Christopher B. Barry’s research while affiliated with University of North Texas Health Science Center and other places

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Publications (17)


Interest rate changes and the timing of debt issues
  • Article

April 2009

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77 Reads

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24 Citations

Journal of Banking & Finance

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Christopher B. Barry

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There is much recent interest in the role of market timing in firm financial decisions. Using a large detailed sample of corporate public debt issues, private placements, Rule 144A issues and bank loans over the period 1970-2006, we investigate the relationship between interest rate changes and issues of floating and fixed-rate debt. Our results indicate that both past and future rates are associated with issuance decisions. We examine whether firms are able to lower their cost of capital by anticipating future rate changes, controlling for firm characteristics and market conditions. Our findings suggest that evidence of timing success is dependent on the time interval and type of debt examined. Over the longest time intervals available in our data, we do not find evidence of timing ability for fixed-rate or floating-rate debt issues.


Corporate Debt Issuance and the Historical Level of Interest Rates

September 2008

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402 Reads

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94 Citations

Financial Management

"Using a sample that comprises more than 14,000 new issues of corporate debt for the period 1970-2001, we examine the relation between debt issues and the level of interest rates relative to historical levels. Consistent with recent survey evidence, we find that companies issue more debt, more debt relative to investment spending, and more debt compared to equity when interest rates are low relative to historical rates. The effects continue to hold when we control for other variables that influence debt issuance and when we account for refinancing." Copyright (c) 2008 Financial Management Association International..


Debt Financing, Venture Capital, and Initial Public Offerings

March 2006

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341 Reads

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36 Citations

SSRN Electronic Journal

We examine the roles of two financial intermediaries, lenders and venture capitalists, in a sample of more than 6,000 IPO firms during 1980-2012. Venture capitalists and lenders generally fund different types of firms and, on average, are substitutes; however, in some instances we observe interactions and complementary roles between the two funding sources. Firms with high debt have lower valuation uncertainty, and lower initial day returns than those backed by venture capital. However, firms with high debt levels underperform in the long-run, especially those without venture capital. We provide some evidence that firms backed by reputable venture capitalists perform better.


Interest Rates and the Timing of Corporate Debt Issues

March 2005

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115 Reads

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5 Citations

SSRN Electronic Journal

Christopher B. Barry

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[...]

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Graham and Harvey (2001) provide survey results suggesting that managers attempt to time interest rates in their debt issuance decisions. Some of their results may be interpreted as forward-looking (i.e., trying to issue before interest rates rise), and some are backward-oriented, suggesting issuance when interest rates are low compared to historical levels. We employ a sample of more than 14,000 new debt issues over the period 1970-2001 and examine both aspects of debt timing. Our results strongly support backward timing, even after eliminating refinancing transactions, but they do not support the ability to time future interest rates. Our results contrast with recent findings by Baker, Greenwood and Wurgler (2003) that are based on Flow of Funds data. Our results account for number of issues, amount issued, debt maturity, and call and put features. We examine future interest rates, term spreads and excess bond returns. We find managers were not successful at forward timing when weighting issuances by proceeds, maturity and proceeds, or the effects of call and put features on effective maturity. In contrast, our results on backward timing strongly support the recent survey evidence on timing. Debt issuance measured by total amount or number of issues is related to the relative level of interest rates in comparison to their historical values. The amount of debt issued and the number of debt issues is strongly related both to the absolute level of interest rates and to their relative historical levels. Firms issue significantly higher amounts of long-term debt when long- term interest rates are low. We control for a variety of other market conditions that could affect issuance. When interest rates decline, refinancing is common. In our sample, refinancing is indeed much more likely when interest rates are at low historical levels. However, the non-refinancing transactions still demonstrate that debt issuance is significantly more common when relative interest rate levels are low. Refinancing transactions do not cause the results. Our results are consistent with the survey results of Graham and Harvey (2001) and Bancel and Mittoo (2004) showing that financial managers seek to issue debt when rates are "particularly low." Our results are not consistent with forward debt timing. Thus, if managers attempt to issue longer-term debt when they anticipate that future interest rates or spreads will rise or excess bond returns will be negative, they appear to be unsuccessful.


Risk and Return Characteristics of Property Indices in Emerging Markets

September 2003

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52 Reads

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17 Citations

SSRN Electronic Journal

Little is known about the performance and possible diversification benefits from real estate investments in emerging capital markets. During the period examined, property indices experienced relatively high total risk and low returns, but only a few of these indices underperformed on a risk-adjusted basis. Real estate investments offered diversification opportunities to equity market investors in emerging markets as well as to real estate and equity market investors in developed markets. Policy-makers should recognize that there is a tradeoff between potential benefits from keeping capital in their domestic markets versus reductions in diversification benefits available to domestic investors.


Tax-Induced Trading of Equity Securities: Evidence from the ADR Market

February 2003

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57 Reads

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37 Citations

The Journal of Finance

We examine ex-dividend date trading of American Depositary Receipts (ADRs) using a sample of 1,043 dividends over the period 1988 to 1995. ADR dividends are often subject to foreign withholding taxes, creating incentives for certain investors to avoid the distribution. ADRs exhibit negative abnormal ex-dividend day returns, and their prices behave consistently with their related withholding taxes. Abnormal trading volume for taxable issues exceeds 130 percent and 300 percent of normal volume on the cum- and ex-dates, respectively. Abnormal volume is an increasing function of foreign withholding tax rates and decreasing function of transactions costs. This abnormal ex-date trading activity is consistent with tax-motivated trading. Copyright (c) 2003 by the American Finance Association.


Interest Rates and The Timing of Public Issues of Corporate Debt *

January 2003

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23 Reads

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5 Citations

Recent survey evidence suggests that managers try to time financial markets in making their financing decisions. We examine a sample of more than 14,000 new issues of corporate debt to test for evidence of timing of new debt issues. We focus our attention on interest rates in terms of their decile rankings relative to historical rates, and we identify differences in the characteristics of debt issued in light of the decile levels. We find evidence of interest rate timing in that the number of debt issues and the amounts of debt issued are higher when interest rates are in low deciles. Debt maturity choices, call features, and put features are affected by the decile ranking of interest rates. Bond ratings tend to be lower when interest rates are in higher deciles, and the fraction of speculative grade issues also increases. Cross-sectional evidence shows that firms with greater financial flexibility have a greater tendency to time. We also examine the effects of refinancing transactions, and we find that timing is present whether debt is issued for the purpose of refinancing existing debt or as an increment to outstanding debt. Finally, we test for whether the average debt issue would have been more costly had the decision to issue been postponed.



Robustness of size and value effects in emerging equity markets, 1985–2000

May 2001

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96 Reads

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134 Citations

Emerging Markets Review

We examine the robustness of size and book-to-market effects in 35 emerging equity markets during 1985–2000. Mean returns for high book-to-market firms significantly exceed mean returns for low book-to-market firms. These findings are robust to tests that control for size effects and that remove extreme returns. Similarly, mean returns for small firms exceed mean returns for large firms. But, the firm size results lack robustness to the removal of extreme returns. Moreover, significant size effects are found in tests that define firm size relative to the local market average, but generally are not found in tests that use absolute firm size. Our findings are confirmed by cross-sectional regressions that control for systematic risk at the global and local levels.


Robustness of Size and Value Effects in Emerging Equity Markets, 1985-2000

January 2001

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31 Reads

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8 Citations

SSRN Electronic Journal

We examine the robustness of size and book-to-market effects in 35 emerging equity markets during 1985-2000. Book-to-market effects are significant and are robust to tests accounting for non-normality and for firm size effects, and they do not depend on extreme returns. Size effects are also present but do not have the robustness found for book-to-market results. Book-to-market effects are found within size portfolios, but size effects are not found within book-to-market portfolios. Significant size results are produced by extreme returns. Moreover, size effects are found when size is measured relative to the local market but not in tests using absolute firm size. Cross-sectional regressions controlling for global and local systematic risk confirm the findings.


Citations (17)


... Fourth, an examination and comparison of inflation-hedging features of property stocks in multiple developed and emerging markets will shed additional light on the debate of the differences between developed and emerging property markets. Numerous studies have compared the performance and diversification characteristics between developed and emerging property markets (Barry et al. 1996;Barry, Rodriguez 2004), while there is far less formal attention has been place to the inflation-hedging properties of real estate stocks. This study, therefore, is crucial for investors and policy-makers to further recognise the dissimilarities between emerging and developed property markets. ...

Reference:

Does European Real Estate Stocks Hedge Inflation? Evidence from Developed and Emerging Markets
Risk and Return Characteristics of Property Indices in Emerging Markets
  • Citing Article
  • January 2003

SSRN Electronic Journal

... In emerging economies, the work of Barry et al. (1996) examined the potential of international real estate investment in emerging markets by analyzing the risk-return attributes of real estate Institutional real estate funds companies in such markets. The findings showed that emerging markets real estate companies experienced comparable returns to real estate companies in developed markets, but with higher return volatility. ...

Diversification Potential from Real Estate Companies in Emerging Capital Markets
  • Citing Article
  • January 1996

Journal of Real Estate Portfolio Management

... Specifically, the focus of investigation is on the role of capital market conditions and adverse selection costs of 4 Faulkender (2005), in contrast with the standard textbook treatment of interest rate risk management, or the matching hypothesis that firms match the risk exposure of their debt to that of their assets, shows that the final interest rate exposure of newly issued debt is largely driven by the slope of the yield curve at the time of debt issuance, suggesting that interest rate risk management practices are primarily driven by speculation rather than by hedging considerations. 5 While there is no consensus in the literature about the real meaning of managerial market timing (Barry et al., 2005), market timing in the context of this study refers to the clustering of debt issues or 'hot' debt market periods. 6 Additional evidence, available upon request, from post issue calendar time portfolio returns for hot-market and cold-market issuing firms, confirms that debt market timing is not related to investor beliefs as hot-market issuers' post-debt issuance long term alphas are indistinguishable from zero. ...

Interest Rates and The Timing of Public Issues of Corporate Debt *
  • Citing Article
  • January 2003

... ence, Urrutia (1995), Ojah and Karemera (1999) Karemera et al. (1999) examined random walk behaviour in only four Latin American markets using just variance ratio tests, and while Haque's et al. (2001) analysis added another three markets, none of these studies employed data with a higher frequency than weekly or with a sample longer than a decade. Barry and Rodriguez (1997), Grieb and Reyes (1999), Soydemir (2000, 2001) and Curci et al. (2002) To meet this deficiency, this note examines the random walk behaviour of seven Latin American stock markets (Argentina, Brazil, Chile, Columbia, Mexico, Peru and Venezuela) using daily data for up to a fifteen-year period and three sets of alternative, though complem ...

Risk, Return and Performance of Latin America's Equity Markets, 1975-1995
  • Citing Article
  • June 1998

Latin American Business Review

... The size variable was not significant in estimating stock returns in the different periods of study, the only exception being the U.S. market. Moreover, the book-to-market variable was statistically significant at 5% and positive for different time periods in Barry et al. (2002) study in the context of emerging countries as well as in Loughran and Wellman's (2012) study of the U.S. market. The results of both these prior studies are in line with the results obtained for the same variable in this study for the period 2005-2013. ...

Robustness of Size and Value Effects in Emerging Equity Markets, 1985-2000
  • Citing Article
  • January 2001

SSRN Electronic Journal

... As Barry et al. (1998) reported that investors prefer to trade in liquid markets, we follow Barry et al. (1998), Kortas et al. (2006) among others and we use the market turnover ratio (Note 14) as an indicator of market liquidity. Data was collected from the World Bank website (http://data.worldbank.org/). ...

Performance Characteristics of Emerging Capital Markets
  • Citing Article
  • January 1998

Financial Analysts Journal

... Specifically, the focus of investigation is on the role of capital market conditions and adverse selection costs of 4 Faulkender (2005), in contrast with the standard textbook treatment of interest rate risk management, or the matching hypothesis that firms match the risk exposure of their debt to that of their assets, shows that the final interest rate exposure of newly issued debt is largely driven by the slope of the yield curve at the time of debt issuance, suggesting that interest rate risk management practices are primarily driven by speculation rather than by hedging considerations. 5 While there is no consensus in the literature about the real meaning of managerial market timing ( Barry et al., 2005), market timing in the context of this study refers to the clustering of debt issues or 'hot' debt market periods. 6 Additional evidence, available upon request, from post issue calendar time portfolio returns for hot-market and cold-market issuing firms, confirms that debt market timing is not related to investor beliefs as hot-market issuers' post-debt issuance long term alphas are indistinguishable from zero. ...

Interest Rates and the Timing of Corporate Debt Issues
  • Citing Article
  • March 2005

SSRN Electronic Journal

... Limited access to capital is a common feature of the challenges to most entrepreneurs in Ghana (Korankye-Sakyi & Oluyeju, 2022;Hwang, Desai & Baird, 2019;Korankye-Sakyi, ibid). Studies have shown that a critical challenge faced by entrepreneurs is the difficulty in accessing sufficient funding for startups or scale businesses (Korankye-Sakyi & Oluyeju, ibid; Hwang, Desai & Baird, ibid; Korankye-Sakyi, ibid; Bellavitis, Filatotchev, Kamuriwo & Vanacker, 2017;Barry & Mihov, 2015;Bates & Robb, 2013;Alsos, Isaksen & Ljunggren, 2006). Again, additional financial resources are often required to cater for inadequate infrastructure such as intermittent power supply, limited access to technology and digital infrastructure, and inadequate transportation networks that hinder efficient business output, especially in developing countries. ...

Debt Financing, Venture Capital, and Initial Public Offerings
  • Citing Article
  • March 2006

SSRN Electronic Journal

... Two types of proxies are used to represent this variable: dummies for credit ratings, and dummy for rated and non-rated firms. Barry et al. (2008) argued that firms use more debt when present interest rate is lower than the historical interest rate. Higher inflation means paying lower to the lender at the time of inflation and real value of tax advantage which is higher at the time of inflation (Taggart, 1985) may result positive relationship between inflation and leverage under the prediction of Trade-off theory. ...

Corporate Debt Issuance and the Historical Level of Interest Rates
  • Citing Article
  • September 2008

Financial Management

... An examination of closed-end fund IPOs reveals no abnormal performance in the first two days of trading (Barry & Jennings, 1993). Subsequently, the price declines sharply as large traders sell to small "noise" traders (Barry & Peavy, 1990; Weiss-Hanley, Lee, & Seguin, 1996). The primary goal of any trading strategy is to outperform the market portfolio on a risk-adjusted basis. ...

Risk characteristics of closed-end stock fund IPOs
  • Citing Article
  • March 1990

Journal of Financial Services Research