Structured Finance Income And Corporate Governance Performance

Structured financing offers a variety of benefit for the sponsoring firm.Amongst the most important are: future cash flow shifted to present, whichenhances liquidity and equips the firm with better investing opportunities;isolated or mitigated bankruptcy cost;reduced information asymmetry due tosignaling, information production and tranching technology. Structured financeis a win-win game from the perspective of both the firm and the investors.However, the notorious Enron scandal sounded an alarm bell for the presentstructured financing fad. Enron fraudulently created over 3000 SPV, many ofwhich assuming the function of structured financing. The financing design itselfwas not undetectable, but the proof-seeking process took too much time. TheEnron scandal raised an unavoidable question: Is structured financing anall-wining game? If not, how should its net benefit be measured? Theincremental cash flow model is a widely used, fundamental model often appliedto measuring corporate governance performance. By decomposing the model,we are trying to find out structured financing's influence to the models differentparts, in order to measure the net financing benefit...