FACT SHEETS FOR ASSIGNED RESEARCH PAPERS

# REQUIRED RESEARCH PAPER 1

1 Title of the Paper Human Capital, Bankruptcy, and Capital Structure

2 Author(s) Jonathan B. Berk, Richard Stanton, And Josef Zechner

3 Year of Publication June 2010

4 Journal of Publication The Journal Of Finance

5 Volume/Issue of Journal VOL. LXV, NO. 3

6 Page Number 891

7 Main Area of Research Financial bankruptcies reasons and impacts

Financial institutions as lenders
8 Main population
Firms, corporate entities, and entrepreneur startups as borrower

9 Sample (Data) 100,000 Sample paths

This is a mixed research , a combination of quantitive and qualitative research . Financial models are used to drive
10 Methodology
results and understand the key factors which impact bankruptcy.
There are three main variables used in this article

11 Variables used 1. Firms’ bankruptcy ( dependent variable )

2. Cost of human capital and firm’s capital structure (independent variables)
12 Results Following are the results extracted after analyzing this article.
1. When a firm is not financing by debts, equity financing the employees have a more job satisfaction because
 they are confident the firm wouldn’t suffer bankruptcy and their jobs are secure.
2. The capital markets have a perfect competition, and the risk factor arises due stock variations of firms.
Capital structure is always a combination of external financing ways such as debt and equity. For every company a
capital structure shows their cost benefit analysis of debt and equity financing. As far as debt is concerned there is
13 Conclusion
always a risk of bankruptcy. The capital structure is having strong influence on the employee’s performance and
productivity
This article is a positive contribution in academics and real world by exploring the various facts which will be helpful
14 Future directions
in further researches and corporate world.
This article is written a decade back , so thing are getting updated and advanced in financial institutions and corporate

15 Limitations world , so the financial model used there are not updated and there are many new dynamics of financial markets which
should be explored according to recent statistics.

16 No. of References 70

# REQUIRED RESEARCH PAPER 2

1 Title of the Paper Enjoying the Quiet Life? Corporate Governance and Managerial Preferences

2 Author(s) Marianne Bertrand and Sendhil Mullainathan

3 Year of Publication October 2003

4 Journal of Publication Journal of Political Economy

5 Volume/Issue of Journal Vol. 111, No. 5

6 Page Number 34
7 Main Area of Research Managerial finance and firm’s corporate financial structure .

8 Main population Corporate firms

Secondary data – and probabilistic sampling

9 Sample (Data)  Longitudinal research design and – from bureau of census (249 workers)
 Compustat – from standerds and poors ( of 7500 individuals )
This is a qualitative research .

10 Methodology Empirical methodology – difference in difference methodology

Regression analysis
Average per hour production

11 Variables used Capital stock

Plant birth
 Wages – managers would prefer to pay high salaries to retrain workforce , otherwise the workforce goes for
absenteeism and turnover .
 Death birth and investment – it describes how to invest in a new venture or demolish an obsolete business

12 Results activity and where we should go for further investment .

 Productivity and profitability – how the managerial decisions impacts the overall productivity of employees
and profit margins of the firm .
 Robustness check – statistical verifications of the findings by regression .
This article is about a firm’s corporate structure and how the managers keeps and retain their workforce . Workforce is
a necessary pillar for organization , because human resource has to use the capital and other resources effectively for

13 Conclusion better output and profitability . the managers would prefer to pay slightly above than market to retain the workforce.
The quite life is a personal character of managers. Antitakeover legislation is used for resolving the queries of
corporate finance.
14 Future directions This article is literature contribution for understanding the corporate finance and managerial actions or to keep the
 workforce motivated . It has a future implication by describing “quite life”, which is a managerial personality
characteristic that will be helpful in understanding the question or issues related to corporate finance .
There are some minor limitations with this research such as data constraints , it only focuses on specific outcomes , for
15 Limitations
example towards employee’s productivity and profitability .

16 No. of References 40
# REQUIRED RESEARCH PAPER 3
1 Title of the Paper Collateral and Rationing: Sorting Equilibria in Monopolistic and Competitive Credit Markets
2 Author(s) David Besanko and Anjan V. Thakor
3 Year of Publication Oct 1987
4 Journal of Publication International Economic Review
5 Volume/Issue of Journal Vol. 28, No. 3
6 Page Number 671
7 Main Area of Research Credit markets

8 Main population Financial institutions

9 Sample (Data) Secondary Data – source

This research is a combination of quantitive and qualitative data , which is extracted by secondary sources. On the
10 Methodology
basic of which for hypothesis prepositions were drawn , it is test and verified by financial models.
Credit market rationing (dependent variable)
11 Variables used
Inters rate , collateral (independent variable)
The results are
1. Collateral situation is used in extreme critical situation when it is necessary to make a transaction secure and
12 Results risk free .
2. There are certain banks which don’t prefer high risk borrowing ; thus, banks demand a relatively high interest
rate to resist them from borrowing .
13 Conclusion This article is about borrowing and lending of firm , and what are the factors which shapes the competitive credit
market . Credit rationing is necessary for the monetary policy and functioning of financial institutions. There is always
lesser investments available in the financial markets for borrowers, it is not sufficient for every small- and large-scale
firm , so the banks or lending firm have certain criteria to choose the borrower which could offer a high rate of return
 (interest ) or a secured loan ie backed up by collateral . there is a great influence of credit terms for money market .
It has a further scope for working on credit market , which will be quite beneficial for academics and corporate world.
14 Future directions
It will be beneficial for understanding the credit market and its impacts on monetary policy .
There are many other factors which impact the credit market , which is not discussed properly .
15 Limitations
It has not clearly mentioned about data sources .
16 No. of References 23
# REQUIRED RESEARCH PAPER 4
1 Title of the Paper Screening vs. Rationing in Credit Markets with Imperfect Information

2 Author(s) Helmut Bester

3 Year of Publication Sep 1985

4 Journal of Publication The American Economic Review

5 Volume/Issue of Journal Vol. 75, No. 4

6 Page Number 850

Credit markets and how they lends in high risky and high paying borrowers or low risky and less rate of return
7 Main Area of Research
opportunities .

8 Main population Credit markets

9 Sample (Data) Data has been collected by secondary sources .

10 Methodology This is a qualitative study based on examples and analysis by financial models .
Independent variable – rate of interest , collateral .
11 Variables used
Dependent variables – Credit markets
Here are some results which I have drawn after reading and understanding this article.
1. By increasing the collateral restriction , financial sector have negative impact on profitability .
2. There is no equilibrium and credit rationing , when banks have more restrictions for collateral and interest rate
12 Results
is high .
3. Less risky borrowing are more profitable for corporate firms and financial lenders , because it don’t goes to a
bad debt .
13 Conclusion This article is About the credit markets and what are the factors which makes borrowing easier or difficult for some
firm. With the imperfect information it's difficult to maintain the equilibrium of markets, because of adverse selection
and moral hazards. Generally, the credit market lends their money for high risky investments for higher rate of return
 which create moral and ethical issue in business world
As it is an early masterpiece ,so it a positive contribution in literature for academics and it has also an implication for
14 Future directions
corporate world financing which were successfully applied in past ages.
One of the major limitations of this research article is that it’s an outdated masterpiece . It has been written in

15 Limitations September 1985 , and there is a huge change in the financial markets and ways of crediting between financial
institutions and corporate entities .

16 No. of References 9
 SUMMARIES OF THE ASSIGNED RESEARCH PAPERS

1
Human capital , bankruptcy, and capital structure
Article is about root bankruptcy and how human capital and the financial capital structure of a firm impacts on financial stability and leads to bankruptcy.
Capital structure is a combination of debt and equity financing, choose the ratio of debt and capital by own . Cost of borrowing is also dependent on the
amount of investment, and market information. As humans are a valuable asset of an organization, please must be confident about job security it will
improve happiness and motivation level which improves the firm’s productivity. Retaining the workforce is necessary for a firm as recruiting new people
have a cost of hiring and training. In various countries where the economy is having a perfect capital and labor markets the employees would face a
difficulty in maintaining cost of human’s bankruptcy.
A capital Structure is always having curtail status for all the stakeholders. A good firm never down the wage rate. As capital structure is associated with
certain risk, so risk sharing is found between investor and employees depending on the size of investment. A financial model depicts that, for a labor-
intensive firm , debt have low leverage. Firms pay their employees according to their financial conditions.
The firms take financial decisions by considering the cost of bankruptcies and the taxation. Bankruptcy is not just an issue for the firms are employees
but it's a huge stake for all the stakeholders , cause they either have to receive the dividend or interest rate. Bankruptcy is a critical situation that a firms
cannot pay its obligations , including cost of capital and wages of workers. Interest and tax rate are having strong influence on capital structure. From this
article we conclude us from was high leverage is always have a higher wage for their workers, a firm with high leverage have a low average rent
entrenchment rate. The more capital-intensive firms have more profitability and payrate, which will uplift employee’s satisfaction and performance that
enhance firm’s productivity.
 2
Enjoying the quite life? corporate governance and managerial preferences
This article is about corporate governance and management perspectives and managers actions to keep the workforce motivated. Managers have different
personalities and attitude , some managers are concerned about the wellbeing of all the stakeholders ,while some have a selfish approach and the take the
decision which are only beneficial for them . Every decision of management is having a cost for the firm, so it's advisable to optimistically choose the
strategies which are beneficial for the firm in long run and will maximize the returns of maximum stakeholders. The data used in this paper is extracted
from LRD longitudinal research design and compustat . The managers often pay high salaries to the worker by even neglecting the profitability and
returns of other stakeholders. This article is highlighting the scope of antitaker legislation which is further useful for understanding the corporate
governance.
 3
Collateral and rationing : sorting equilibrium in monopolistic competitive credit market
As the title describes , this article is about collateral and competitive credit market . So here we have studies how the credit market is working by using
instrument such as interest rate and collateral . Market information is also having great influence on the dynamics of competitive credit market .
Collateral is a security for the loan , so that it doesn't became a bad debt. This study is based on some assumption like, the credit market is perfectly
competitive , and every bank is perfectly elastic in its deposits and supply schedule , banks also compete with each other for loans from central bank .
The borrowing contracts are negatively related to interest rate and collateral requirements. And it has subdivided the risk into smaller chunks. In credit
market high risk investment is associated with highest rate of return and low risk loans have low rate of return. A risk neutral financial market is called
end of period endowment. For an optimal credit level, the collateral will be zero.Nash equilibrium is a situation in which the borrowers earns
nonnegative profits for the lending institute. The phenomena of credit rationing is increasing due to loan restrictions , more demand and less supply of
money, and a chance of being bad debt.
 4
Screening vs rationing in credit market with imperfect information
This Article is about the credit market and how it deals with the imperfect information. Credit rationing Is a phenomenon when some forms access to
financial institutions and the get the loans and others do not succeed in getting loans. Credit lending and borrowing is Associated with collateral and
interest rate. Financial lending Firms prefer to give financial loan on a higher rate of return. High rate of return is associated with the high level of risk
for banks . There is no equilibrium in markets because banks most and to the forms with requirement of collateral and high rate of interest .
Any kind of business the entrepreneur and business needs capital raised from external sources such as Debit. The phenomena of credit rationing Occurs
when the borrowing expectancy of a firm become zero, as financial landers are more interested in giant firms , which have already a strong position in
the market. Many problems are there with adverse selection , as it's based on market Information which fluctuate time by time . Here are some
assumptions we can draw from this research article that high risk firms have more access to financial markets, but low risk startups can also gain capital
investment by collateral