Milind Shrikhande

Economic exposure and debt financing choice

In recent years, firms in several industrialized economies have globalized. In this paper, it is shown that the economic exposure of such non-financial firms plays an important role in their long-term debt financing choice. When firms face positive economic exposure, eurocurrency debt denominated in foreign currency dominates foreign debt as well as domestic debt. However, when firms face negative economic exposure, foreign debt dominates other forms of debt financing as the value-maximizing choice for the shareholders of the firm. If firms are not exposed, domestic debt, foreign-currency debt, and eurocurrency debt are equivalent financing alternatives, in the absence of bankruptcy costs.

Do Country Specific Bankruptcy Codes Determine Long-term Financial Performance? The Case of Metallgesellschaft AG and Columbia Gas System

In this paper, we examine the impact of financial distress, the bankruptcy code, and related procedures on the long-term performance of two companies engaged in similar businesses across two countries. Both the companies were driven into bankruptcy as a result of unanticipated changes in energy prices. Though the resolution of bankruptcy of the US firm took a longer time, the post-reorganization performance of the firm has been excellent. In contrast, the post-reorganization performance of the German firm, which emerged out of bankruptcy in 2 weeks, has been poor. These results are consistent with the view that one of the important determinants of post-bankruptcy performance of a firm is more likely to be the underlying economic fundamentals rather than the country specific bankruptcy code through which the firm reorganizes.

Managing the Risk of Loans with Basis Risk: Sell, Hedge, or Do Nothing?

Individual loans contain a bundle of risks including credit risk and interest rate risk. This paper focuses on the general issue of banks’ management of these various risks in a model with costly loan monitoring and convex taxes. The results suggest that if the hedge is not subject to basis risk, then hedging dominates a strategy of “do nothing.” Whether hedging dominates loan sales depends on whether it induces reduced monitoring, the net benefit of monitoring, and the reduced tax burden of eliminating all risk via selling. If the hedge is subject to basis risk, then a “do nothing” strategy may dominate the hedging and loan sales strategy for risk neutral banks. A number of empirical implications follow from the analytical and numerical results in the paper.

Evaluating Characteristics of Top and Bottom Performance: Online Versus In-Class

ABSTRACT This study compared the characteristics of students who excel (those in the top quarter of their class) and students who merely survive (bottom quarter of class) when attending a course either in-class or online. Student characteristics such as personal attributes (learning styles and gender), individual competence (grade point average), and major (nonquantitative or quantitative) may influence performance differently in each setting. This study shows that low-performing students, who typically need the most guidance in an online course, do in fact have traits that differ from those of low-performing students in-class. Accordingly, it is imperative that instructors develop proper materials and evaluation procedures aimed at helping low-achieving students succeed. However, because online education lacks face-to-face interaction, faculty may not realize that these differences exist.