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We show that debt financing can increase firm value by serving as a commitment device in the presence of information asymmetry.

We develop a model in which firms privately learn the true quality of their investment projects over time, which can cause adverse selection when these firms seek to raise additional capital for new investments in later stages. Using this framework, we investigate the optimal capital structure of firms that can mitigate the adverse selection that is expected to arise in the future.

We find that each firm’s owner may choose to issue debt ex ante to avoid the adverse selection in the future because the intentionally created debt burden will hurt firms with low-quality investment projects more severely, discouraging these firms from mimicking high-quality firms to raise additional capital for new investments. Our model also predicts that equity or enterprise values of firms in the industry with higher leverages will diverge more significantly over time.

Our paper contributes to the capital structure literature by providing a novel mechanism to show that debt financing can improve firm value by acting as a commitment device in the presence of information asymmetry.

This paper develops a debt-run model to study the effects of liquidity injections on debt markets in the presence of a renegotiation option. In the model, creditors decide when to withdraw their funding and equityholders can renegotiate the contract terms of debt. We show that when equityholders have a large bargaining power, liquidity injections into distressed firms can rather cause more aggressive runs from their creditors, hurting the debt value. This outcome occurs because equityholders can strategically utilize the renegotiation option as a bankruptcy threat, pushing down the debt value below the potential liquidation value of the firm. In such a scenario, a deterred default resulting from emergency capital injections could be detrimental to creditors.

We develop a credit-risk model to study the informational role of investment in an economy susceptible to large liquidity shocks. Firms' investment decisions carry information about their asset quality, thereby mitigating informational frictions when firms enter bankruptcy. An increase in aggregate investment can reduce the informational value of investment, depressing firms' recovery values. Therefore, policies boosting investment can decrease debt and firm values by reducing the informational value of investment. The presence of debt overhang may enhance firm value by making firms' investment decisions more informative. We present suggestive empirical evidence consistent with model predictions on the relation between firms' investments and recovery rates.

This paper aims to develop a credit-risk model in which firms face rollover risk, and the markets for defaulted assets are segmented due to entry costs. The paper shows that reducing the entry costs in this economy may decrease the total surplus of the economy. This outcome can arise because when market barriers are lifted, the gap between the liquidation prices across the markets will shrink, but then the market that would experience a price drop may face more bankruptcies because the rollover risk will increase in that market. The paper describes under which condition such an intervention policy improves or hurts the total surplus.

The Hanbo (meaning Korean treasure) scandal or “Hanbogate” occurred on January 23, 1997, with the bankruptcy of Hanbo Iron and Steel Company, the second largest steel company and 14th largest conglomerate in South Korea, as its debt had accumulated to US$5.6 billion. Hanbo's bankruptcy triggered an investigation by the Public Prosecutor's Office that resulted in the imprisonment for 15 years of Hanbo's founder, Chung Tae-Soo, for bribing politicians and bankers to pressure banks to extend hugh bank loans to Hanbo. Nine other persons were also convicted including Chung's son, who was jailed for three years for bribery and embezzlement, and Kim Hyun-Chol, the second son of President Kim Young-Sam, who was sentenced to three years jail and fined US$1.5 million (New York Times, 1997).

This paper aims to identify and classify the parameters that construct the input, processes, output, productivity and outcome variables that affect performance. These parameters are used in the evaluation model to measure research performance in universities so that they can be used as the basis for making leadership policies both at the national and institutional levels.

The design of this research is a quantitative research method using a survey questionnaire that was sent to the heads of research institutions at universities in Indonesia. To obtain these parameters, a test for determining the value of the loading factor was used.

The authors found that input variable parameters consisted of 10 parameters; process variable consisted of 22 parameters; output variable parameters consisted of 8 parameters; productivity variable consisted of 4 parameters; and outcome variable parameters consisted of 10 parameters.

One approach to obtain parameters is through systems theory, where every element that makes up the organization contributes to the achievement of goals. This study attempted to develop parameters in the performance appraisal model of systems theory-based research institutions that are adapted to trends in the direction of research in universities. These parameters are based on aspects of input, process, output, productivity and outcome.

Purpose – The purpose of the research was to examine the process of new teacher evaluation policy development in South Korea, in order to gain insight into how a controversial policy could be established in education. Research questions were about the process of the policy development, political actors involved and their influences, and the meaning of teacher evaluation in the newly established teacher evaluation policy.Methodology – The study uses a qualitative and descriptive-analytical process from a hermeneutics perspective that views policy as text to be interpreted. This perspective allows policy to be connected to a larger social context through interpretations of text. The main data sources included policy documents, statements by various organizations, research reports, and public media artifacts produced between 2000 and 2012. For data analysis, constant comparison and content analysis methods were used.Findings – The findings show that the process of developing a teacher evaluation system demonstrated an unsuccessful attempt to apply the Habermasian notion of discursive democracy. Relevant stakeholders were invited to deliberate on the reform, but official meetings ended prematurely without consensus. In the end, the government proceeded without full support of any stakeholders. During the deliberation process, teacher organizations and parent groups demonstrated conflicting perspectives on teacher work and the new evaluation system only partially accommodated both perspectives. The effectiveness of the new evaluation system remains to be researched.Value – The policy development process and the evaluation system shown in this study should inform similar efforts in other contexts.