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Browsing CPBS - Working Papers / Preprints by Author "Alves, Paulo"
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- How banks price loans in leveraged buy-outs: an empirical analysis of spreads determinantsPublication . Pinto, João; Pacheco, Luís; Alves, Paulo; Cunha, RicardoThis paper investigates which factors determine the pricing of loans in LBOs, using a worldwide sample of 12,673 syndicated loans closed during the 2000 - 2013 period . We find that spreads and pricing processes differ significantly in market - based versus bank - based financial systems as well as in the U.S. vis - à - vis W.E. In the pre - crisis period borrowers in market - based financial systems face higher spreads (33.59 bps) than those in bank - based financial systems and loans closed in common law countries are associated with higher spreads ( 50.71 bps ) than those closed in civil law countries . D uring the crisis period only loans in common law legal systems are associated with higher spreads . In line with Carey and Nini’s (2007) findings , w e show that U.S. borrowers face higher spread s than W.E. borrowers. We also find that the pric ing of loans in LBOs depends mainly on marketability and default factors and that acquired firms with a h igher cash flow potential and asset tangibility face lower spreads. Finally, a robust convex relationship between spread and maturity is found for loans in LBOs .
- The R2 PuzzlePublication . Alves, Paulo; Peasnell, Ken; Taylor, PaulPrevious research has argued that the degree of co-movement of stock returns (the R² of a market regression) at country-level can be explained by the interaction of firm specific and market-wide information. The R² measure has been used to investigate a number of issues of potentially great importance to accounting, such as whether countries with poor corporate governance regimes and weak legal protection of private property rights are more likely to have poor information environments or to assess the informativeness of prices. To date, only limited research has been carried out to assess the reliability of an information interpretation of the R² measure at a firm-level within a country rather than at an aggregate country level. In this paper we now examine the properties of stock returns co-movement at the firm-level within two countries, UK and USA, thereby being able to filter out certain extraneous factors that could arise in cross-country settings. We analyse the performance of this overall measure by triangulating it with other information-related measures which previous research has suggested capture partial aspects of the information environment. We find some serious flaws in the methodology and our findings suggest that when using it at firm-level, it may be being driven by other factors related to uninformed trading.
- The use of the R2 as a measure of firm-specific information: A cross-country critiquePublication . Alves, Paulo; Peasnell, Ken; Taylor, PaulRecent research uses the degree of stock returns co-movement as a measure of the quality of a country’s information environment. It has been argued that stronger property rights, better corporate governance regimes and more efficient enforcement mechanisms lead to prices incorporating more firm-specific information and, therefore, co-moving less with the market. In this paper, we use a much more comprehensive international data set than in prior research, encompassing forty countries over twenty years, to evaluate the reliability of this approach in a crosscountry setting and to analyse the behaviour of the measure used. Our results demonstrate severe limitations in the use of co-movement as measure of information quality. We highlight the instability of the measure and show that it can produce results that are often difficult to reconcile with such an informational explanation.