Now, when speculation and research concerning the life after death are arousing more interest in the public mind than at any other time in human history, it seems peculiarly fitting that I should publish my "Travels in the Spirit World.
So far, every attempt to lift the curtain that separates us from the realms of the spirits has been carried on through a "medium." But in this little book, I shall describe scenes of the Spirit World which I have witnessed with my own eyes, and I shall relate conversations with spirits in which I have actually taken part. I have been enabled to tell you of these marvelous occurrences by virtue of a rare faculty which few possess: the ability to leave the physical body and to live for the time being in the astral, the power of being a spirit though there has been no actual physical death. So, because of my additional ability to reason and to reflect on the meaning of all I saw and beard, as well as the power to retain it in the memory, I have garnered the knowledge of the life hereafter which I now present to the public—a knowledge which must be considered as first hand evidence on the subject; a knowledge obtained, I believe, by the only process possible to mortals.
During the recent past central banks around the world have increased their efforts to improve the analysis of systemic financial stability. Examining situations of stress for the financial system has gained particular attention reinforced by the IMF’s Financial Sector Assessment Program (FSAP) that explicitly requires stress testing exercises, in particular for banks.
While many new contributions have been made it is fair to say that a canonical framework of analysis has not yet emerged. In this paper we suggest a method that might provide such a framework for the analysis of banking systems of financially highly developed economies relying mostly on market data. We apply these ideas to the major UK banks. Our analysis gives us new insights into the role played by correlations between the values of bank assets on the one hand and on interbank linkages on the other hand for Systemic Risk - the large scale breakdown of financial intermediation. In our view correlations and interlinkages capture the two central aspects of systemic risk and should indeed form the focus of analysis for an institution in charge of systemic risk monitoring. This is because these two properties of financial networks will usually result in simultaneous bank failures. If banks have correlated exposures a consequence of an adverse economic shock may directly result in simultaneous multiple bank defaults. Banks in distress may default on their interbank liabilities and hence cause other banks to default triggering a domino effect. Modeling these two aspects requires a risk analysis that looks at banks simultaneously and that captures credit linkages between them.
This paper examines the capital structure puzzle that many firms appear to be are underleveraged from a tax savings perspective. The tradeoff theory of capital structure predicts that firms will borrow up to the point where the marginal value of tax shields on additional debt is just offset by the increase in the costs of financial distress. There is a general consensus that significant tax incentives are available through corporate borrowing. Nevertheless, many large and profitable companies with apparently low risk of financial distress have relatively low debt ratios. The perceived inefficiency of capital structure from a tax perspective is particularly surprising, since taxes seem to be “important” or “very important” to most of the CFOs surveyed by Graham and Harvey (2001).
Several studies have documented a negative relation between profitability and leverage, challenging the tradeoff theory, suggesting that firms do not fully exploit their tax shields and therefore, appear to be underleveraged (see, e.g., Miller (1977), Fama and French (2002) and Rajan and Zingales (1995) among others). Recently, Graham (2000) quantified the tax benefits of corporate borrowing by estimating marginal tax rates and concluded that “the firms that use debt conservatively are large, profitable, liquid, in stable industries”, and face low ex ante costs of distress. He estimates that the typical firm could add up to 15.7% (7.3%) to firm value, ignoring (considering) the personal tax penalty on debt financing.
