Steven S. Byers

Do Bank Loan Relationships Still Matter

James (1987) and Lummer and McConnell (1989) find that during the 1970s and 1980s the market responded positively to announcements of bank lending agreements. However, many of the advantages associated with bank lending relationships have largely disappeared since the 1980s due to financial system changes and greater availability of and less costly financial information. We find that bank loan announcements produced positive abnormal returns in the 1980s, but by the latter part of our sample period those announcement returns disappear entirely. We do find that bank loan relationships may still be valuable to smaller, poorer performing firms or during periods of high credit risk spreads.

Capital, economic returns and the creation of value

Focuses on sources of capital to an organization, investment and flows of capital within an organization, interaction with markets, the generation of economic returns, and the potential for the creation of value. Illustrates how the creation of value provides benefits to employees, shareholders, and society. Provides numerical illustration of the dollar value of a capital project to employees, shareholders and separately to society. Provides the foundation for understanding concepts such as economic value added, a practical understanding of how economics works, especially in terms of allocation of capital, invested capital, flowing capital, and returns on capital. Traces the creation of value to the markets for goods and services.

The cost of capital for projects: conceptual and practical issues

Examines how individual projects will affect the organization’s stated desire to “add value” by its operations, particularly how the market will judge each project on this basis. Considers rates of return, risk and cost of capital. Provides practical guidance for managers seeking to establish the cost of capital for a number of different types of project. Also provides special guidelines useful in the analysis of cost reduction projects.

Capital investment analysis for managers

Briefly describes the nature and importance of capital investments and why managers of all functional areas should understand the basics of analysis. Reviews conceptual issues. Develops important perspectives for corporate leaders, managers and analysts. Provides practical guidelines for analysis. Furnishes a useful format for analysis easily adaptable to spreadsheet analysis. Illustrates techniques of analysis using a sample capital project. Interprets the results in a common‐sense manner and in terms of the contribution of the project to shareholder value. Addresses issues at a level appropriate for each professional manager regardless of their area of expertise and functional assignment.

Variable costs and process design: critical issues for “restructuring” emerging and transition economies

Focuses on critical issues related to variable cost drivers essential in establishing criteria or parameters to consider in the modification and/or design of production facilities. Key concepts and relationships influence the choice of alternative technologies and methods in the design, upgrading, modification, or expansion of manufacturing and process facilities. Cost relationships are important in evaluating whether to retain an existing facility or, alternatively, scrap the assets and “start over”. For brevity, focus is restriced to decisions concerning overhaul, modification, upgrade, expansion, abandonment, and fresh investment as “design”.

Creating value: economics and accounting ‐ perspectives for managers

Focuses on understanding accounting and economic concepts, relationships and factors important as a basis for economic decisions that create value. Provides the background essential for understanding the future papers in the series. Offers a review and develops perspectives useful to those with or without knowledge of accounting. Distinguishes between accounting and economic events, providing examples to support understanding of issues such as types of cost, relevant costs in economic analysis, economic contribution margin and break‐even, and basic concepts related to product pricing, and the relationship between risk, expected economic profits and value. Relates costs and risk factors that have an impact on value and addresses issues critical in decision making.

The critical operating cycle

Focuses on the operating cycle. Provides a conceptual and practical understanding of issues and relationships of importance to all managers, such as invested capital, flowing capital, return of and on capital, lost and idle capital, risk‐return‐value relationships, basic cost relationships and economic break‐even. Explains and emphasizes how the operating cycle, and indeed the survival of the firm and creation of value, are critically dependent on the marketing function. Demonstrates why the contribution of each individual to the “team” is vital to creating value. Illustrates the importance of and provides guidelines for applying the concepts in the different functional areas with an example focusing on human resource management.

Listing and the liquidity of bank stocks: revisited

This paper investigates the association between listing and liquidity over the January 1991-December 1994 period for a large number of bank stocks. An empirical model is developed in which liquidity (using a measure that reflects the volume-price effects of demand and supply in market price) is a function of listing and certain other (ceteris paribus) variables. The model is virtually identical to the one employed in the previous study of the topic. The empirical results of the current study are compared to those of the prior one. Despite enormous changes in the structure of the financial system and in the banking system, the empirical results are consistent with those of the prior study: listed bank stocks do not appear to have greater liquidity than unlisted bank stocks. In fact, the results suggest that listing adversely affects liquidity. Various potential reasons for this finding are presented in the paper.

The effect of lender and loan type on a borrowing firm’s equity return

ABSTRACT Past empirical studies appear to support the idea that banks and finance companies do not differ in their ability to resolve adverse selection problems associated with issuing new debt. In this article, we find there is a difference. More specifically, using an event study we find larger abnormal returns for secured loan disclosures to lower quality borrowers when the lender is a finance company versus a bank. This suggests the market views finance companies as more effective than banks in evaluating/monitoring lower quality borrowers obtaining secured loans. We posit this is due to finance companies’ greater expertise in this type of lending, resulting from specialization. Our findings extend the literature on how lender identity can influence signals about firm value from loan disclosures. Our results also support recent findings that positive abnormal returns to borrowing firms may not be a general feature across the loan population, but may be restricted to smaller, lower quality borrowers. Finally, we are the first to provide evidence that the market takes loan type into account, not just lender and borrower type, when considering the information embedded in loan disclosures.