Equity Structure Research Articles

EVALUATION OF THE FINANCIAL POSITION OF THE ENTERPRISE AND DETERMINATION OF THE OPTIMAL MODEL OF THE PROBABILITY OF BANKRUPTCY

The article deals with the financial analysis of the companies in bankruptcy proceedings. Using the principle of invariance of factors in predicting the functions of financial analysis, it was possible to assess the parameters and structure of the optimal model of the probability of bankruptcy and to establish criteria for the financial situation of the company. All possible models and methods of probability of bankruptcy to anticipate the onset of bankruptcy with a certain degree of probability, but in predicting bankruptcy of domestic producers must be borne in mind that the weights used in the prior art methods require adjustments for regional and sectoral conditions of functioning of economic entities, and the existing trend does not reflect the full information on the dynamics and structure of equity and debt, working capital and liquidity. Thus, it is considered appropriate to use the theory of econometrics, which ensures the independence of the numerical results of the analysis and forecast of the series shift along the time axis. It needs to estimate parameters and structures of the optimal model of the probability of bankruptcy and to establish criteria for the financial position of the company on the principle of invariance in the bankruptcy proceedings. The study serves the basis for a proactive approach to the identification of the optimal model terms of probability of bankruptcy of enterprises and the financial situation of enterprises.

Fund Company's Equity Structure Effects on Fund Performance

It is well known that the equity structure of listed companies have effects on the company performances to some extent. However, the fund company is one special kind of financial enterprise and the relationship between its unique equity structure and fund performance still remains in suspense. On the basis of theoretical conjectures and results of predecessors, the development history of equity structure of Chinese fund company is analyzed and the fund evaluation methods are discussed in this paper which is based on the risk adjustment of excess return. Through sieving and accounting data, we conducted an empirical study about the effects of equity structure and regional feature on fund performance. The conclusions can be drew as that the fund company with foreign capital shows no signs of highlights and we found that concentrated shareholding and national resources are beneficial to improving fund performance level. In addition, the operating time and the fund company's location, investment fund's average tenure also have influences on fund performance.

The Term Structure of Equity Returns: Risk or Mispricing?

The term structure of equity returns is downward-sloping: stocks with high cash flow duration earn 1.10% per month lower returns than short-duration stocks in the cross section. I create a measure of cash flow duration at the firm level using balance sheet data to show this novel fact. Factor models can explain only 50% of the return differential, and the difference in returns is three times larger after periods of high investor sentiment. I use institutional ownership as a proxy for short-sale constraints, and find the negative cross-sectional relationship between cash flow duration and returns is only contained within short-sale constrained stocks.

Brand Equity and Its Elements: Case of the Lake Balaton (Hungary)

The article provides a valuable insight into understanding brand equity and its elements that endows the destination with a unique character. Using empirical data, the study seeks to identify potential brand equity items of a destination type, namely waterside area (Lake Balaton, Hungary). The innovative approach of the research is its holistic view, because it integrates the customer-based brand equity with stakeholders’ (including media and tourism professionals) perceptions. This enables a complex understanding of the researched topic, the conclusions are summarized in the Five-Stage Brand Pyramid model. The results highlight four main dimension of the brand equity: (1) the fundamental role of destination specific (waterside in this case) attributes, (2) the country of origin elements (emotional and rational benefits of domestic travel in this case), (3) the tourism products/activities, and (4) the emotional dimension. Furthermore, the research also identifies some important gap between demand and supply side. The research resulted important theoretical (structure of brand equity, need for a complex methodology) and practical (strong emotional perceptions of consumers, comprehensive analysis of tourism products/activities) implications that can be scope of further researches.

Nominal Rigidities and the Term Structures of Equity and Bond Returns

A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a technology shock, and hence their riskiness, and generate countercyclical inflation. Marginal costs gradually fall after a negative technology shock as the price level increases sluggishly, so the payoffs of short-duration dividend claims (bonds) are more (less) procyclical than the payoffs of long-duration claims (bonds). The simultaneous presence of market and home consumption habits allows for uniting nonlinear habits and a production economy without compromising the ability of the model to fit macroeconomic variables.

Nominal Rigidities and the Term Structures of Equity and Bond Returns

A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a technology shock, and hence their riskiness, and generate countercyclical inflation. Marginal costs gradually fall after a negative technology shock as the price level increases sluggishly, so the payoffs of short-duration dividend claims (bonds) are more (less) procyclical than the payoffs of long-duration claims (bonds). The simultaneous presence of market and home consumption habits allows for uniting nonlinear habits and a production economy without compromising the ability of the model to fit macroeconomic variables.

Application of the concept of destination brand equity: the example of two Polish cities

Purpose – This paper has two purposes in mind: to present the model of destination brand equity as well as its managerial implications for city brand management. Design/methodology/approach – Based on a model developed by the author in 2011 which adopts a consumer-based approach to assessing place/destination brand equity, brand equities for two Polish cities were calculated. The research was conducted in two stages on a sample of 800 Poles. Its detailed results served as a basis for a comparison of the two cities’ brand equities. Findings – The general results show the strength of the cities’ brand equities while the detailed results show the strengths and weaknesses of the specific city brands broken down to the types of respondents and according to the brand equity dimensions. Research limitations/implications – The discussion and results are based on two cities only, in one country. Practical implications – The results of the city brand equity survey provide place marketers with information about the existing structure of brand equity and the elements of brand equity which may reinforce a city brand in the consumers’ (potential and current tourists’) eyes. Such an assessment also enables to track destination brand changes over time and in relation to other city destinations. The results offer therefore city managers the knowledge of brand areas which require attention and intervention. Social implications – The model presents provides place managers with information related to the necessary social support of the residents of destination. Originality/value – The paper presents comprehensive and original research results of a research into city destination brand equity conducted on a representative national sample. A strong theoretical concept is combined with practical results.

How Customer Experience Affects the Customer-Based Brand Equity for Tourism Destinations

ABSTRACTIn this study we examine the impact of customer experience (CE) on customer-based brand equity (CBBE) for tourism destinations. Breaking down CE into the constituents of service performance, word-of-mouth(WOM), and advertising, we use a structural equation model to test survey data gathered from Mainland Chinese outbound tourists. We found that destination service performance (DSP) has the most significant impact on destination brand equity, followed by WOM. Advertising does not show a significant effect. This study also confirms the structure of destination brand equity. Based on results, this study offers some managerial insights into the effective building of destination brand equity.

The Term Structure of Returns: Facts and Theory

We summarize and extend the new literature on the term structure of equity. Short-term equity claims, or dividend strips, have on average significantly higher returns than the aggregate stock market. The returns on short-term dividend claims are risky as measured by volatility, but safe as measured by market beta. These facts are hard to reconcile with traditional macro-finance models and we provide an overview of new models that can reproduce some of these facts. We relate our evidence on dividend strips to facts about other asset classes such as nominal and corporate bonds, volatility, and housing. We conclude by discussing the broader economic implications by linking the term structure of returns to real economic decisions such as hiring and investment.

Total Factor Productivity, Foreign Direct Investment, and Entry Barriers in the Chinese Automotive Industry

ABSTRACTWe explore three questions on foreign direct investment (FDI): (1) What are the differences in entry barriers for foreign, public, and private investors? (2) What are the effects of past productivity levels on future foreign direct investment (FDI) decisions? (3) What is the effect of equity structure on future total factor productivity (TFP) levels? The empirical results based on a monopolistic competition model and using a firm-level data set from the Chinese automobile industry suggest that foreign investors face higher entry barriers and react stronger to past TFP levels. FDI is also found to improve future TFP more than other forms of investment. Finally, World Trade Organization (WTO) accession is found to reduce entry barriers for foreign and domestic private investors while increasing entry barriers for public investors.

Risk diversification: a study of persistence with a filtered correlation-network approach

In this paper, we study the evolution over time of the correlation structure of equity returns by means of a filtered-network approach and use this to investigate persistency and recurrences and their implications for risk-diversification strategies. We build dynamically planar maximally filtered graphs from the correlation structure over a rolling window and study the persistence of the associated directed bubble hierarchical tree (DBHT) clustering structure.We observe that the DBHT clustering structure is quite stable during the early 2000s, becoming gradually less persistent before the unfolding of the 2007-8 crisis. The correlation structure eventually recovers persistence in the aftermath of the crisis, setting up a new phase, distinct from the precrisis structure, in which the market structure is less related to industrial sector activity. We observe that the correlation structure is again losing persistence, which indicates the building up of another, different phase. Such dynamical changes in persistency and its occurrence at the unfolding of financial crises raise concerns about the effectiveness of correlation-based portfolio management tools for risk diversification.

Loss aversion, habit formation and the term structures of equity and interest rates

I propose a consumption-based asset pricing model that jointly explains the high equity premium, the counter-cyclical behaviour of stock returns, the upward-sloping term structure of interest rates and the downward-sloping term structure of equity. The driving forces behind these results are loss aversion and time-varying habits. The high premium is the reward for holding assets that deliver low returns when consumption descends below habits. The term structure of interests rates is upward-sloping because long-term bonds are more sensitive to fluctuations of discount rates. The term structure of equity is downward-sloping because long-horizon equity gives higher chances to beat consumption habits than short-horizon equity.

Multistage Effort and the Equity Structure of Venture Investment Based on Reciprocity Motivation

For venture capitals, it is a long process from an entry to its exit. In this paper, the activity of venture investment will be divided into multistages. And, according to the effort level entrepreneurs will choose, the venture capitalists will provide an equity structure at the very beginning. As a benchmark for comparison, we will establish two game models on multistage investment under perfect rationality: a cooperative game model and a noncooperative one. Further, as a cause of pervasive psychological preference behavior, reciprocity motivation will influence the behavior of the decision-makers. Given this situation, Rabin’s reciprocity motivation theory will be applied to the multistage game model of the venture investment, and multistage behavior game model will be established as well, based on the reciprocity motivation. By looking into the theoretical derivations and simulation studies, we find that if venture capitalists and entrepreneurs both have reciprocity preferences, their utility would have been Pareto improvement compared with those under perfect rationality.

Nominal Rigidities and the Term Structures of Equity and Bond Returns

A downward-sloping term structure of equity and upward-sloping term structures of interest rates arise endogenously in a general-equilibrium model with nominal rigidities and nonlinear habits in consumption. Countercyclical marginal costs exacerbate the procyclicality of dividends after a technology shock, and hence their riskiness, and generate countercyclical inflation. Marginal costs gradually fall after a negative technology shock as the price level increases sluggishly, so the payoffs of short-duration dividend claims (bonds) are more (less) procyclical than the payoffs of long-duration claims (bonds). The simultaneous presence of market and home consumption habits allows for uniting nonlinear habits and a production economy without compromising the ability of the model to fit macroeconomic variables.

A Methodological Framework for Projecting Brand Equity: Putting Back the Imaginary into Brand Knowledge Structures

The aim of this paper is to outline a methodological framework for Brand Equity planning with structuralist rhetorical semiotics. By drawing on the connectionist conceptual model of the brand generative trajectory of signification (Rossolatos 2013a, 2013g) it will be displayed in a step-wise fashion how a set of nuclear semes and classemes or an intended semic structure that underlies manifest discursive structures may be projected by its internal stakeholders (i.e., a brand management team, an account planning team or a marketing research team) with view to attaining differential brand associations. The suggested methodological framework focuses on the strength and uniqueness of brand associations as integral aspects of a brand’s equity structure and comprises a set of calculi that aim at addressing from a brand textuality point of view how associations may be systematically linked to their key sources with an emphasis on the ad filmic text. The propounded methodology is exemplified by recourse to a corpus of ad filmic texts from the major brand players in the UK cereals market. The argumentative thrust is intent on demonstrating that structuralist rhetorical semiotics is not only useful for analyzing/interpreting brand texts, but, moreover, for constructing and for managing them over time. This demonstration is deployed by adopting a synchronic/diachronic and intra (ad) filmic / inter (ad) filmic approach to the formation of brand associations that make up a projected Brand Equity structure, in the context of embedded product category dynamics.

Investor Information, Long-Run Risk, and the Term Structure of Equity

We study the role of information in asset-pricing models with long-run cash flow risk. When investors can distinguish short- from long-run consumption risks (full information), the model generates a sizable equity risk premium only if the equity term structure slopes up, contrary to the data. In general, the short- and long-run components are unidentified. We propose a sparsity-based bounded rationality model of long-run risk that is both parsimonious and fully identified from historical data. In contrast to full information, the model generates a sizable market risk premium simultaneously with a downward-sloping equity term structure, as in the data.

The structure of equity markets across countries: Scarcity and stock valuations

We build a dataset of the industrial composition of the stock market and the economy for 26 countries. This composition is far from representative of that of the economy, particularly in less-developed markets. Based on this, we build a measure of scarcity of investable securities and show that industries that are underrepresented relative to the economy exhibit higher valuations. Moreover, valuation differences are shown to be more important when informational issues make it more difficult for firms to get listed.

Equity Structure of MNE Affiliates and Scope of Their Activities: Distinguishing the Incentive and Control Effects of Ownership

This study examines the effects of an MNE's equity ownership on the scope of its affiliate's activities. We focus on architectural design and engineering (ADE) activities and distinguish them from other activities because ADE capabilities are often core to the MNE's competitiveness. Our empirical analysis, set in the Chinese automobile industry, reveals that the MNE's equity ownership tends to narrow the scope of an affiliate's ADE activities while widening the scope of other knowledge‐intensive activities the two parties undertake jointly. The results suggest that equity ownership enables an MNE to control more effectively the scope of its affiliate's ADE activities for better protection against leakage and, at the same time, motivates the MNE to perform a broader spectrum of other knowledge‐intensive activities at the affiliate.

Culture and Corporate Governance: The Influence of Language and Religion in Switzerland

We investigate the effect of culture on corporate governance using the extraordinary opportunity that the corporate landscape of Switzerland provides. Within a single institutional framework (e.g., Swiss federal corporate law), we use language (German and French) and religion (Roman Catholicism and Protestantism) as proxies for culture. These groups share a distinct set of values particularly in their tolerance for hierarchical structures. We observe that firms in Swiss–French areas and firms in Roman Catholic cantons are more likely to have one-tier boards, whereas two-tier boards are more prevalent in Swiss–German areas and Protestant cantons. Furthermore, board composition is significantly driven by language. In contrast, ownership and equity structure are not significantly related to culture.

Effect of foreign ownership on cost of borrowing: Evidence from small and medium-sized enterprises in China

This article draws upon a sample of more than 27,000 Chinese small and medium-sized enterprises (SMEs) to explore whether and how foreign equity investment in local SMEs affects the cost of debt. The results show that foreign ownership lowers the cost of borrowing for Chinese SMEs, and that this effect is stronger in more developed provinces. These findings contribute to evidence regarding the halo effect of foreign direct investment in emerging markets. This study also expands pecking order theory by demonstrating the signalling effect of equity structure characteristics on debt financing.