Gabriel de la Fuente

Capital Budgeting Practices in Spain

This paper seeks to shed further light on the capital budgeting techniques used by Spanish companies. Our paper posits that the gap between theory and practice might be related to the nature of sources of value and to the efficiency of mechanisms aligning managerial and shareholder incentives, rather than to resource restrictions or model misinterpretation. We analyze data from a survey conducted in 2011, the final sample comprising 140 non-financial Spanish firms. Our findings show a behaviour pattern similar to that reported in prior research for firms in other countries. Particularly noteworthy is that payback appears to be the most widely used tool, while real options are used relatively little. Our results confirm that size and industry are related to the frequency of use of certain capital budgeting techniques. Further, we find that the relevance of growth opportunities and flexibility is an important factor explaining the use of real options.

Growth opportunities and the effect of corporate diversification on value

Abstract This paper provides empirical evidence of how a firms growth opportunities shape the diversification–value relationship on a sample of U.S. companies between 1998 and 2010. Our findings suggest that the negative relationship between diversification and a firms value may reverse at high levels of diversification, and that such a U-form diversification–value relation is partly mediated by a firms growth opportunities. Results are robust to various model specifications and after controlling for endogenous self-selection of the diversification decision.

The effect of the financial crisis on the value of corporate diversification in Spanish firms

This paper examines the impact of the financial crisis on the value of corporate diversification in a civil law country such as Spain. The financial crisis offers a natural research experiment to test the effect of a credit-constrained environment on benefits and costs emerging from internal capital markets. Using a panel of Spanish listed firms over the 1997–2012 period and controlling for endogeneity, we find that the financial crisis negatively moderates the impact of industrial diversification on a firm’s value. This result supports the idea that financial constraints are likely to exacerbate agency costs within internal capital markets in civil law countries over financial benefits, due to a weaker protection of investors’ rights.

Capital structure decisions: What Spanish CFOs think

The way business practice adjusts to the models proposed by financial theory has been under moderate yet constant scrutiny from the academic world. The purpose of this paper is to contribute to this line of research by showing CFOs’ perceptions of Spanish companies with regard to their capital structure decisions.,The empirical approach is examined using information gathered through a survey answered by 140 CFOs of Spanish companies during 2011. Results are obtained from mean difference tests and ordered probit estimations.,The results of the paper show that managers attach importance to establishing and monitoring a target debt ratio and the capacity to maintain additional debt in order to provide financial flexibility. In addition, CFOs prefer internal financing to external, using debt when internal funds do not allow investments to be funded.,On the whole, the results of this research show that trade-off and pecking order theories are not alternative views of the same problem, but represent complementary approaches of how companies define their capital structures.,El modo en que la practica empresarial se ajusta a los modelos propuestos por la teoria financiera ha sido objeto de un timido pero constante escrutinio por parte del mundo academico. En este trabajo, se contribuye a esta linea de investigacion mediante la exploracion de las percepciones que los directivos financieros de empresas espanolas mantienen sobre sus decisiones de estructura de capital.,El analisis empirico explota las respuestas de 140 directores financieros de empresas espanolas a una encuesta realizada en el ano 2011. Los principales resultados son obtenidos de los tests de diferencias de medias y la estimacion de modelos Probit ordenado.,Nuestros resultados muestran que los directivos financieros consideran importante el establecimiento y persecucion de un objetivo de deuda objetivo y la flexibilidad financiera que otorga el mantenimiento de capacidad de endeudamiento adicional. Ademas los directores financieros prefieren utilizar los recursos generados internamente antes que la financiacion externa, utilizando deuda cuando los fondos internos son insuficientes para financiar sus inversiones.,En conjunto, los resultados de nuestra investigacion muestran que la teoria del trade-off y del pecking-order no son soluciones alternativas de un mismo problema, sino enfoques complementarios sobre las decisiones de estructura de capital adoptadas en la practica.