Werner Neus

Kursgewinne durch Entlassungspläne? Erste Ergebnisse aus Deutschland

Abstract Employing traditional event study methodology we examine the market reaction to layoff announcements of firms listed on the German stock market. We contribute to the international literature in this field with two major results. First, unlike anecdotal and similar to international evidence we report a negative and significant abnormal rate of return of −0.37 percent on the announcement day. Further, we find that the reason for the layoff announcement plays a decisive role in the revaluation process. On the one hand, stocks of firms that announce layoffs as a reaction to declining market conditions are associated with a more intense negative market response. On the other hand, even stocks of firms that intend to enhance their profitability by means of layoffs do not show a significant positive reaction.

Risk and the Role of Collateral in Debt Renegotiation

In his basic model of debt renegotiation, BESTER [1994] argues that collateral is more effective if high risk projects are financed. This result, however, crucially depends on the definition of risk. Using the second-order stochastic dominance criterion introduced by ROTHSCHILD AND STIGLITZ [1970], we show that it is not a projects high risk, induced by a high probability of default, that makes collateral more effective. Instead it turns out that, given the expected return, the probability of default has no impact on the collaterals effectiveness. Moreover, a higher risk of the project caused by a higher loss given default makes the use of collateral even less effective.

What Determines Collection Rates of Debt Collection Agencies

We contribute to the literature on debt collection agencies in two ways: First, we present an estimation of the collection rates. The distribution of collection rates exhibits a mean of about 65% and a strong bimodality with peaks at the very ends of the distribution. Second, we investigate potential determinants of the collection success. We find that collection rates are positively related to the exposure at default and to prior debtor-specific collection rates. In contrast, the age of the account and—if applicable—prior experience with the debtor have a negative impact on collection rates.

Discussion of “Incentive Compensation, Valuation, and Capital Market Access”

Discussion of “Incentive Compensation, Valuation, and Capital Market Access�?.

Capital Structure, the Risk Incentive Problem, and Repeated Investment Opportunities

The risk incentive problem is well known in the analysis of debt financing. Capital costs can be reduced by a credible commitment to select the efficient, less risky project. Here, in a two-period model it is shown that under certain circumstances merely revealing future investment opportunities is a sufficent commitment. Where in a single-period context the risky project is selected, in the two-period model the owner-manager chooses the less risky project in the first period in order to increase the probability for an amount of equity sufficient to commit to the less risky project in the second period, as well. Thus, for firms with ongoing operations commitments are much easier than for entrepreneurs with a one shot project.