OFF BALANCE SHEET FINANCING This research examine

Major changes in the financial markets in the 1980s prompted the development of financial innovations. These changes were the level and volatility of interest rates, technological progress in computers and communications, changes in governmental regulation of business activity, and tax law changes.1

The financial innovations that developed may be classified as product, process, and organizational in character.2 The types of financial innovation considered in this research are primarily organizational in character.

An interest rate swap is a transaction in which two parties swap interest payments for a predetermined period.3 The credit risk associated with an interest rate swap is less than that for a comparable debt contract because no principal changes hands, and interest payments are made on a net basis. The practical

1Tim S. Campbell, "Innovations in Financial Intermediation," Business Horizons, 32 (NovemberDecember 1989): 70.

3Larry D. Wall and John J. Pringle, "Alternative Explanations of Interest Rate Swaps," Financial Management, 18 (Summer 1989): 59.effect of an intere

. . .
ate diversification strategies, in which the principal goal of any eventual merger or consolidation was growth. By contrast, either the unfriendly takeover, or the leveraged buyout, wherein (in either case) the strategic goal of the merger often has little relevance to the primary business activities of the separate firms involved, appeared to characterize most of the corporate acquisition, merger, and consolidation activity of the 1980s.14 Regardless of the strategic goals involved, merger and acquisition activity usually results in some degree of corporate diversification. This result was particularly characteristic of most mergers and acquisitions in the 1980s, where the principal business activities of target firms, more often than not appeared to have little in common with those of the raiding firms. Diversification has long been recognized as a desirable goal for both firms and investors. In this context, diversification is viewed as a viable means of reducing risk in a variety of contexts. A cursory consideration of diversification attained through corporate acquisition, merger, and consolidation __________ 14J. Smith, "Merger Poppycock," Financial World
. . .

Some common words found in the essay are:
Financial Management, FASB Statement, Management Journal, Compensation Benefits, Swaps Consolidation, CA Magazine, Financial World, Decision Science, Finance June, Portfolio Management, pension fund, balance sheet, rate swaps, financial management, financial accounting, financial innovation, federal reserve, debt/equity swaps, pension plans, fixedinterest debt, balance sheet financing, accounting standards board, financial accounting standards, statement financial accounting, national bureau economic,
Approximate Word count = 5248
Approximate Pages = 21 (250 words per page)

More Essays on OFF BALANCE SHEET FINANCING This research examine