NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Alexander J. W. Sappington

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Gainesville, FL 32608

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NBER Working Papers and Publications

January 2016To Borrow or Not to Borrow? An Analysis of University Leverage Decisions
with Harvey S. Rosen: w21951
This paper investigates the decisions of universities to issue debt. We test whether the expected value and uncertainty of a university’s nonfinancial income (the income generated by sources other than its endowment) affect its leverage (the ratio of the value of an institution’s liabilities to the value of its assets). We find that leverage is negatively related to both the expected value and the uncertainty of nonfinancial income. On average, increasing the expected value of nonfinancial income by one standard deviation decreases a university’s debt by about $5.1 million, while increasing the uncertainty of nonfinancial income by one standard deviation decreases debt by about $2.7 million. This behavior is consistent with the pecking order theory of capital structure, which posits that m...

Published: Harvey S. Rosen & Alexander J.W. Sappington, 2016. "To borrow or not to borrow? An analysis of university leverage decisions," Research in Economics, vol 70(1), pages 170-185.

June 2015What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income
with Harvey S. Rosen: w21271
This paper examines whether university endowment managers think only in terms of the assets they manage, or also take into account background income, the other flows of income to the university. Specifically, we test whether the level and variability of a university’s background income (e.g., from tuition and government grants) affect its endowment’s allocations to so-called alternative assets such as hedge funds, private equity, and venture capital. We find that both the probability of investing in alternative assets and the proportion of the portfolio invested in such assets increase with expected background income and decrease with its variability.

Published: Harvey S. Rosen & Alexander J. W. Sappington, 2016. "What Do University Endowment Managers Worry About? An Analysis of Alternative Asset Investments and Background Income," Education Finance and Policy, vol 11(4), pages 404-425.

 
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