Effect of Earnings Volatility on Cost of Debt: The case of Swedish Limited Companies

The paper empirically tests the relationship between earnings volatility and cost of debt with a sample of more than 77,000 Swedish limited companies over the period 2006 to 2013 observing more than 677,000 firm years. As called upon by many researchers recently that there is very limited evidence of the association between earnings volatility and cost of debt this paper contributes greatly to the existing literature of earnings quality and debt contracts, especially on the consequence of earnings quality in the debt market. Earnings volatility is a proxy used for earnings quality while cost of debt is a component of debt contract. After controlling for firms’ profitability, liquidity, solvency, cashflow volatility, accruals volatility, sales volatility, business risk, financial risk and size this paper studies the effect of earnings volatility measured by standard deviation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on Cost of Debt. Overall finding suggests that lenders in Sweden does take earnings volatility into consideration while determining cost of debt for borrowers. But a deeper analysis of various industries suggest earnings volatility is not consistently used by lenders across all the industries. Lenders in Sweden are rather more sensitive to borrowers’ financial risk across all the industries. It may also be stated that larger borrowers tend to secure loans at a lower interest rate, the results are consistent with majority of the industries. Swedish debt market appears to be well prepared for financial crises as the debt crisis seems to have no or little adverse effect borrowers’ cost of capital. This study is the only empirical evidence to study the association between earnings volatility and cost of debt. Prior indirect research suggests earnings volatility has a negative effect on cost debt (i.e. an increase in earnings volatility will increase firm’s cost of debt). Our direct evidence from the Swedish debt market is consistent for some industries including media, real estate activities, transportation & warehousing, and other consumer services.

Energy Efficient Buildings with Functional Steel Cladding

The aim of the study is to develop a model for the energy balance of buildings that includes the effect from the radiation properties of interior and exterior surfaces of the building envelope. As a first step we have used ice arenas as case study objects to investigate the importance of interior low emissivity surfaces. Measurements have been done in two ice arenas in the north part of Sweden, one with lower and one with higher ceiling emissivity. The results show that the low emissivity ceiling gives a much lower radiation temperature interacting with the ice under similar conditions. The dynamic modelling of the roof in ice arenas shows a similar dependence of the roof-to-ice heat flux and the ceiling emissivity.A second part of the study focus on how to realise paints with very low thermal emissivity to be used on interior building surfaces.

Essays on growth and environment

This thesis consists of a summary and four self-contained papers. Paper [I] Following the 1987 report by The World Commission on Environment and Development, the genuine saving has come to play a key role in the context of sustainable development, and the World Bank regularly publishes numbers for genuine saving on a national basis. However, these numbers are typically calculated as if the tax system is non-distortionary. This paper presents an analogue to genuine saving in a second best economy, where the government raises revenue by means of distortionary taxation. We show how the social cost of public debt, which depends on the marginal excess burden, ought to be reflected in the genuine saving. We also illustrate by presenting calculations for Greece, Japan, Portugal, U.K., U.S. and OECD average, showing that the numbers published by the World Bank are likely to be biased and may even give incorrect information as to whether the economy is locally sustainable. Paper [II] This paper examines the relationships among per capita CO2 emissions, per capita GDP and international trade based on panel data spanning the period 1960-2008 for 150 countries. A distinction is also made between OECD and Non-OECD countries to capture the differences of this relationship between developed and developing economies. We apply panel unit root and cointegration tests, and estimate a panel error correction model. The results from the error correction model suggest that there are long-term relationships between the variables for the whole sample and for Non-OECD countries. Finally, Granger causality tests show that there is bi-directional short-term causality between per capita GDP and international trade for the whole sample and between per capita GDP and CO2 emissions for OECD countries. Paper [III] Fundamental questions in economics are why some regions are richer than others, why their growth rates differ, whether their growth rates tend to converge, and what key factors contribute to explain economic growth. This paper deals with the average income growth, net migration, and changes in unemployment rates at the municipal level in Sweden. The aim is to explore in depth the effects of possible underlying determinants with a particular focus on local policy variables. The analysis is based on a three-equation model. Our results show, among other things, that increases in the local public expenditure and income taxe rate have negative effects on subsequent income income growth. In addition, the results show conditional convergence, i.e. that the average income among the municipal residents tends to grow more rapidly in relatively poor local jurisdictions than in initially “richer” jurisdictions, conditional on the other explanatory variables. Paper [IV] This paper explores the relationship between income growth and income inequality using data at the municipal level in Sweden for the period 1992-2007. We estimate a fixed effects panel data growth model, where the within-municipality income inequality is one of the explanatory variables. Different inequality measures (Gini coefficient, top income shares, and measures of inequality in the lower and upper part of the income distribution) are examined. We find a positive and significant relationship between income growth and income inequality measured as the Gini coefficient and top income shares, respectively. In addition, while inequality in the upper part of the income distribution is positively associated with the income growth rate, inequality in the lower part of the income distribution seems to be negatively related to the income growth. Our findings also suggest that increased income inequality enhances growth more in municipalities with a high level of average income than in municipalities with a low level of average income.

Radiation properties of coil-coated steel in building envelope surfaces and the influence on building thermal performance

Recent studies have shown that the optical properties of building exterior surfaces are important in terms of energy use and thermal comfort. While the majority of the studies are related to exterior surfaces, the radiation properties of interior surfaces are less thoroughly investigated. Development in the coil-coating industries has now made it possible to allocate different optical properties for both exterior and interior surfaces of steel-clad buildings. The aim of this thesis is to investigate the influence of surface radiation properties with the focus on the thermal emittance of the interior surfaces, the modeling approaches and their consequences in the context of the building energy performance and indoor thermal environment. The study consists of both numerical and experimental investigations. The experimental investigations include parallel field measurements on three similar test cabins with different interior and exterior surface radiation properties in Borlänge, Sweden, and two ice rink arenas with normal and low emissive ceiling in Luleå, Sweden. The numerical methods include comparative simulations by the use of dynamic heat flux models, Building Energy Simulation (BES), Computational Fluid Dynamics (CFD) and a coupled model for BES and CFD. Several parametric studies and thermal performance analyses were carried out in combination with the different numerical methods. The parallel field measurements on the test cabins include the air, surface and radiation temperatures and energy use during passive and active (heating and cooling) measurements. Both measurement and comparative simulation results indicate an improvement in the indoor thermal environment when the interior surfaces have low emittance. In the ice rink arenas, surface and radiation temperature measurements indicate a considerable reduction in the ceiling-to-ice radiation by the use of low emittance surfaces, in agreement with a ceiling-toice radiation model using schematic dynamic heat flux calculations. The measurements in the test cabins indicate that the use of low emittance surfaces can increase the vertical indoor air temperature gradients depending on the time of day and outdoor conditions. This is in agreement with the transient CFD simulations having the boundary condition assigned on the exterior surfaces. The sensitivity analyses have been performed under different outdoor conditions and surface thermal radiation properties. The spatially resolved simulations indicate an increase in the air and surface temperature gradients by the use of low emittance coatings. This can allow for lower air temperature at the occupied zone during the summer. The combined effect of interior and exterior reflective coatings in terms of energy use has been investigated by the use of building energy simulation for different climates and internal heat loads. The results indicate possible energy savings by the smart choice of optical properties on interior and exterior surfaces of the building. Overall, it is concluded that the interior reflective coatings can contribute to building energy savings and improvement of the indoor thermal environment. This can be numerically investigated by the choice of appropriate models with respect to the level of detail and computational load. This thesis includes comparative simulations at different levels of detail.

What determines the use of capital budgeting methods? : Evidence from Swedish listed companies

Purpose: This paper aims to extend and contribute to prior research on the association between company characteristics and choice of capital budgeting methods (CBMs). Design/methodology/approach: A multivariate regression analysis on questionnaire data from 2005 and 2008 is used to study which factors determine the choice of CBMs in Swedish listed companies. Findings: Our results supported hypotheses that Swedish listed companies have become more sophisticated over the years (or at least less unsophisticated) which indicates a closing of the theory-practice gap; that companies with greater leverage used payback more often; and that companies with stricter debt targets and less management ownership employed accounting rate of return more frequent. Moreover, larger companies used CBMs more often. Originality/value: The paper contributes to prior research within this field by being the first Swedish study to examine the association between use of CBMs and as many as twelve independent variables, including changes over time, by using multivariate regression analysis. The results are compared to a US and a continental European study.