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European Managerial Perceptions of the Net Benefits of Foreign Stock Listings

This study surveys the European managers on the costs, benefits, and net benefits of foreign listing. Increase in prestige and visibility, and growth in shareholders are perceived as the major benefits, and the costs of public relations and legal fees are cited as the major costs by the managers. While a majority of managers (60%) perceive that benefits outweigh the costs of foreign listing, about 30% also view the net benefits to be negative. Perceived net benefits are positively related to the increase in the total trading volume after foreign listing, the financial disclosure levels of the firm, and the dual listing on both the US and European foreign exchanges. Without the influence of these factors, the perceived net benefits are negative.

Financial flexibility and the impact of the global financial crisis: Evidence from France

Purpose - The purpose of this study is to gain some insights into how managers perceive and achieve financial flexibility and its value in coping with the 2008 global financial crisis. The study focuses on the following questions: What are the sources and measures of financial flexibility? Do financially flexible firms suffer a lower impact from the crisis? Is financial flexibility related to business flexibility? and Is financial flexibility important for the firms capital structure decision? Design/methodology/approach - This paper employs two methods: a questionnaire survey and interviews with chief financial officers (CFOs). The results are used to examine the relation between the firms financial flexibility level and the impact of the global financial crisis on its liquidity, investments, capital structure and business operations. The results are used to analyze the robustness of different financial flexibility measures constructed from the survey data to identify an appropriate financial flexibility measure. Findings - The main finding is that firms with high financial flexibility suffer lower impact from the crisis. The results show that firms with greater internal financing are likely to have lower leverage, higher cash ratios, and suffer a lower impact from the crisis on their business operations. The analysis indicates that an index based on the firms leverage, liquidity, and operating ratios, similar to the Altman Z-score, might be a better financial flexibility measure than long-term debt ratio. The evidence also suggests that financial flexibility is a part of the firms business strategy and is important for its capital structure decisions. Originality/value - A major challenge for researchers is how to measure the firms financial flexibility level, as it is unobservable and difficult to quantify. The innovation of this paper is to directly ask managers about the firms financial flexibility, from both internal and external financing, construct several financial flexibility variables based on the survey data, and examine their correlations with the global financial crisis impact, to identify a robust financial flexibility measure. The research also provides unique data to investigate the value of financial flexibility during a severe credit crisis.

Financial flexibility and the impact of the global financial crisis

Purpose – The purpose of this study is to gain some insights into how managers perceive and achieve financial flexibility and its value in coping with the 2008 global financial crisis. The study focuses on the following questions: What are the sources and measures of financial flexibility? Do financially flexible firms suffer a lower impact from the crisis? Is financial flexibility related to business flexibility? and Is financial flexibility important for the firms capital structure decision?Design/methodology/approach – This paper employs two methods: a questionnaire survey and interviews with chief financial officers (CFOs). The results are used to examine the relation between the firms financial flexibility level and the impact of the global financial crisis on its liquidity, investments, capital structure and business operations. The results are used to analyze the robustness of different financial flexibility measures constructed from the survey data to identify an appropriate financial flexibilit...

Survey evidence: what do we know about European and US firms’ motivations for going public?

The Handbook of Research on IPOs provides a comprehensive review of the emerging trends and directions in the global initial public offerings (IPO) markets. The empirical evidence included in the book covers Europe, the US and the Far East, and presents a truly global perspective of IPO markets around the world and at the different stages of the entire IPO process.

Firm Valuation with Cash-Flow@Risk

We propose in this article an alternative approach to the Discounted Cash-Flow model based on the concept of economic capital developed by Merton and Perold (1993). We define what we call cash-flow@risk that consists in stripping future cash-flows, each cut into two parts, a low risk part (supporting debt funding within rating objective) and a high risk part (to be funded with equity), and discounted at the corresponding appropriate discount rates of debt and equity. Compared with the DCF approach, our model presents several advantages. Firstly, valuation has to depend much on risk and on the cost of risk. Having set a target of risk and properly measured the cost of risk will lead to a specific and better valuation. Secondly, we consider that the firm leverage is a key issue and has to be taken into account in the valuation process. Lastly, we show that the firm can reduce its risk and its economic capital need, holding two or more business lines presenting a correlation coefficient lower than one.

Multinational Cost of Capital and Capital Structure

An MNC fi nances its operations by using a capital structure (proportion of debt versus equity fi nancing) that can minimize its cost of capital. By minimizing the cost of capital used to fi nance a given level of operations, fi nancial managers minimize the required rate of return necessary to make the foreign operations feasible and therefore maximize the value of those operations. The specific objectives of this chapter are to:

Valuing Companies with Cash-Flow@Risk

The classic DCF approach to capital budgeting - the one that MBA students in the worlds top business schools have been taught for the last 30 years - begins with the assumption that the corporate investment decision is “independent of” the financing decision. That is, the value of a given investment opportunity should not be affected by how a company is financed, whether mainly with debt or with equity. A corollary of this capital structure “irrelevance” proposition says that a companys investment decision should also not be influenced by its risk management policy - by whether a company hedges its various price exposures or chooses to leave them unhedged. In this article, the authors - one of whom is the CFO of the French high-tech firm Gemalto - propose a practical alternative to DCF that is based on a concept they call “cash-flow@risk.” Implementation of the concept involves dividing expected future cash flow into two components: a low-risk part, or “certainty equivalent,” and a high-risk part. The two cash flow streams are discounted at different rates (corresponding to debt and equity) when estimating their value. The concept of cash-flow@risk derives directly from, and is fully consistent with, the concept of economic capital that was developed by Robert Merton and Andre Perold in the early 1990s and that has become the basis of Value at Risk (or VaR) capital allocation systems now used at most financial institutions. But because the approach in this article focuses on the volatility of operating cash flows instead of asset values, the authors argue that an internal capital allocation system based on cash-flow@risk is likely to be much more suitable than VaR for industrial companies.