nep-cfn New Economics Papers
on Corporate Finance
Issue of 2005‒01‒16
five papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Finance, Firm Size, and Growth By Thorsten Beck; Asli Demirgüç-Kunt; Luc Laeven; Ross Levine
  2. Use of the Formal and Informal Financial Sectors: Does Gender Matter? Empirical Evidence from Rural Bangladesh By Signe-Mary McKernan; Mark M. Pitt; David Moskowitz
  3. Mergers, Investment Decisions and Internal Organisation By Albert Banal-Estaño; Inés Macho-Stadler; Jo Seldeslachts
  4. Asset price shocks, real expenditures, and financial structure: a multi-country analysis By Chirinko, R.S.; Haan, L. de; Sterken, E.
  5. Behavioral Biases of Dealers in U.S. Treasury Auctions By David Goldreich

  1. By: Thorsten Beck (World Bank); Asli Demirgüç-Kunt (World Bank); Luc Laeven (World Bank); Ross Levine (World Bank)
    Abstract: The authors examine whether financial development boosts the growth of small firms more than large firms and hence provides information on the mechanisms through which financial development fosters aggregate economic growth. They define an industry’s technological firm size as the firm size implied by industrial specific production technologies, including capital intensities and scale economies. Using cross-industry, cross-country data, the results indicate that financial development exerts a disproportionately large effect on the growth of industries that are technologically more dependent on small firms. This suggests that financial development accelerates economic growth by removing growth constraints on small firms and also implies that financial development has sectoral as well as aggregate growth ramifications. This paper—a product of the Finance Group, Development Research Group—is part of a larger effort in the group to understand the growth finance link.
    Keywords: Domestic Finance; Macroecon & Growth
    Date: 2005–01–12
  2. By: Signe-Mary McKernan; Mark M. Pitt; David Moskowitz
    Abstract: Access to transfers and credit, whether cash or in-kind, is a major source of poverty alleviation and income generation in many developing countries around the world. Women may especially benefit from transfers and credit in countries such as Bangladesh, where they often have few work alternatives. In this paper, the authors descriptively examine the formal and informal financial sectors of rural Bangladesh, placing special emphasis on differences between men and women. Their analysis uses unique data on the credit and transfer behaviors of 1,800 households in rural Bangladesh. The authors focus on five important questions: • How important are the formal and informal financial sectors? • What are the primary sources of gifts and loans within those sectors? • Do men and women rely on different sources for finances (for example, formal versus informal) or different types of finances (for example, transfers versus loans)? • How have the financial sectors evolved during the 1990s? • What is the relationship between the formal and informal sectors? This paper—a product of the Gender Division, Poverty Reduction and Economic Management Network—is part of a larger effort in the network to integrate gender into economic policy work.
    Keywords: Poverty; Social Development
    Date: 2005–01–13
  3. By: Albert Banal-Estaño; Inés Macho-Stadler; Jo Seldeslachts
    Abstract: We analyse the effects of investment decisions and firms’ internal organisation on the efficiency and stability of horizontal mergers. In our framework synergies are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effectively realised. Moreover, the paper offers a possible explanation for merger failures. <br> <br> <i>ZUSAMMENFASSUNG - (Fusionen, Investitionsentscheidungen und unternehmensinterne Organisation) <br> Wir analysieren die Auswirkungen von Investitionsentscheidungen und internen Organisationsstrukturen auf die Effizienz und Stabilität von horizontalen Firmenzusammenschlüssen. In unserer Untersuchung sind Synergien endogen und es können interne Konflikte in dem fusionierten Unternehmen auftreten. Es zeigt sich, dass "stabile" Fusionen häufig nicht zu mehr Effizienz, sondern sogar zu Effizienzverlusten führen können. Da solche Firmenzusammenschlüsse zu einer geringeren Wohlfahrt führen, sollte der Regulierer nicht ungeprüft annehmen, dass potentielle Wohlfahrtsgewinne auch immer tatsächlich erreicht werden. Außerdem bietet das Papier eine mögliche Erklärung für das Scheitern von Fusionen.</i>
    Keywords: Horizontal Mergers, Investment, Efficiency gains, Internal Conflict.
    JEL: L22 D43
    Date: 2004–12
  4. By: Chirinko, R.S.; Haan, L. de; Sterken, E. (Groningen University)
    Abstract: This paper examines the response of the economies of 11 EU countries, Japan, and the United States to shocks in housing and equity prices. The effects are assessed with a Structural Vector Auto Regressive (SVAR) model, and four key findings emerge. First, the impacts of asset price shocks are heterogeneous across countries. Second, these heterogeneous responses are systematically related to cross-country variation in financial structure, and we are thus able to document the importance of a wealth/balance sheet channel for consumption and an equity finance channel for investment. Third, for a given country, housing shocks have a much greater impact than equity shocks. Fourth, variance decompositions indicate that monetary policy reacts to equity price shocks but not to housing price shocks. These results highlight the important role played by asset prices on real activity, and fuel the debate about the inclusion of asset prices in the formulation of monetary policy.
    Date: 2004
  5. By: David Goldreich (London Business School and CEPR)
    Abstract: This paper provides evidence of bounded rationality by large dealers in U.S. Treasury auctions. I argue that these dealers use a heuristic of yield-space bidding which leads to biases manifested in three ways: they submit dominated bids, i.e., those that could be improved without raising the bidding price; they bid in a manner that disregards the unevenly spaced price grid; and they round bids in yield space. Consistent with bounded rationality, I show that bidders are less susceptible to bias when the cost of suboptimal bidding is high. While the literature provides substantial evidence of behavioral biases among individual investors, they are less well documented for large sophisticated institutions that are likely to be important for setting asset prices. These primary bond dealers who regularly bid for billions of dollars in Treasury bill auctions are precisely such economic agents.
    Keywords: Treasury auctions, Behavioral finance
    JEL: H63 H74 D44
    Date: 2004–12

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