nep-cfn New Economics Papers
on Corporate Finance
Issue of 2006‒07‒09
six papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Stock price informativeness, cross-listings and investment decisions By Foucault, Thierry; Gehrig, Thomas
  2. Corporate Governance and Firms' Market Values: Time Series Evidence from Russia By Bernard S. Black; Inessa Love; Andrei Rachinsky
  3. The Relationship between Risk and Expected Return in Europe. By Ángel León; Juan Nave; Gonzalo Rubio
  4. The Corporate Governance Role of the Media: Evidence from Russia By Alexander Dyck; Natalya Volchkova; Luigi Zingales
  5. Internal Capital Markets and Lending by Multinational Bank Subsidiaries By Ralph de Haas; Iman van Lelyveld
  6. Loan Officers and Relationship Lending By Hirofumi Uchida; Gregory F. Udell; Nobuyoshi Yamori

  1. By: Foucault, Thierry; Gehrig, Thomas
    Abstract: In this paper, the authors show that a cross-listing allows a firm to make better investment decisions because it enhances stock price informativeness.
    Keywords: Cross-listings; cross-listings premium; price informativeness; investment decisions; flow-back; ownership.
    JEL: D92 G11
    Date: 2006–04–01
  2. By: Bernard S. Black (University of Texas at Austin); Inessa Love (The World Bank); Andrei Rachinsky (New Economic School/CEFIR)
    Abstract: There is increasing evidence that broad measures of firm-level corporate governance predict higher share prices. However, almost all prior work relies on cross-sectional data. This work leaves open the possibility that endogeneity or omitted firm-level variables explain the observed correlations. We address the second possibility by offering time-series evidence from Russia for 1999-present, exploiting a number of available governance indices. We find an economically important and statistically strong correlation between governance and market value in OLS with firm clusters and in firm random effects and firm fixed effects regressions. We also find significant differences in the predictive power of different indices, and in the components of these indices. How one measures governance matters.
    Keywords: Russia, corporate governance, corporate governance index, law and finance, firm valuation, disclosure, emerging markets
    JEL: G32 G34
    Date: 2005–11
  3. By: Ángel León (University of Alicante); Juan Nave (University of Castilla La Mancha); Gonzalo Rubio (University of the Basque Country)
    Abstract: We employ MIDAS (Mixed Data Sampling) to study the risk-expected return trade-off in several European stock indices. Using MIDAS, we report that, in most indices, there is a significant and positive relationship between risk and expected return. This strongly contrasts with the result we obtain when we employ both symmetric and asymmetric GARCH models for conditional variance. We also find that asymmetric specifications of the variance process within the MIDAS framework improve the relationship between risk and expected return. Finally, we introduce bivariate MIDAS and find some evidence of significant pricing of the hedging component for the intertemporal riskreturn trade-off.
    Keywords: Risk-return trade-off, hedging component, MIDAS, conditional variance
    JEL: G12 C22
    Date: 2005–07–04
  4. By: Alexander Dyck (University of Toronto); Natalya Volchkova (New Economic School/CEFIR); Luigi Zingales (Harvard University, NBER, and CEPR)
    Abstract: We study the effect of media coverage on corporate governance outcomes by focusing on Russia in the period 1999-2002. Russia provides a setting with multiple examples of corporate governance abuses, where traditional corporate governance mechanisms are ineffective, and where we can identify an exogenous source of news coverage arising from the presence of an investment fund, the Hermitage fund, that tried to shame companies by exposing their abuses in the international media. We find that the probability that a corporate governance abuse is reversed is affected by the coverage of the news in the Anglo-American press. The result is not due to the endogeneity of news reporting since this result holds even when we instrument media coverage with the presence of the Hermitage fund among its shareholders and the “natural” newsworthiness of the company involved. We confirm this evidence with a case study.
    Date: 2004–10
  5. By: Ralph de Haas; Iman van Lelyveld
    Abstract: We use panel data on the intra-group ownership structure and balance sheets of 45 of the largest banking groups from 1992 to 2004 to analyse what determines the credit growth of multinational bank subsidiaries. Both home- and host-country conditions and characteristics of the subsidiaries themselves and their parent banks are taken into account. We find that the lending of multinational bank subsidiaries is influenced by substitution effects, in which parent banks trade-off lending in several countries, as well as support effects, in which parent banks support weak subsidiaries. This provides strong evidence for the existence of internal capital markets through which multinational banks manage the credit growth of their subsidiaries. We also find that greenfield subsidiaries are more closely integrated into internal capital markets than subsidiaries that result from a take-over.
    Keywords: multinational banks; credit supply; internal capital markets
    JEL: F15 F23 F36 G21
    Date: 2006–06
  6. By: Hirofumi Uchida; Gregory F. Udell; Nobuyoshi Yamori
    Abstract: Theoretical and empirical work suggests that commercial loan officers play a critical role in relationship lending by producing soft information about their SME borrowers. We test whether loan officers in the Japanese SME loan market perform this role in a manner that is consistent with the theoretical predictions in the relationship lending literature. While we find limited evidence that soft information may benefit SME borrowers, we do not find evidence that is on balance consistent with theoretical predictions that loan officers produce soft information that is not easily transmitted to others within the bank. These results are consistent with alternative explanations including the possibility that the social environment in Japan leads to a credit culture where it is easier to transmit soft information from one loan officer to another. It could also be consistent with the possibility that the relationship lending may not be particularly important in the Japanese SME loan market.
    Date: 2006–06

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