Karlyn Mitchell

The Call, Sinking Fund, and Term-To-Maturity Features of Corporate Bonds: An Empirical Investigation

Do bond-issuing firms attempt to choose the call, sinking fund, and term-to-maturity features of bonds to improve shareholder wealth? This paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model. The model is estimated on a sample of bonds issued between 1982 and 1986. Model estimates show that a bonds call, sinking fund, and term-to-maturity features are statistically related to the issuing firms retention ratio, ratio of convertible to long-term debt, two-year change in net operating income, and whether the firm is listed on the NYSE and included in the S&P400. These findings support the view that firms financing highquality projects, but facing information asymmetries, choose shorter-term (medium-term) callable bonds with and without the sinking fund feature.

Discount window borrowing across federal reserve districts: Evidence under contemporaneous reserve accounting☆

Abstract In recent years, bank borrowing at the discount window has been less reliably related to the spread between the Federal funds rate and the discount rate, complicating the implementation of the borrowed reserves targeting procedure of the Federal Reserve. This paper investigates borrowing across Federal Reserve districts to see if there are significant differences in borrowing behavior across bank size and discount window administrations. The results suggest that borrowing behavior does differ across districts, that standard borrowing models are least satisfactory in explaining the borrowing of large banks, and that borrowing behavior changed after the 1987 stock market crash. The gains in explanatory power from disaggregation, however, are not large.

Interest rate uncertainty and corporate debt maturity

Abstract This paper presents an expected utility model of the corporate debt maturity decision to help explain the 20-year decline in the average maturity of U.S. corporate sector debt. Simulations of the model suggest that increasing uncertainty about future nominal interest rates caused the decline in debt maturity: managers substituted away from long-term debt to avoid rolling over the debt at highly uncertain future rates.

Bank dependency and banker directors

Purpose – Directors play a hard-to-quantify but critical role in the success of corporations. Outside directors supplement the firm-specific knowledge of inside directors by providing expertise and monitoring. Prior research finds that outside directors who are commercial bankers can be both beneficial and costly to large, non-financial corporations. Smaller, bank-dependent corporations should benefit more than large firms from the services banker directors provide, but may also be more prone to the costs they can impose. The purpose of this paper is to investigate the influence of bank dependency on appointments of banker directors. Design/methodology/approach – The author estimates models relating the probability of a first-time banker-director appointment to proxies of bank dependency on data for a matched sample of firms with and without banker directors drawn from a size-representative sample of Compustat firms. Findings – Bank-dependent firms are less likely to appoint bankers as directors than bank...