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36 posts on "Corporate Finance"
October 12, 2016

Let the Light In: How Financial Reporting and Transparency Improve Corporate Governance

Financial reporting is valuable because corporate governance—which we view as the set of contracts that help align managers’ interests with those of shareholders—can be more efficient when the parties commit themselves to a more transparent information environment. This is a key theme in our article The Role of Financial Reporting and Transparency in Corporate Governance, which reviews recent literature on the part played by financial reporting in resolving agency conflicts among managers, directors, and shareholders. In this post, we highlight some of the governance issues and recommendations discussed in the article, and we focus on how information asymmetries can create agency conflicts.

October 5, 2016

Why Did the Recent Oil Price Declines Affect Bond Prices of Non‑Energy Companies?

Oil prices plunged 65 percent between July 2014 and December of the following year. During this period, the yield spread—the yield of a corporate bond minus the yield of a Treasury bond of the same maturity—of energy companies shot up, indicating increased credit risk. Surprisingly, the yield spread of non‑energy firms also rose even though many non‑energy firms might be expected to benefit from lower energy‑related costs. In this blog post, we examine this counterintuitive result. We find evidence of a liquidity spillover, whereby the bonds of more liquid non‑energy firms had to be sold to satisfy investors who withdrew from bond funds in response to falling energy prices.

February 19, 2016

Quantifying Potential Spillovers from Runs on High‑Yield Funds

On December 9, 2015, Third Avenue Focused Credit Fund (FCF) announced a “Plan of Liquidation,” effectively halting investor redemptions.

June 22, 2015

Becoming a Large Bank? It’s Not Easy

Rajlakshmi De and Hamid Mehran Size is usually seen as the leading indication of the costs that a bank failure would impose on society. As a result, the Dodd-Frank Act of 2010 requires banks to have adequate capital and liquidity to mitigate default risk and imposes additional requirements on larger banks to enhance their safety. […]

June 1, 2015

What Drives Buyout Booms and Busts?

Valentin Haddad, Erik Loualiche, and Matthew Plosser Buyout activity by financial investors fluctuates substantially over time. In the United States, peak years result in close to one hundred public-to-private buyout transactions and trough years in as few as ten. The typical buyout is primarily funded by debt, hence the term “leveraged buyout” (or LBO). As […]

January 5, 2015

Worker Flows in Banking Regulation

In the aftermath of the 2008 financial crisis, job transitions of personnel in banking supervision and regulation between the public and private sectors—often labeled the revolving door—have come under intense scrutiny and have been blamed by certain economists (Johnson and Kwak), legal scholars (John Coffee in the Financial Times), and policymakers (Dodd-Frank Act of 2010, Section 968) for distorting regulators’ actions in favor of banks.

Posted at 7:00 am in Banks, Corporate Finance, Regulation | Permalink
November 3, 2014

Evolution of S‑Corporation Banks

Commercial banks didn’t become eligible for S-Corporation status until 1997, when President Bill Clinton signed legislation (the Small Business Job Protection Act of 1996) that allowed commercial banks to select S-Corporation as their preferred tax status.

April 3, 2014

The Failure Resolution of Lehman Brothers

The bankruptcy of Lehman Brothers and its 209 registered subsidiaries was one of the largest and most complex in history, with more than $1 trillion of creditor claims in the United States alone, four bodies of applicable U.S. laws, and insolvency proceedings that involved over eighty international legal jurisdictions.

March 25, 2014

Do Big Banks Have Lower Operating Costs?

Despite recent financial reforms, there is still widespread concern that large banking firms remain “too big to fail.”

August 28, 2013

U.S. Leveraged Buyouts: The Importance of Financial Visibility

In global finance, leveraged buyouts (LBOs) are an important tool for restructuring corporations.

Posted at 7:00 am in Corporate Finance | Permalink
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Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

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