Tag Archives: ipo

A definition of materiality offers preparers and users of financial statements guidance about what are unimportant (immaterial) misrepresentations and what are important (material) misrepresentations. The U.S. Supreme Court defines information as material if there is “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’… Read More »

Corporate alliances and mergers and acquisitions (M&As) are the alternative strategies for external growth that expand firms’ boundaries. A recent report by KPMG suggests that about half of the responding CEOs said they plan to form a new alliance to enhance their corporate performance and growth, while four out of ten plan to make a new acquisition.… Read More »

The Federal Deposit Insurance Corporation (FDIC or Corporation) has recently made news in typical Washington, DC fashion: a fight over power.  A conflict between the FDIC Chairperson, a Trump Administration holdover, and the three members of the FDIC board – appointed by Democratic Administrations – over bank merger review protocols led to the Chairperson’s resignation.[1]  Accordingly, the… Read More »

Institutional loans have risen dramatically over the past couple of decades and have become one of the most important avenues for firms to obtain credit. The amount of new issuance of institutional loans increased from less than $100 billion in the early 2000s to over $600 billion in recent years. Underwriters (i.e., lead banks) play… Read More »

Many of the central banks pursuing the goal of developing a Central Bank Digital Currency (CBDC), including early leaders, such as the Swedish Riksbank, are finding that designing a workable CBDC is proving extremely difficult. Many solutions would introduce significant changes, and thus considerable operational risks, into their respective banking systems; so much so, that the Bank for… Read More »

Renegotiation is a crucial element in private debt contracting. Unlike public bonds, whose vast dispersed ownership structure makes renegotiation impossible to coordinate, private loans are typically issued by either one lender or a coterie of lenders (also known as a loan syndicate)—so renegotiating these contracts is a lot easier. Indeed, loan contracts are frequently amended… Read More »

There is ample evidence that some investors are inattentive and cause stock prices to fluctuate in ways that disagree with the rational framework. However, a less studied question in the behavioral finance literature is how firm managers respond to fluctuations in stock prices that stem from such irrational trading behaviors. In our recent paper, we exploit a… Read More »

Corporate syndicated loan contracts frequently include financial covenants, namely provisions that require a borrowing corporation to periodically achieve specified accounting-based performance objectives or maintain specified accounting-based capital requirements. Practitioners, academics, and policymakers are interested in these provisions because they mitigate costly agency frictions that arise between borrowers and lenders, thereby enhancing the flow of capital… Read More »

Under US securities laws, the Securities and Exchange Commission (SEC) regulates and monitors the financial reporting and disclosure of SEC registrants (companies) with the aims of increasing corporate transparency and protecting investors. Nonetheless, companies’ interests are also considered under the securities laws, which allow companies to make confidential treatment requests to redact certain information from… Read More »