Dpto. Economía y Empresa

This paper explores the external financing–cash flow relationship in capital structure theory by comparing unlisted (financially constrained) and listed (financially unconstrained) companies. We postulate that investment is determined endogenously in the case of unlisted firms, as they are strongly dependent on internally generated funds (cash flow). Consequently, unlisted firms invest their cash flow in profitable projects, using any residual cash flow to increase their holdings of safe assets. In turn, listed companies determine their investment exogenously and may reduce leverage if they raise an excess of cash flow. As a result, listed companies would react more negatively to shocks in cash flow. Our findings reveal that both unlisted and listed companies show a negative external financing–cash flow relationship, that of the latter being clearly more intense.

Our evidence suggests that Spanish public firms adjust slowly toward their capital structure target, with the typical firm closing approximately one-fifth of the gap between its current and target debt ratios each year. This finding is in contrast with previous evidence; however, we employ econometric techniques specially designed for highly persistent dependent variables, like market debt ratios. Moreover, our evidence does not seem to indicate that macroeconomic conditions, at least under the conditions experienced by the Spanish economy during our sample period, affect the speed of adjustment. If anything, our results are consistent with faster adjustments during economic states in which the distance between the current and target leverage is the greatest.

We analyze the relevance of adjustment costs in keeping Spanish public firms away from their target leverage. We argue that firm's cash flow outcomes determine the importance of the adjustment costs on capital structure changes. Then, we estimate capital structure adjustment speeds across three different cash flow realizations. We report that during years in which either over-levered or under-levered Spanish public firms make changes in their financing decisions, as a result of their high cash flow realizations, they close significantly more of the gap between current and target capital structure than those firms with intermediate and low cash flow observations. Moreover, independently of the cash flow level, we find that leverage adjusts more quickly for over-levered than for under-levered firms.

This article explores the cash–cash flow relationship by comparing financially constrained and financially unconstrained companies. Unlike previous research, we test the sensitivity of cash to cash flow by considering unlisted firms as constrained and listed firms as unconstrained. Our empirical evidence is based on findings from Spanish firms and is consistent with the core rationale that unlisted firms face more difficulties than their listed counterparts when looking for funding from external markets. As a result, unlisted firms tend to hoard significant amounts of cash out of the generated cash flow, while listed firms do not. Our findings are robust to a number of additional empirical tests.

The potentially important impact of taxation on corporate financing decisions is widely recognized despite the fact that the empirical evidence is far from conclusive. In this study, we assess the debt tax benefits of Spanish listed firms throughout the period 2007-2013. Specifically, using a simulation approach, we found the capitalized value of gross interest deductions amounts to approximately 6.4% of firms’ market value, while the net debt benefit (of personal taxes) is estimated at 2.1%, in contrast to the traditional 11.4% (i.e. marginal tax rate times debt). Conversely, the panel data regression approach reveals a 13.6% (34.2%) debt tax shield in terms of firm (debt) value. This evidence supports the view that taxes influence corporate decision-making and that debt makes a reasonable contribution to firm value.

Purpose: The purpose of this study is to analyse the impact of the European Central Bank’s (ECB) Public Sector Purchase Programme (PSPP) on Spanish sovereign debt. Design/methodology/approach: The authors assess the impact of the PSPP on Spanish Government bonds from two different transmission channels (the signalling and the portfolio substitution) with two effects for each of them (the announcement and the expectation effects for the former and the stock and the rebalancing effects for the latter). The empirical study has been undertaken with event study methodology, controlled by macroeconomic variables, panel data and cross-sectional regression analyses. Findings: The results show that both the ECB’s purchases under the PSPP and the announcements reduced Spanish Government bond yields. Compared to previous literature the Spanish Government bond yields reductions are larger than those for other countries. Research limitations/implications: The authors’ approach to the impact of investors’ expectations is interesting, although they cannot draw evidence on this issue due to the lack of data. Practical implications: From an economic perspective, the ECB can change economic agents’ expectations without actually carrying out any programme, only by announcing such a programme. Originality/value: This paper contributes to the literature examining the PSPP from different transmission channels in Spain, taking into account the announcements, the expectations, the purchases and the variation in debt holdings relating to the PSPP from the beginning of the programme until 2020. Due to the large degree of heterogeneity across euro area countries, the results in this paper should improve our understanding of the relative differences in the impact of the PSPP and, thus, be of interest to academics and policymakers.

En el presente artículo se estudia el mercado europeo para el comercio de emisiones de gases de efecto invernadero. De manera específica, se profundiza en los rasgos característicos del mercado de la contaminación, y se realiza un análisis comparativo entre las Bolsas de CO2 y los mercados OTC. Dentro de las Bolsas europeas de CO2, se hace un especial énfasis en la única plataforma de negociación existente en España, SENDECO2. Tras un estudio de la evolución de la cotización de la tonelada de CO2 a lo largo del periodo 2005-2007, se constata que las bondades y el buen funcionamiento de un mercado secundario dependen en gran medida de cuán afinada y eficiente haya sido la oferta o asignación previa de derechos de emisión a las empresas contaminantes.

The analysis of efficiency and productivity in banking has received a great deal of attention for almost three decades now. However, most of the existing literature to date has not explicitly accounted for risk when measuring efficiency. We propose an analysis of profit efficiency taking into account how the inclusion of a variety of bank risk measures might bias efficiency scores. Our measures of risk are partly inspired by the literature on earnings management and earnings quality, considering that loan loss provisions, as a generally accepted proxy for risk, can be adjusted to manage earnings and regulatory capital. We also consider some variants of traditional models of profit efficiency where different regimes are stipulated so that financial institutions can be evaluated in different dimensions—i.e. prices, quantities, or prices and quantities simultaneously. We perform this analysis on the Spanish banking industry, whose institutions are deeply affected by the current international financial crisis, and where re-regulation is taking place. Our results can be explored in multiple dimensions but, in general, they indicate that the impact of earnings management on profit efficiency is of less magnitude than what might, a priori, be expected, and that the performance of savings banks has been generally worse than that of commercial banks. However, savings banks are adapting to the new regulatory scenario and rapidly catching up with commercial banks, especially in some dimensions of performance.