The University of Southampton
University of Southampton Institutional Repository

Capital structure, asset redeployability, top-management compensation and credit risk measurements: The impact of the on and off-balance sheet financing

Capital structure, asset redeployability, top-management compensation and credit risk measurements: The impact of the on and off-balance sheet financing
Capital structure, asset redeployability, top-management compensation and credit risk measurements: The impact of the on and off-balance sheet financing
With the existence of loopholes in the accounting rules, firms have been able to keep many assets and their corresponding debt off the balance sheets, thus, hiding the true value of debt and firm financial risk (Ketz (2003), Franzen et al. (2009) and Koller et al. (2010)). Graham and Leary (2011) point out that one of the noticeable gaps in the capital structure research area is the mis measurement of leverage when off-balance sheet financing is excluded. Therefore, this thesis bridges the mis-measurement gap by adjusting leverage for three important off-balance sheet debt equivalents and two on-balance sheet ones. Moreover, this study investigates the relationships between asset redeployability, top-management compensation and both adjusted and non-adjusted leverage as well as examines whether these on and off-balance sheet debt equivalents are reflecte in credit risk measurements. Focusing on large US firms from 1996 to 2010, my results show that the off-balance sheet debt equivalents account for significantamounts over total reported debt. Also,there is a considerable gap between reported debt and adjusted debt for debt equivalents, and this gap seems to increase sharply over time. I suggest that these debt equivalents should be considered carefully; otherwise, firms' financial health can be misinterpreted. In addition, I document different results for adjusted and non-adjusted leverage which indicates that existing theories related to the conventional capital structure might not be able to give the same explanations to the adjusted one. Moreover, credit risk measurements do not incorporate all of these debt equivalents in their credit risk assessments; which implies that the market may not be fully aware of the importance of these debt equivalents.
Nguyen, Quyen
59080ac1-d596-4752-b188-1f5daee6cbcf
Nguyen, Quyen
59080ac1-d596-4752-b188-1f5daee6cbcf
Choudhry, Taufiq
6fc3ceb8-8103-4017-b3b5-2d38efa57728
KLING, GERHARD
feea1f9e-c49a-4d9c-b688-ec839cef9624

Nguyen, Quyen (2014) Capital structure, asset redeployability, top-management compensation and credit risk measurements: The impact of the on and off-balance sheet financing. University of Southampton, Southampton Business School, Doctoral Thesis, 248pp.

Record type: Thesis (Doctoral)

Abstract

With the existence of loopholes in the accounting rules, firms have been able to keep many assets and their corresponding debt off the balance sheets, thus, hiding the true value of debt and firm financial risk (Ketz (2003), Franzen et al. (2009) and Koller et al. (2010)). Graham and Leary (2011) point out that one of the noticeable gaps in the capital structure research area is the mis measurement of leverage when off-balance sheet financing is excluded. Therefore, this thesis bridges the mis-measurement gap by adjusting leverage for three important off-balance sheet debt equivalents and two on-balance sheet ones. Moreover, this study investigates the relationships between asset redeployability, top-management compensation and both adjusted and non-adjusted leverage as well as examines whether these on and off-balance sheet debt equivalents are reflecte in credit risk measurements. Focusing on large US firms from 1996 to 2010, my results show that the off-balance sheet debt equivalents account for significantamounts over total reported debt. Also,there is a considerable gap between reported debt and adjusted debt for debt equivalents, and this gap seems to increase sharply over time. I suggest that these debt equivalents should be considered carefully; otherwise, firms' financial health can be misinterpreted. In addition, I document different results for adjusted and non-adjusted leverage which indicates that existing theories related to the conventional capital structure might not be able to give the same explanations to the adjusted one. Moreover, credit risk measurements do not incorporate all of these debt equivalents in their credit risk assessments; which implies that the market may not be fully aware of the importance of these debt equivalents.

PDF
Final PhD thesis - Quyen Nguyen.pdf - Other
Download (2MB)

More information

Published date: November 2014
Organisations: University of Southampton, Southampton Business School

Identifiers

Local EPrints ID: 372411
URI: http://eprints.soton.ac.uk/id/eprint/372411
PURE UUID: d5774753-c431-4fcb-8127-9259439eedd2
ORCID for Taufiq Choudhry: ORCID iD orcid.org/0000-0002-0463-0662

Catalogue record

Date deposited: 13 Jan 2015 14:39
Last modified: 24 Jul 2019 00:36

Export record

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×