerian Stock Exchange on Feb 19, 2004, N 150bn Federal Government Bond. Strategic debt accumulation has not really being utilised as a political weapon at the Federal level in Nigeria possibly because most of the Leaders and the ruling party since 1999 never wish to relinquish power.

Factors determining the success of public private partnership projects in Nigeria

The implementation of public private partnership (PPP) procurement method is expected to help governments in the development of infrastructures and provides an opportunity for the reduction in the governments’ debt profiles. This method has been adopted in Nigeria for more than a decade and with these years of implementation, few infrastructural projects have been developed using this method while some have been unsuccessful. This study aims to examine the PPP projects implementation in Nigeria and identify the most critical factors that could determine the success of such projects. A total of 184 questionnaires were received from public and private sectors’ participants in the implementation of PPP projects. An exploratory factor analysis identified seven critical success factors as projects feedback, leadership focus, risk allocation and economic policy, good governance and political support, short construction period, favourable socio-economic factors, and delivering publicly needed service. This study shows that more developmental projects could be delivered through PPP if the government could focus on these main factors in the implementation process. The result will influence policy development towards PPP and guide the partners in the development of PPP projects.

The moderating effect of profitability and leverage on the relationship between eco-efficiency and firm value in publicly traded Malaysian firms

PurposeThe purpose of this study is to examine the impact of profitability and leverage on the relationship between eco-efficiency and firm value.Design/methodology/approachThe study extends the Ohlson’s model on value relevance using the hierarchical regression analysis to establish the moderating effects of the firm-specific variables. The sample includes 667 non-financial firms from the Bursa Malaysia, as of 2013. The data for eco-efficiency were extracted from content analysis of the annual report, whereas the financial data were retrieved from the data stream.FindingsThe study provides support for the stakeholder theory that purports that managers must develop a relationship with stakeholders by embarking on environmental friendly practices to maintain a positive firm value. The study shows a positive association between eco-efficiency and the value of the firm and provides support for a positive moderating relationship for profitability in the relationship between eco-efficiency and firm value, whereas there was no significant effect for leverage in the relationship.Research limitations/implicationsIt should be noted that, first, the data comprised exclusively Malaysian companies. Including firms from similar developing countries with varying institutional make-up and culture would enhance the understanding of the subject. Second, considering that the data for this study is cross-sectional, it may not be sufficient to draw strong causal influences. The study is the first to the best of the researcher’s knowledge to provide evidence that profitability positively moderates the relationship between eco-efficiency and firm value.Practical implicationsThe result shows the management and potential investors that an investment in eco-efficiency will lead to a higher firm value, irrespective of the debt profile of the firm and that profitable firms are more likely to embark on an eco-efficient policy.Originality/valueThis study contributes to the literature by providing evidence from a developing country’s perspective, as well as extending prior studies that merely examined the direct relationship, to now explore the moderating relationship of profitability and leverage in the relationship between eco-efficiency and firm value using a large sample.

Regional Social Expenditures: A Country of Contrasts

Regional consolidated budgets are facing three main trends in 2015, namely marked growth of budget revenues, slower growth of budget expenditures, insignificant growth of debts and enhanced debt profile. The dynamics of the regional consolidated budget revenues in 2015 (according to the data on January–September) has improved amid economic downturn over the dynamics seen in 2013–2014. However, there is a large difference between the regions: some (most) of them have seen their budget revenues decline, whereas others have experienced a substantial growth in the same. The regions and municipalities have seen their debts grow slower than in 2013–2014, increasing by merely 5% in the period between January and earlier in November 2015. Consolidated budget expenditures have increased by merely 4% due to strengthening the responsibility of the regions for their budget policy. However, analysis of the dynamics of social spending has shown a strong differentiation as to both certain budget lines and regions. The nontransparent regional budgets’ Health care spending pattern is an apparent problem.

Risk Management Optimization for Sovereign Debt Restructuring

Abstract Debt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed conditional Debt-at-Risk. A multi-period stochastic programming model minimizes the expected cost of debt financing subject to risk limits. It provides an operational model to handle significant aspects of debt restructuring: it collects all debt issues in a common framework, and can include contingent claims, multiple currencies and step-up or linked contractual features. Alternative debt profiles – obtained by maturity rescheduling, interest payment concessions or nominal value haircuts – are analyzed for their expected cost-risk tradeoffs. With a suitable re-calculation of the efficient frontier, the risk of debt un-sustainability of alternative risk profiles can be ascertained with a given confidence level. The model is applied to Greece sovereign debt crisis analyzing the suitability of various proposals to restore debt sustainability.

Debt Profile and Debt Sustainability - The Case of Ghana

The global financial crisis and the expansionary government reaction in Africa have revamped the attention of policy makers and academics on the growth effects of large public debts. Ghana as less developed country which finances its fiscal deficit through borrowing is not an exception. This article examine the trend of Ghana’s public debt from 2000 to 2014 fiscal year and its effects on the economic growth in Ghana.

Challenges of Public Finance Sustainability in the European Union

Abstract The deterioration of the global fiscal sustainability emphasized the interest of academics and policy makers for this topic. Thus, in this article, the aim is to highlight the need for analysis of fiscal sustainability challenges through the evaluation path, identification of benchmark tax burden indicators, shocks definition and their transmission mechanism, trajectory analysis of the benchmark indicators under a baseline and alternative scenarios given the macroeconomic risks that may arise in terms of applied monetary and fiscal policies. The entire analysis will start from the debt evaluation by three criteria: solvency, liquidity and realistic adjustment criteria. The first one implies compliance with the intertemporal budget constraint, government's ability to pay the debt without renegotiation or default and that the tax burden indicators are designed either to stabilize or reduce both under a baseline scenario or alternative scenarios. The second one considers that there is sufficient funding and liquid assets to meet obligations when due, that the level and trajectory of tax burden indicators continuously facilitate market access, the debt roll over risk is low and the debt profile is balanced in terms of maturity, currency composition and investment base. The last one is based on realistic assumptions and projections in terms of macroeconomic adjustment in the primary balance, meaning that the adjustment is economically and politically feasible.

Risk profiles for re-profiling the sovereign debt of crisis countries

Purpose– This paper aims to use a risk management approach for re-profiling of sovereign debt. It develops profiles that trade off expected cost of financing alternative debt structures against their risk. The risk profiles are particularly informative for countries facing sovereign debt crisis, as they allow us to identify, with high probability, debt unsustainability. Risk profiles for two eurozone countries with excessive debt, Cyprus and Italy, were developed. In addition, risk profiles were developed for a proposal to impose debt sanctions in the Ukrainian crisis and it was shown that the financial impact could be substantial.Design/methodology/approach– Using scenario analysis, a risk measure of the sovereign’s debt – Conditional Debt-at-Risk – was developed, and an optimization model was then used to trade off expected cost of debt financing against the Conditional Debt-at-Risk. The model is applied to three diverse settings from current crises.Findings– The methodology traces informative risk profiles to identify sustainable debt structures. Interesting, although tentative, conclusions are drawn for the countries where the methodology was applied. Cyprus’s debt sustainability hinges on current International Monetary Fund (IMF) projections about gross domestic product growth and small deviations can push debt into unsustainable territory. For Italy, our analysis provides evidence of debt unsustainability. Common assumption of debt by eurozone member states could restore sustainability for Italy. Finally, it is shown how a proposal to impose debt sanctions against Russia for the Ukrainian crisis could have significant financial impact for Ukraine.Research limitations/implications– Additional work is needed to calibrate the simulation models for each country separately. Nevertheless, the direction of the results is such that more careful calibration will most likely not alter the conclusions but make them stronger instead.Practical implications– The results provide significant insights for the management of sovereign debt for Cyprus and Italy. They also show the significant positive impact on Ukrainian public finances from debt sanctions. However, the most important practical implication is to show how the proposed methodology provided a decision support tool for restructuring and rescheduling sovereign debt for crisis countries.Social implications– There is widespread acceptance that debt restructuring has been too little and too late in recent crises failing to re-establish market access in a durable way. How to develop risk profiles for alternative debt structures has been illustrated. Debt profiles that are unsustainable can be identified, with high probability, and alternative structures proposed that restore sustainability. The methodology proposed in this paper is providing a useful tool of analysis. The topic of debt relief is currently debated widely at policy circles by the IMF and the United Nations, and the analysis of this paper provides some insightful input to the debate.Originality/value– The use of scenario analysis for sovereign debt modeling and the use of an optimization model developed by the authors in previous research provide empirical analysis for three current problems in sovereign debt management. Useful insights are obtained for three important real-world cases for Cyprus, Italy and Ukraine.

Risk Management Optimization for Sovereign Debt Restructuring

Debt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed conditional Debt-at-Risk. A multi-period stochastic programming model minimizes the expected cost of debt financing subject to risk limits. It provides an operational model to handle significant aspects of debt restructuring: it collects all debt issues in a common framework, and can include contingent claims, multiple currencies and step-up or linked contractual features. Alternative debt profiles -- obtained by maturity rescheduling, interest payment concessions or nominal value haircuts -- are analyzed for their expected cost-risk tradeoffs. With a suitable re-calculation of the efficient frontier, the risk of debt unsustainability of alternative risk profiles can be ascertained with a given confidence level. The model is applied to Greece sovereign debt crisis analyzing the suitability of various proposals to restore debt sustainability.

Compressive strength Characteristic of Cowdung ash blended cement Concrete

This work reports on an investigation into the use of cowdung ash(CDA) as Supplementary Cementitious Material(SCMs) in concrete . Cement was replaced with cowdung ash (CDA) up to 30% at 5% interval. Setting times (initial and Final) and slump test were carried out on the fresh cement/CDA blended paste and concrete respectively. A total of 105mm cubes of 150mm dimensions were cast and cured in water for 7,14,28,60 and 90days and tested for compressive strength. The result of setting times indicates that as the percentage of CDA increases, the initial and final setting times increased by 12.2%-59.3% and 2.74%-43.90% respectively indicating the potential of Cowdung ash as a set retarder. The workability of concrete decreased as the cowdung ash content increases. The results on compressive strength showed a decrease with increasing cowdung ash content and an increase with curing age. There was no significant difference in compressive strength between the control concrete and those containing up to 15% Cowdung ash at 5% level of significance. A regression model showing the relationship between compressive strength, curing age and cowdung ash content was proposed which was highly significant and revealed that curing age and cowdung ash are useful predictor. eveloping countries like; Nigeria, Sudan, Republic of Be- nin, Asia-Pacific region e.t.c, are seeking to improve their inadequate infrastructure, they are faced with many challenges which include high cost of cement, diminishing national income due to the global economic recession, rising debt profile, decreas- ing foreign aid, scarcity of building materials-Cement, etc. In order to improve their infrastructure, cement (binder) and related materials are needed. Cement is the main binder in the produc- tion of concrete.The production of strong and durable concrete is fundamental to building better roads, bridges, houses, and civil infrastructure. The rising cost of cement particularly in the devel- oping countries has made it difficult for majority of the populace whom are low income earners to own houses. For instance, A 50 kg bag of cement, had, at a time, been sold for $17(N2500) in Ni- geria, while it settles for around $12.5(N2000) now. In the Repub- lic of Benin and Ghana, the same quantity sells for about $10(4500CFA) and $10.63(GH¢25.00) respectively as compared to 6$(N800.00) international price. Meanwhile, despite the huge increase in supply, the price of cement locally remains at least N2,000 per 50 kg bag, almost twice the international price of the same size of cement(1)-(4) . It can be duly noted that the exorbi- tant cost of cement production, government policies, among oth- er factors has made housing developers

An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-HIPC Low-Income Countries

We analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives with a view to applying a probabilistic approach to estimating future debt paths for those countries. We extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006). This required addressing the twin challenges of a the time period that is too short to conduct country-by-country estimations and the presence, suggested by econometric evidence, of a break–point around 2006 in the dynamics of debt accumulation. To overcome the data limitations, we pool the data and estimate a panel VAR, thus taking advantage of the large cross–section. To account for the break–point, while applying a probabilistic approach to forecasting debt paths, we use the post–break–point information so as not to bias the forecasts of debt paths. As an illustration of the approach we apply the methodology to eight countries with different debt profiles.

An Application of the "Fan-Chart Approach" to Debt Sustainability in Post-Hipc Low-Income Countries

We analyse the debt dynamics in countries that benefited from the HIPC/MDRI debt relief initiatives with a view to applying a probabilistic approach to estimating future debt paths for those countries. We extend the probabilistic approach to public debt sustainability analysis (DSA) proposed by Celasun et al. (2006). This required addressing the twin challenges of a the time period that is too short to conduct country-by-country estimations and the presence, suggested by econometric evidence, of a break–point around 2006 in the dynamics of debt accumulation. To overcome the data limitations, we pool the data and estimate a panel VAR, thus taking advantage of the large cross–section. To account for the break–point, while applying a probabilistic approach to forecasting debt paths, we use the post–break–point information so as not to bias the forecasts of debt paths. As an illustration of the approach we apply the methodology to eight countries with different debt profiles.

ESTRUTURA DE CAPITAL DE EMPRESAS DO AGRONEGÓCIO: ANÁLISE DO ENDIVIDAMENTO GERAL E FINANCEIRO NO PERÍODO DE 2004 A 2011

O estudo objetivou investigar a estrutura de capital de uma amostra composta por 23 empresas do setor do agronegócio brasileiro listadas na BMFBOVESPA, analisando o seu endividamento geral e bancário, com base nos dados oriundos das suas demonstrações financeiras padronizadas – DFPs no período de 2004 a 2011. Trata-se de uma pesquisa descritiva quanto aos seus objetivos, de natureza básica e aplicada e quantitativa na abordagem do problema, utilizando-se de técnicas estatísticas básicas e de análise de variância na análise dos dados. A partir disso, analisou-se o impacto desse endividamento nos resultados e sua possível relação com o volume de recursos financeiros disponibilizados por meio da política agrícola oficial. Embora os resultados das análises mostrem não haver mudança na estrutura de capital dessas empresas nos últimos quatro anos, a composição do endividamento se apresenta diferente, com evolução significativa no endividamento bancário, evidenciando um perfil de dívida diferente do período de 2004 a 2007. Mesmo sendo o fato coincidente com o aumento da lucratividade e rentabilidade dessas empresas a partir de 2008, não se pôde concluir, com base nos dados e análises, que o aumento do endividamento bancário tenha sido um fator determinante. O que se infere, entretanto, é que o aumento do preço das commodities pode ter sido fator relevante para o aumento da lucratividade e rentabilidade das empresas estudadas.