Serafeim Tsoukas

To What Extent Does the Interest Burden Affect Firm Survival? Evidence from a Panel of UK Firms during the Recent Financial Crisis†

Using a panel of mainly unquoted UK firms over the period 2000–09, we document a significant effect of changes in the interest burden from debt-servicing on firm survival. The effect is found to be stronger during the recent financial crisis compared with more tranquil periods. Furthermore, the survival chances of bank-dependent, younger, and non-exporting firms are most affected by changes in the interest burden, especially during the crisis. Our results are robust to using different estimation methods and different interest burden measures They suggest that one way for policymakers to mitigate the effects of financial crises by limiting firm failures would be to prevent financing costs from rising, especially for those firms more likely to face liquidity constraints.

Market Implied Ratings and Financing Constraints: Evidence from US Firms

Financing constraints have been found to play an important role in several aspects of firm behavior, but no attention has been given to their effects on credit ratings. In this paper we analyze a unique and comprehensive data set for US firms rated by Fitch over the period 2001–07. We employ Fitchs market implied ratings derived from bond and equity prices. The analysis finds evidence that financial variables are more important in predicting credit ratings for firms likely to face financing constraints. We conclude that the financing constraint is an important dimension in the market implied ratings process. Our findings are of relevance to managers, investors and rating agencies seeking to understand the mechanism through which financing constraints affect credit ratings.

Firm survival, uncertainty and Financial frictions: Is there a Financial uncertainty accelerator?

Using a large panel of unquoted UK firms over the period 2000-09, we examine the impact of firm-specific uncertainty on corporate failures. In this context we also distinguish between firms which are likely to be more or less dependent on bank finance as well as public and non-public companies. Our results document a significant effect of uncertainty on firm survival. This link is found to be more potent during the recent financial crisis compared with tranquil periods. We also uncover significant firm-level heterogeneity since the survival chances of bank-dependent and non-public firms are most affected by changes in uncertainty, especially during the recent global financial crisis.

Exploring Determinants of Firms’ Participation in the New Offshore Renminbi Debt Securities Market

Once in a while a major financial innovation creates a new product that changes the landscape for firms that adopt it. For example, junk bonds enabled leveraged buyouts, securitization stimulated off balance sheet growth in banks, and CDS offered pure trading in credit risk. New RMB financial products emerging as China opens its capital account provide a similar change to the landscape for firms and investors engaged with China or those using RMB as a vehicle currency. Uptake of the new products has been rapid, and in this paper we use the data from the Hong Kong Monetary Authority for offshore RMB bonds to explore that process. We are mostly interested in what determines firms’ participation decision in this market. We allow for changes in regulation, market depth, parallel market developments and changes in the advantages of participation using interest differentials to explain what influences firms’ and investors’ choices to enter the market and find that they all have an influence on the decision to participate in this new financial market.