We consider a setting where a firm delegates an investment decision and, subsequently, a sales decision to a privately informed manager. For both decisions corporate income taxes have real effects. We show that compensating the manager based on pre-tax residual income can ensure after-tax NPVmaximization (‘‘goal congruence’’) for each decision problem in isolation. However, this metric fails if...

This paper explores liquidity risk in a system of interconnected financial institutions when these institutions are subject to regulatory solvency constraints and mark their assets to market. When the market’s demand for illiquid assets is less than perfectly elastic, sales by distressed institutions depress the market prices of such assets. Marking to market of the asset book can induce a furt...

Capital Asset Pricing Model (CAPM) provides an equilibrium linear relationship between expected return and risk of an asset. The purpose of this paper is to investigate a risk-return relationship within the CAPM framework. The study also aims at exploring whether CAPM is a good indicator of asset pricing in Bangladesh. For this study, a period 19992003 have been considered. Fama-French [1992] m...

Models of bank loan sales often appeal to regulatory constraints to motivate this off-balance-sheet activity. Here, we present a market-based model of bank asset sales in which information asymmetries create the incentive for unregulated banks to originate and sell loans to other banks, rather than fund them with deposit liabilities. Banks have a comparative advantage in locating and screening ...

U.S. stock portfolios sorted on size, momentum, transaction costs, M/B, I/A and ROA ratios, and industry classification show considerable levels and variation of return predictability, inconsistent with asset pricing models. This means that a predictable risk premium is not equal to compensation for systematic risk as implied by asset pricing theory (Kirby 1998). We show that introducing market...

The purpose of this study was to identify and analyze the determinants capital structure in industries on Indonesia Stock Exchange listed LQ 45. This research uses a quantitative approach using panel data. sampling method is purposive sampling. secondary data originating from industrial financial reports published for 2017-2019 period. results show that asset proxied by Fixed Asset Ratio has po...

This study aims to determine the effect of sales growth, asset structure, company size and stock price on capital structure with profitability as a moderating variable in manufacturing companies listed Indonesia Stock Exchange 2018-2020 both partially simultaneously. research method is descriptive quantitative multiple linear regression analysis. The population this has all for period, namely 1...