Corporate Funding on the European Debt Capital Market

The integrated European debt capital market has undoubtedly broadened the possibilities for companies to access funding from the public and challenged investors to cope with an ever increasing complexity of its market participants. Well into the Euro-era, it is clear that the unified market has created potential for all involved parties, where investment opportunities are able to meet a supply of funds from a broad geographical area now summoned under a single currency. Europe’s traditionally heavy dependency on bank lending as a source of debt capital has thus been easing as corporate residents are able to tap into a deep and liquid capital market to satisfy their funding needs. As national barriers eroded with the inauguration of the Euro and interest rates for the EMU-members converged towards over-all lower yields, a new source of debt capital emerged to the vast majority of corporate residents under the new currency and gave an alternative to the traditionally more maturity-restricted bank debt. With increased sophistication came also an improved knowledge and understanding of the market and its participants. Further, investors became more willing to bear credit risk, which opened the market for firms of ever lower creditworthiness. In the process, the market as a whole saw a change in the profile of issuers, as non-financial firms increasingly sought their funding directly from the bond market. This thesis consists of three separate empirical studies on how corporates fund themselves on the European debt capital markets. The analysis focuses on a firm’s access to and behaviour on the capital market, subsequent the decision to raise capital through the issuance of arm’s length debt on the bond market. The specific areas considered are contributing to our knowledge in the fields of corporate finance and financial markets by considering explicitly firms’ primary market activities within the new market area. The first essay explores how reputation of an issuer affects its debt issuance. Essay two examines the choice of interest rate exposure on newly issued debt and the third and final essay explores pricing anomalies on corporate debt issues.

Function and regulation of Cdk7

Understanding the process of cell division is crucial for modern cancer medicine due to the central role of uncontrolled cell division in this disease. Cancer involves unrestrained proliferation as a result of cells loosing normal control and being driven through the cell cycle, where they normally would be non-dividing or quiescent. Progression through the cell cycle is thought to be dependent on the sequential activation of cyclin-dependent kinases (Cdks). The full activation of Cdks requires the phosphorylation of a conserved residue (threonine-160 on human Cdk2) on the T-loop of the kinase domain. In metazoan species, a trimeric complex consisting of Cdk7, cyclin H and Mat1 has been suggested to be the T-loop kinase of several Cdks. In addition, Cdk7 have also been implicated in the regulation of transcription. Cdk7, cyclin H, and Mat1 can be found as subunits of general transcription factor TFIIH. Cdk7, in this context, phosphorylates the Carboxy-terminal domain (CTD) of the large subunit of RNA polymerase II (RNA pol II), specifically on serine-5 residues of the CTD repeat. The regulation of Cdk7 in these and other functions is not well known and the unambiguous characterization of the in vivo role of Cdk7 in both T-loop activation and CTD serine-5 phosphorylation has proved challenging. In this study, the fission yeast Cdk7-cyclin H homologous complex, Mcs6-Mcs2, is identified as the in vivo T-loop kinase of Cdk1(Cdc2). It also identifies multiple levels of regulation of Mcs6 kinase activity, i.e. association with Pmh1, a novel fission yeast protein that is the apparent homolog of metazoan Mat1, and T-loop phosphorylation of Mcs6, mediated by Csk1, a monomeric T-loop kinase with similarity to Cak1 of budding yeast. In addition, Skp1, a component of the SCF (Skp1-Cullin-F box protein) ubiquitin ligase is identified by its interactions with Mcs2 and Pmh1. The Skp1 association with Mcs2 and Pmh1 is however SCF independent and does not involve proteolytic degradation but may reflect a novel mechanism to modulate the activity or complex assembly of Mcs6. In addition to Cdk7, also Cdk8 has been shown to have CTD serine-5 kinase activity in vitro. Cdk8 is not essential in yeast but has been shown to function as a transcriptional regulator. The function of Cdk8 is unknown in flies and mammals. This prompted the investigation of murine Cdk8 and its potential role as a redundant CTD serine-5 kinase. We find that Cdk8 is required for development prior to implantation, at a time that is co-incident with a burst of Cdk8 expression during normal development. The results does not support a role of Cdk8 as a serine-5 CTD kinase in vivo but rather shows an unexpected requirement for Cdk8, early in mammalian development. The results presented in this thesis extends our current knowledge of the regulation of the cell cycle by characterizing the function of two distinct cell cycle regulating T-loop kinases, including the unambiguous identification of Mcs6, the fission yeast Cdk7 homolog, as the T-loop kinase of Cdk1. The results also indicate that the function of Mcs6 is conserved from fission yeast to human Cdk7 and suggests novel mechanisms by which the distinct functions of Cdk7 and Mcs6 could be regulated. These findings are important for our understanding of how progression of the cell cycle and proper transcription is controlled, during normal development and tissue homeostasis but also under condition where cells have escaped these control mechanisms e.g. cancer.

The Functions and Regulation of Ornithine Decarboxylase

Ornithine decarboxylase (ODC) regulates the synthesis of polyamines which are involved in many cellular functions e.g. proliferation and differentiation. Due to its critical role, ODC is a tightly regulated enzyme by antizymes and antizyme inhibitors. If the regulation fails, the activity of ODC increases and may lead to malignant transformation of a cell. Increased ODC activity is found in many common cancers, including colon, prostate, and breast cancer. In a transformed cell, dynamics of the actin cytoskeleton is disturbed. A small G-protein, RhoA regulates organization of the cytoskeleton, and its overactivity increases malignant potential of the cell. The present results indicate that covalent attachment of polyamines by transglutaminase is a physiological means of regulating the activity of RhoA. The translocation of RhoA to the plasma membrane, where it exerts its activity is dependent on the presence of catalytically active ODC. As the overactivity of ODC and RhoA are implicated in cell transformation, the results provide a mechanistic explanation of the interrelationship between the polyamine metabolism and the reorganization of the actin cytoskeleton occurring in cancer cells. ODC and polyamines have also an important role in the function of central nervous system. They participate in the regulation of brain morphogenesis in embryos. In adult nervous tissue, polyamines regulate K+ and glutamate channels. K+ inward rectifying channels control membrane potentials and NMDA-type glutamate receptors (NMDAR) regulate synaptic plasticity. High ODC activity and polyamine levels are considered important in the development of ischemic brain damage and they are implicated in the pathogenesis of Alzheimer s disease (AD). A homolog of ODC was cloned from a human brain cDNA library, and several alternatively spliced variants were detected in human brain and testis. The novel protein was nevertheless devoid of ODC catalytic activity. It was subsequently found to be a novel inductor of ODC activity and polyamine synthesis, called antizyme inhibitor 2 (AZIN2). The accumulation of AZIN2 in vesicle-like formations along the axons and beneath the plasma membrane of neurons as well as in steroid hormone producing Leydig cells and luteal cells of the gonads implies that AZIN2 plays a role in secretion and vesicle trafficking. An accumulation of AZIN2 was detected also in specimens of AD brains. This increased expression of AZIN2 was specific for AD and was not found in brains with other neurodegenerative diseases including CADASIL or dementia with Lewy bodies.

Hantavirus glycoprotein GN in virion assembly and regulation of interferon response

Hantaviruses have a tri-segmented negative-stranded RNA genome. The S segment encodes the nucleocapsid protein (N), M segment two glycoproteins, Gn and Gc, and the L segment the RNA polymerase. Gn and Gc are co-translationally cleaved from a precursor and targeted to the cis-Golgi compartment. The Gn glycoprotein consists of an external domain, a transmembrane domain and a C-terminal cytoplasmic domain. In addition, the S segment of some hantaviruses, including Tula and Puumala virus, have an open reading frame (ORF) encoding a nonstructural potein NSs that can function as a weak interferon antagonist. The mechanisms of hantavirus-induced pathogenesis are not fully understood but it is known that both hemorrhagic fever with renal syndrome (HFRS) and hantavirus (cardio) pulmonary syndrome (HCPS) share various features such as increased capillary permeability, thrombocytopenia and upregulation of TNF-. Several hantaviruses have been reported to induce programmed cell death (apoptosis), such as TULV-infected Vero E6 cells which is known to be defective in interferon signaling. Recently reports describing properties of the hantavirus Gn cytoplasmic tail (Gn-CT) have appeared. The Gn-CT of hantaviruses contains animmunoreceptor tyrosine-based activation motif (ITAM) which directs receptor signaling in immune and endothelial cells; and contain highly conserved classical zinc finger domains which may have a role in the interaction with N protein. More functions of Gn protein have been discovered, but much still remains unknown. Our aim was to study the functions of Gn protein from several aspects: synthesis, degradation and interaction with N protein. Gn protein was reported to inhibit interferon induction and amplication. For this reason, we also carried out projects studying the mechanisms of IFN induction and evasion by hantavirus. We first showed degradation and aggresome formation of the Gn-CT of the apathogenic TULV. It was reported earlier that the degradation of Gn-CT is related to the pathogenicity of hantavirus. We found that the Gn-CT of the apathogenic hantaviruses (TULV, Prospect Hill virus) was degraded through the ubiquitin-proteasome pathway, and TULV Gn-CT formed aggresomes upon treatment with proteasomal inhibitor. Thus the results suggest that degradation and aggregation of the Gn-CT may be a general property of most hantaviruses, unrelated to pathogenicity. Second, we investigated the interaction of TULV N protein and the TULV Gn-CT. The Gn protein is located on the Golgi membrane and its interaction with N protein has been thought to determine the cargo of the hantaviral ribonucleoprotein which is an important step in virus assembly, but direct evidence has not been reported. We found that TULV Gn-CT fused with GST tag expressed in bacteria can pull-down the N protein expressed in mammalian cells; a mutagenesis assay was carried out, in which we found that the zinc finger motif in Gn-CT and RNA-binding motif in N protein are indispensable for the interaction. For the study of mechanisms of IFN induction and evasion by Old World hantavirus, we found that Old World hantaviruses do not produce detectable amounts of dsRNA in infected cells and the 5 -termini of their genomic RNAs are monophosphorylated. DsRNA and tri-phosphorylated RNA are considered to be critical activators of innate immnity response by interacting with PRRs (pattern recognition receptors). We examined systematically the 5´-termini of hantavirus genomic RNAs and the dsRNA production by different species of hantaviruses. We found that no detectable dsRNA was produced in cells infected by the two groups of the old world hantaviruses: Seoul, Dobrava, Saaremaa, Puumala and Tula. We also found that the genomic RNAs of these Old World hantaviruses carry 5´-monophosphate and are unable to trigger interferon induction. The antiviral response is mainly mediated by alpha/beta interferon. Recently the glycoproteins of the pathogenic hantaviruses Sin Nombre and New York-1 viruses were reported to regulate cellular interferon. We found that Gn-CT can inhibit the induction of IFN activation through Toll-like receptor (TLR) and retinoic acid-inducible gene I-like RNA helicases (RLH) pathway and that the inhibition target lies at the level of TANK-binding kinase 1 (TBK-1)/ IKK epislon complex and myeloid differentiation primary response gene (88) (MyD88) / interferon regulatory factor 7 (IRF-7) complex.

The function and regulation of the U11-48K protein in U12-dependent splicing

The removal of noncoding sequences, or introns, from the eukaryotic messenger RNA precursors is catalyzed by a ribonucleoprotein complex known as the spliceosome. In most eukaryotes, two distinct classes of introns exist, each removed by a specific type of spliceosome. The major, U2-type introns account for over 99 % of all introns, and are almost ubiquitous. The minor, U12-type introns are found in most but not all eukaryotes, and reside in conserved locations in a specific set of genes. Due to their slow excision rates, the U12-type introns are expected to be involved in the regulation of the genes containing them by inhibiting the maturation of the messenger RNAs. However, little information is currently available on how the activity of the U12-dependent spliceosome itself is regulated. The levels of many known splicing factors are regulated through unproductive alternative splicing events, which lead to inclusion of premature STOP codons, targeting the transcripts for destruction by the nonsense-mediated decay pathway. These alternative splice sites are typically found in highly conserved sequence elements, which also contain binding sites for factors regulating the activation of the splice sites. Often, the activation is achieved by binding of products of the gene in question, resulting in negative feedback loops. In this study, I show that U11-48K, a protein factor specific to the minor spliceosome, specifically recognizes the U12-type 5' splice site sequence, and is essential for proper function of the minor spliceosome. Furthermore, the expression of U11-48K is regulated through a feedback mechanism, which functions through conserved sequence elements that activate alternative splicing and nonsense-mediated decay. This mechanism is conserved from plants to animals, highlighting both the importance and early origin of this mechanism in regulating splicing factors. I also show that the feedback regulation of U11-48K is counteracted by a component of the major spliceosome, the U1 small nuclear ribonucleoprotein particle, as well as members of the hnRNP F/H protein family. These results thus suggest that the feedback mechanism is finely tuned by multiple factors to achieve precise control of the activity of the U12-dependent spliceosome.

Essays on Corporate Governance and the Quality of Disclosed Earnings: Across Transitional Europe

A growing body of empirical research examines the structure and effectiveness of corporate governance systems around the world. An important insight from this literature is that corporate governance mechanisms address the excessive use of managerial discretionary powers to get private benefits by expropriating the value of shareholders. One possible way of expropriation is to reduce the quality of disclosed earnings by manipulating the financial statements. This lower quality of earnings should then be reflected by the stock price of firm according to value relevance theorem. Hence, instead of testing the direct effect of corporate governance on the firm’s market value, it is important to understand the causes of the lower quality of accounting earnings. This thesis contributes to the literature by increasing knowledge about the extent of the earnings management – measured as the extent of discretionary accruals in total disclosed earnings - and its determinants across the Transitional European countries. The thesis comprises of three essays of empirical analysis of which first two utilize the data of Russian listed firms whereas the third essay uses data from 10 European economies. More specifically, the first essay adds to existing research connecting earnings management to corporate governance. It testifies the impact of the Russian corporate governance reforms of 2002 on the quality of disclosed earnings in all publicly listed firms. This essay provides empirical evidence of the fact that the desired impact of reforms is not fully substantiated in Russia without proper enforcement. Instead, firm-level factors such as long-term capital investments and compliance with International financial reporting standards (IFRS) determine the quality of the earnings. The result presented in the essay support the notion proposed by Leuz et al. (2003) that the reforms aimed to bring transparency do not correspond to desired results in economies where investor protection is lower and legal enforcement is weak. The second essay focuses on the relationship between the internal-control mechanism such as the types and levels of ownership and the quality of disclosed earnings in Russia. The empirical analysis shows that the controlling shareholders in Russia use their powers to manipulate the reported performance in order to get private benefits of control. Comparatively, firms owned by the State have significantly better quality of disclosed earnings than other controllers such as oligarchs and foreign corporations. Interestingly, market performance of firms controlled by either State or oligarchs is better than widely held firms. The third essay provides useful evidence on the fact that both ownership structures and economic characteristics are important factors in determining the quality of disclosed earnings in three groups of countries in Europe. Evidence suggests that ownership structure is a more important determinant in developed and transparent countries, while economic determinants are important determinants in developing and transitional countries.

Essays on the Costs and Benefits of Large Shareholders in Corporate Governance (summary section only)

“Corporate governance deals with the ways in which suppliers of finance to firms assure themselves of getting a return on their investment” (Shleifer and Vishny (1997, p. 737). According to La Porta et al. (1999), research in corporate finance relevant for most countries should focus on the incentives and capabilities of controlling shareholders to treat themselves preferentially at the expense of minority shareholders. Accordingly, this thesis sets out to answer a number of research questions regarding the role of large shareholders in public firms that have received little attention in the literature so far. A common theme in the essays stems from the costs and benefits of individual large-block owners and the role of control contestability from the perspective of outside minority shareholders. The first essay empirically examines whether there are systematic performance differences between family controlled and nonfamily controlled firms in Western Europe. In contrast to the widely held view that family control penalizes firm value, the essay shows that publicly traded family firms have higher performance than comparable firms. In the second essay, we present both theoretical and empirical analysis on the effects of control contestability on firm valuation. Consistent with the theoretical model, the empirical results show that minority shareholders benefit from a more contestable control structure. The third essay explores the effects of individual large-block owners on top management turnover and board appointments in Finnish listed firms. The results indicate that firm performance is an important determinant for management and board restructurings. For certain types of turnover decisions the corporate governance structure influences the performance / turnover sensitivity. In the fourth essay, we investigate the relation between the governance structure and dividend policy in Finnish listed firms. We find evidence in support of the outcome agency model of dividends stating that lower agency conflicts should be associated with higher dividend payouts.