Pablo de Andrés

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.

Independent versus non-independent outside directors in European companies: Who has a say on CEO compensation?

Our study reveals how two separate dimensions of board composition—the proportion of independent directors and of non-independent directors—influence CEO compensation in Western European firms. Controlling for the simultaneous determination of CEO pay structure and board design, we find that firms with a higher proportion of non-independent outsiders on their boards pay less direct compensation (salary + bonus) and less equity-linked compensation to their CEOs. By contrast, CEOs working for firms with more independent boards receive more equity based-pay. When we control for the fact that equity linked is not granted systematically in Europe we find that firms with more independent directors on the board tend to grant equity-linked compensation more often than firms with more non independent outside directors. Our results challenge the commonly accepted view of independent directors as safeguards of shareholder value, uncovering the relevance of non-independent outsiders for pay moderation and incentives.

POLITIZACIÓN Y PERICIA FINANCIERA EN LAS CAJAS DE AHORROS ESPAÑOLAS. PATRONES EN LA CONFIGURACIÓN DE SUS CONSEJOS

This study examines the politicization and financial knowledge-experience of the boards of directors of Spanish savings banks. To do this, we build a database with the biographic information of directors during the period 2004-2010. The results of the cluster analysis show the existence of four types of boards, depending on the politicization and the financial expertise of its members. Furthermore, we find that savings banks with higher financial expertise in their boards have higher levels of financial solvency.

Inside the Board of Spanish Saving Banks

The chapter presents the first in-depth descriptive analysis of the Spanish Saving Banks’ boards in terms of size, independence, and quality (knowledge, experience and diversity). We build an original handmade database with the biographical profile of 1525 different directors for the entire population of Spanish savings banks during the period of 2004–2010. Our results show that on average, their board was larger with less knowledge in business and less professional experience in banking but more gender diversity than the private banks analyzed in other studies. These board characteristics barely changed during the period of crisis. We also find that 52% of board members are designated by governments or affiliated with political parties. This figure seems to confirm that although the Spanish savings banks had the status of private entities, the real fact is that they were primarily controlled by politicians. Finally, we show several important differences in the board composition, depending on the savings banks’ financial characteristics.

European banks’ executive remuneration under the new European Union regulation

We review how the new European regulation of bank executive compensation could affect the future of banking in Europe. Although there is no conclusive empirical evidence on the relation between bank executive remuneration and the financial crisis, authorities have intensively regulated the compensation of bank managers to eliminate risk-taking incentives in the financial industry. However, the new regulation could have unintended consequences of creating an adverse selection problem at European banks, reducing the number of best-performing managers available for European banks, and motivating an excessive increase in fixed remuneration over total remuneration, altering the way incentive systems work.

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.