nep-cfn New Economics Papers
on Corporate Finance
Issue of 2006‒02‒19
ten papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  3. What Do We Know about the Capital Structure of Small Firms? By Karin Joeveer
  4. Effectiveness of Credit Guarantees in the Japanese Loan Market By Iichiro Uesugi; Koji Sakai; Guy M. Yamashiro
  5. Access to finance by Chilean corporations By Sirtaine, Sophie
  8. ENDEUDAMIENTO A CORTO PLAZO EN LAS PYMES ESPAÑOLAS By Pedro J. García Teruel; Pedro Martínez Solano

  1. By: Belén Gill de Albornoz (Universitat Jaume I); Peter F. Pope (Lancaster University)
    Abstract: Several theoretical papers have addressed the question of why firms raise public equity. However, direct empirical evidence on the characteristics of firms going public is scarce and limited to non-Anglo-Saxon contexts. Our research combines the analysis of ex ante and ex post characteristics of Initial Public Offering (IPO) companies to cast more light on the determinants of the going public decision in the UK. Some of our findings are consistent with prior empirical studies in other contexts: IPO probability depends positively on firm size and stock price levels. Results also suggest that a firm?s need to finance investments is not the main motive to go public, although this reason underlies the going public decision in a number of UK firms. Besides, contrary to the evidence shown by Pagano et al. (1998) for Italian IPOs, we find that UK firms do not go public to reduce debt since leverage is negatively related to the probability of going public. Finally, the relationship between profitability and the likelihood of an IPO for our whole IPO sample is negative and significant. Whether firms that go public have higher investment rates than other firms, as is the case of our survivor IPOs, the negative effect of profitability on the probability of going public may reflect the fact that these firms cannot yield sufficient internal funds to finance large investments. In fact, the relationship between profitability and the likelihood of an IPO becomes significantly positive for our acquired IPO group, where investment opportunities variables have no significant effect on the going public decision. This result is consistent with the portfolio rebalancing motive to go public.
    Keywords: Initial Public Offerings, the Going Public Decision.
    JEL: G10 G30 G32
    Date: 2004–06
  2. By: Yadira González de Lara (Universidad de Alicante)
    Abstract: This paper proposes a historically-grounded mechanism-design model of corporate finance, with two-side risk aversion under limited contract enforceability, where (inside) equity held by entrepreneurs, debt and (outside) equity coexist. This capital structure shares optimally the non-diversifiable risk associated with costly and risky ventures. Furthermore, it uniquely sustains the optimal risk allocation if agents' personal wealth is contractible at a higher enforcement cost than the projects' returns. Otherwise, the irrelevance theorem of Modigliani and Miller applies. Consistent with the theoretical predictions, we observe that (i) risk-averse merchants-entrepreneurs financed part of their ventures (hold inside equity) and raised additional funds from risk-averse investors through debt-like sea loan and equity-like commenda contracts when long-distance medieval trade was indeed highly costly and risky and that (ii) maritime insurance, with higher protection against the non-diversifiable "risk of loss at sea or from the action of men" but higher enforcement costs, did not develop until the mid-fourteenth century, when the ventures' costs and risk had decreased significantly. Whereas the model emphasizes the entrepreneurs' equity holdings and the limited-liability aspects of debt and equity, the choice between debt or equity derives from simple, although historically backed, information assumptions. The analysis is therefore complementary to other capital-structure theories based on agency costs, information asymmetries, signalling, transaction costs and incomplete contracting.
    Keywords: debt contracts, capital structure, creditworthiness, enforceability, inside and outside equity, insurance, limited liability, private information, risk-sharing
    JEL: D81 D82 G22 G32 N23
    Date: 2004–04
  3. By: Karin Joeveer
    Abstract: There are no stylized facts about the capital structure of small firms. Therefore, in this paper I use firm data from 10 Western European countries to contrast the sources of leverage across small and large firms. Specifically, I jointly evaluate the explanatory power of firm-specific, country of incorporation institutional, and macroeconomic factors. Using data that is more comprehensive in coverage than that used in the existing research, I confirm the stylized facts of the capital structure literature for large and listed firms, but I obtain contrasting evidence for smaller companies: First, the country of incorporation carries much more information for small firms supporting the idea that small firms are more financially constrained and face non-firm-specific hurdles in their capital structure choice. Second, using two different leverage measures I show that the relationship of firm size and tangibility to leverage is robust to the measure used for listed, but not for unlisted, firms.
    Keywords: Capital structure, Publicly traded and privately hold companies, Europe.
    JEL: G32
    Date: 2005–12
  4. By: Iichiro Uesugi; Koji Sakai; Guy M. Yamashiro
    Abstract: From 1998-2001, the Japanese government, in an effort to stimulate the flow of funds to the small business sector, implemented a massive credit guarantee program that was unprecedented in both scale and scope. Because the program was accessible by nearly every small firm we are able to clearly identify the policy effect. The program, therefore, presents a unique opportunity to determine if government intervention can improve the efficiency of credit allocation among bank-dependent small businesses. Utilizing a new panel data set of Japanese firms, which covers the implementation period of the program, we empirically test the theoretical predictions of Mankiw's (1986) adverse selection model. The model of credit markets under asymmetric information allows us to investigate whether government credit programs do more to stimulate small business investment, or serve to worsen the adverse selection problems prevalent in credit markets. We find evidence consistent with the former hypothesis. Specifically, we find that (1) program participants significantly increase their leverage, especially their use of long-term loans, and (2) with the exception of high-risk firms, become more efficient.
    Date: 2006–04
  5. By: Sirtaine, Sophie
    Abstract: The author assesses the extent to which Chilean firms have access to sufficient and adequate sources of funds. Access to finance has become an important issue for policymakers in Latin America. Small and medium enterprises (SMEs), in particular, complain that their lack of access to adequate sources of financing is an obstacle to their growth. Chile represents an interesting case study since it has one of the most developed financial markets in the continent, and thus great potential for using products suited to the needs and risk characteristics of SMEs. The author concludes that the largest firms have access to the whole range of financial instruments available in Chile. All smaller firms face financing constraints. She then analyzes the obstacles to downsizing access to the capital market and further increasing the penetration of banks in smaller segments.
    Keywords: Banks & Banking Reform,Investment and Investment Climate,Microfinance,Small Scale Enterprise,Economic Theory & Research
    Date: 2006–02–01
  6. By: Isidoro Guzmán (Universidad Politécnica de Cartagena)
    Abstract: This paper analyzes the relationship between economic-financial ratios and thedecision of distributing interim dividends by Spanish firms. With that purpose, we takea sample of non-financial companies quoting in the Spanish Stock Market during theperiod from 1999 to 2001. We choose a multivariate analysis in order to determinethe significant factors affecting the behavior of the companies when paying dividends inadvance. The results show that the ratios related with the firm productivity contain thehighest explanatory power regarding the characteristics analyzed. El presente trabajo analiza la relación de causalidad de la información contable asociada al reparto de "dividendos a cuenta", utilizando como variables predictoras un conjunto de ratios económico-financieros. El trabajo se realizó sobre una muestra de sociedades no financieras cotizadas en el mercado español durante los ejercicios 1999 a 2001, practicándose un doble análisis multivariante en orden a establecer los factores regresores relacionados con la distribución de dividendos interinos, mostrando los resultados obtenidos que las variables-ratios con mayor poder explicativo se relacionan generalmente con la productividad empresarial.
    Keywords: dividendos, ratios financieros, información contable, análisis factorial, regresión logit dividends, financial ratios, accounting information, factorial analysis, logit regression
    JEL: G35
    Date: 2004–03
  7. By: Belén Nieto (Universidad de Alicante); Germán López Espinosa (Universidad de Navarra); Joaquín Marhuenda (Universidad de Alicante)
    Abstract: The aim of this paper consists on seeing whether the information differential affects tothe stocks return in the Spanish market. Usually the firm attention by financial analysts,expressed by de number of earnings estimations, has been used as a proxy of the differentialinformation. Nevertheless, in this paper we use a different point of view based in the approachof Hong, Lim and Stein (2000). In particular, given the close relation between the firm size andthe analysts’ number following the firm, we use residual from the regression of the number onanalysts following a firm on size as a proxy of the information differential. The results show,firstly, that the CAPM cannot explain the return difference among portfolios constructed by theresidual coverage level. With this evidence, the next step is to explain how the informationdifferential can affect the stock return level. El objetivo de este trabajo consiste en comprobar si, en el ámbito del mercado español, la existencia de información diferencial afecta al nivel de rentabilidad de los títulos. En muchos trabajos es práctica habitual emplear como proxy del diferencial de información el grado de seguimiento de las empresas por parte de los analistas financieros, medido éste por el número de estimaciones anuales de beneficios que emiten. Sin embargo, en este trabajo se sigue un enfoque diferente basado en el planteamiento propuesto por Hong, Lim y Stein (2000). En particular, dada la estrecha relación existente entre el número de analistas que siguen a una empresa y el tamaño de ésta, se utiliza como proxy del diferencial de información la cobertura residual por parte de los analistas que se obtiene como residuo de la regresión entre el número de analistas que siguen a una empresa y su tamaño. La evidencia obtenida, en un primer momento, indica que el CAPM no es capaz de explicar las diferencias de rentabilidad observadas entre las carteras construidas por el nivel de cobertura residual. Tras obtener este resultado, el siguiente paso consiste en explicar la forma en que el diferencial de información afecta al nivel de rentabilidad.
    Keywords: IBES, analistas financieros, diferencial de información, cobertura residual IBES, financial analysts, information differential, residual coverage.
    Date: 2004–04
  8. By: Pedro J. García Teruel (Universidad de Murcia); Pedro Martínez Solano (Universidad de Murcia)
    Abstract: This paper analyses the debt maturity structure of the small and middle sizedfirms using the trade-off reward risk associated to the use of short-term loans.Therefore, a sample of 11.533 small and middle Spanish manufacturing firms from year1997 through 2001 was used. The results of our study show that short-term loans aremore frequent in firms with greater financial strength and greater financial flexibility,major growth options and when the interest cost differential between short-long terms ismore pronounced. Also, the firm size seems to have an influence on the level of shorttermloans, it being higher in the smaller firms. Este trabajo analiza la estructura de vencimiento de la deuda en las PYMEs a partir del trade-off rentabilidad riesgo asociado al uso de recursos ajenos a corto plazo. Para ello, se ha utilizado una muestra de 11.533 pequeñas y medianas empresas manufactureras españolas durante el periodo 1997-2001. Los resultados obtenidos muestran que el endeudamiento a corto plazo es mayor en aquellas empresas que presentan una mayor solvencia y flexibilidad financiera, mayores oportunidades de crecimiento y cuando el diferencial de tipos de interés corto-largo es más acentuado. Así mismo, el tamaño de las sociedades también parece influir en los niveles de endeudamiento a corto plazo, siendo mayor en las empresas más pequeñas.
    Keywords: Pymes, vencimiento de la deuda, solvencia financiera, flexibilidad financiera. SMEs, debt maturity, financial solvency, financial flexibility.
    JEL: G3 G32
    Date: 2004–04
  9. By: Juan A. Lafuente (Universitat Jaume I); Manuel Illueca Muñoz (Universitat Jaume I)
    Abstract: In November 2001, the Spanish Official Exchange for Financial Futures and options launched the mini IBEX-35 futures contract. Following the seminal paper of Bessembider and Seguin (1992), this paper analyzes the effects of the introduction of the mini-futures contract in the Spanish stock index futures market. The objective of the paper is twofold: a) to analyze the potential destabilizing effect of the mini futures trading activity on the distribution of spot returns, and b) to test whether the mini futures contract significantly contributes to the price discovery process. A non-parametric approach is used to estimate the density function of spot return conditional to both spot and futures trading volume. Empirical findings using 15-minutes intraday data reveals that the mini futures trading activity enhances the price discovery function of the derivative market and does not destabilize spot prices. En Noviembre de 2001, el Mercado Oficial de Futuros y Opciones Financierosen España introdujo el contrato de futuros mini sobre el Ibex 35. En la línea del trabajode Bessembinder y Seguin (1992), este trabajo analiza el efecto de la introducción dedicho contrato sobre el mercado de contado. En particular, hay dos objetivosfundamentales en el trabajo: a) analizar la potencial desestabilización de la actividadnegociadora del mercado de derivados sobre el mercado de contado, y b) estudiar lacontribución del nuevo contrato al proceso de formación de precios del mercado decontado. Para ello, se procede a la estimación no paramétrica de la función de densidadde la rentabilidad del contado, condicional al volumen de negociación tanto el mercadode contado como de futuros. Los resultados empíricos a partir de datos intradía cada15 minutos revelan no solo que el nuevo contrato no tiende a desestabilizar el mercadode contado, sino que además contribuye de forma significativa al proceso de formaciónde precios en el mismo.
    Keywords: Futuros mini, price discovery, desestabilización Ibex 35 Mini-futures, price discovery, destabilization, Ibex 35
    Date: 2004–05
  10. By: Carlos Forner (Universidad de Alicante); Joaquín Marhuenda (Universidad de Alicante)
    Abstract: Previous evidence has demonstrated that the momentum effect is present in the Spanish stockmarket, and that it can not be explained neither by the CAPM nor the Fama&French (1993) threefactor model. The aim of this paper is to deepen in the possible explanations of such phenomenon byanalyzing two new items. In the first part, the possibility that the momentum profits were therecompense for bearing some kind of risk not incorporated in this two models has been studied. Giventhe failure of this first approach, in the second part, the behavioural models of Daniel et al. (1998) andHong and Stein (1999) have been tested, by facing the momentum profits to the size, book-to-marketand analyst coverage characteristics. While the results show that the momentum profits focus on smallstocks, restrictions in the data hinder to obtain conclusive results regarding the validity of these twomodels in explaining the Spanish momentum. La evidencia previa en el mercado español ha puesto de manifiesto la existencia de un efecto momentum robusto ante ajustes tanto por CAPM como por el modelo de tres factores de Fama y French (1993). Este trabajo trata de ahondar en las posibles explicaciones de dicho fenómeno analizando dos nuevos aspectos. En una primera parte se estudia la posibilidad de que los beneficios del momentum sean consecuencia de la incorrecta especificación del modelo de valoración utilizado. Dada la dificultad de explicar los beneficios del momentum en base a esta alternativa, en una segunda parte se contrastan los modelos conductistas de Daniel et al. (1998) y Hong y Stein (1999), enfrentando los beneficios del momentum ante las características de tamaño, ratio book-to-market y cobertura de analistas. Si bien se obtiene que los beneficios del momentum se concentran en títulos de baja capitalización, limitaciones en la muestra impiden obtener resultados concluyentes en relación a la validez de estos modelos.
    Keywords: momentum, factores de riesgo, modelos conductistas momentum, risk factors, behavioural models
    JEL: G14 G11 G12
    Date: 2004–10

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