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on Corporate Finance |
| By: | Moshe Kim (University of Haifa and Universitat Pompeu Fabra); Eirik Gaard Kristiansen (Norwegian School of Economics and Business Administration); Bent Vale (Norges Bank (Central Bank of Norway)) |
| Abstract: | We derive empirical implications from a stylized theoretical model of bankborrower relationships. Banks’ interest rate markups are predicted to follow a life-cycle pattern over the borrowing firms’ age. Due to endogenous bank monitoring by competing banks, borrowing firms initially face a low markup, thereafter an increasing markup due to informatonal lock-in until it falls for older firms when lock-in is resolved. By applying a large sample of small unlisted firms and a new measure of asymmetric information, we find that firms with significant asymmetric information problems have a more pronounced life-cycle pattern of interest rate markups. Additionally, we examine the effects of concentrated banking markets on interest markups. Results indicate that markups are mainly driven by asymmetric information problems and not by concentration. However, we find weak evidence that bank market concentration matters for old firms. |
| Keywords: | Banking, loan-pricing, lock-in, asymmetric information, competition |
| JEL: | G21 L15 |
| Date: | 2007–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2007_04&r=cfn |
| By: | Fernandez, Pablo (IESE Business School); Bermejo, Vicente J. (IESE Business School) |
| Abstract: | 2007 fue un año de escasa creación de valor para los accionistas del IBEX 35: €12 millardos. La rentabilidad (teniendo en cuenta los dividendos) fue 10,7%. Sin embargo, en los 15 primeros días de enero de 2008 la destrucción de valor fue €46 millardos. Entre 1992 y 2007, la rentabilidad media fue 15,1% y la creación de valor para los accionistas €222 millardos. Una parte importante de la rentabilidad media (un 4,4%) se debió al descenso de los tipos de interés en el periodo. Eliminando el efecto de los tipos de interés, la rentabilidad para los accionistas fue inferior a la rentabilidad exigida. Las empresas pequeñas fueron más rentables que las grandes: la rentabilidad media del ITBM fue 16 %, superior a la del IBEX 35 ajustado por dividendos (15,1%). El volumen de negociación de las empresas del IBEX 35 supone más del 90% de la negociación del mercado continuo y ha pasado de ser un 30% de la capitalización en 1992 a ser el 280% en 2007. También se analiza la evolución del IGBM desde 1940 hasta 2007 y del S&P 500 desde 1926 hasta 2007. |
| Keywords: | Creación valor; Rentabilidad para accionistas; Capitalización bursátil; Aumento valor para accionistas; |
| JEL: | G12 G31 G32 |
| Date: | 2008–01–09 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0725&r=cfn |
| By: | Groh, Alexander P. (Montpellier Business School); Liechtenstein, Heinrich (IESE Business School); Canela, Miguel A. (University of Barcelona) |
| Abstract: | We examine the determinants of institutional investors when deciding on international capital allocation in Venture Capital and Private Equity Limited Partnerships; this is done through a questionnaire addressed to (potential) Limited Partners world-wide. The respondents provide information about their criteria for international asset allocation. The protection of property rights is the dominant concern, followed by the need to find local quality General Partners, and the quality of management and skills of local entrepreneurs. Furthermore, the expected deal flow plays an important role in the allocation process, while investors fear bribery and corruption. Public funding and subsidies do not play a role at all in the international allocation process. Hence, private money does not follow public money. The IPO activity and the size of local public equity markets are not as relevant as proposed by other researchers. Our results can support policymakers to increase the attractiveness of their countries for institutional investors and, thus, to receive more risk capital for innovation, entrepreneurship, employment and growth. |
| Keywords: | Venture Capital; Private Equity; International Asset Allocation; Institutional Investors; |
| JEL: | G11 G23 G24 |
| Date: | 2008–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0726&r=cfn |
| By: | Groh, Alexander P. (Montpellier Business School); Liechtenstein, Heinrich (IESE Business School); Canela, Miguel A. (University of Barcelona) |
| Abstract: | Growth expectations and institutional settings in Central Eastern Europe are assumed to be favorable for the establishment of a vibrant Venture Capital and Private Equity market. Despite this, there is a lack of risk capital. We examine the obstacles to institutional investments in the region through a questionnaire addressed to (potential) Limited Partners world-wide. The respondents provide information about their perceptions of the region. The protection of property rights is the dominant concern, followed by social criteria, such as the belief in the management quality of local people, and the lacking size and liquidity of the Central Eastern European capital markets. However, Limited Partners regard the growth expectations as attractive, and those with exposure in Central Eastern Europe are satisfied with the historical risk and return ratio, they have a good knowledge of the region, are attracted by other emerging regions, and they appreciate the region's entrepreneurial opportunities and the local General Partners. Overall, the region is ranked very favorable compared to other emerging regions, and especially with respect to its economic and entrepreneurial activity. |
| Keywords: | Venture Capital; Private Equity; International Asset Allocation; Institutional Investors; |
| JEL: | G23 G24 |
| Date: | 2008–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0727&r=cfn |
| By: | Fernandez, Pablo (IESE Business School); Bermejo, Vicente J. (IESE Business School) |
| Abstract: | La destrucción de valor para los accionistas de las 125 empresas españolas del mercado continuo en 2007 fue €15 millardos en 2007 y €89 millardos en los 17 primeros días de 2008. Telefónica fue la que más valor creó para sus accionistas en 2007, seguida de Arcelor, Iberdrola, Acciona y Gas Natural. 94 empresas destruyeron valor en 2007 y 119 en los 17 primeros días de 2008. La empresa más rentable para sus accionistas en 2007 fue CAF. 74 empresas tuvieron una rentabilidad negativa en 2007 y 112 en los 17 primeros días de 2008 (sólo 12 en 2006). 98 de las 125 proporcionaron en 2007 una rentabilidad inferior a la del IBEX 35 (10,7%). En los años 1994, 1997-8, 2000-6 y en el promedio del periodo 1992-2007, las empresas pequeñas fueron más rentables que las grandes. |
| Keywords: | Creación de valor; IBEX 35; Rentabilidad accionistas; Capitalización bursátil; Aumento valor accionistas; Relación tamaño-rentabilidad; ROE y rentabilidad accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2008–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0732&r=cfn |
| By: | Sourafel Girma; Yundan Gong; Holger Görg |
| Abstract: | This paper investigates the link between inward FDI and innovation activity in China, using a very comprehensive and recent firm level database. We pay particular attention to the impact of domestic access to finance. Our results show that firms with foreign capital participation or those with good access to domestic bank loans innovate more than others do. We also find that inward FDI at the sectoral level is positively associated with domestic innovative activity only if firms engage in own R&D or if they have good access to domestic finance. However, access to finance only plays a role for private or collectively owned firms, less so for state-owned enterprises. Furthermore, we distinguish the effect of sector level inward FDI into technology transfer and FDI affecting domestic credit opportunities and find that the latter is of very little significance for SOEs and is also independent of their access to finance. By contrast, it is an important channel through which FDI affects the innovation of domestic private and collectively owned enterprises. |
| Keywords: | FDI, finance, China |
| JEL: | O31 F23 G32 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1400&r=cfn |
| By: | Günter Franke (University of Konstanz); Julia Hein (University of Konstanz) |
| Abstract: | A recent trend in the German Asset Backed Securities (ABS) market is the securitisation of subordinated loans and profit participation agreements (PPAs) granted to medium-sized enterprises (MEs). This paper provides an overview of this growing market and analyses the benefits of such transactions for the portfolio companies as well as originators and potential investors. Simulations of ten recent transactions indicate that despite of relatively low interest rates charged on obligors, originators and investors can earn attractive returns at fairly low risk. In particular, the junior tranches of these securitisations exhibit quite attractive risk-return profiles. |
| Keywords: | securitisation, middle market transactions, mezzanine loans, medium-sized enterprises, junior tranche |
| JEL: | G10 G21 G24 |
| Date: | 2007–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:knz:cofedp:0709&r=cfn |
| By: | Günter Franke (University of Konstanz); Markus Herrmann; Thomas Weber (University of Konstanz) |
| Abstract: | The strong growth in collateralized debt obligation transactions raises the question how these transactions are designed. The originator designs the transaction so as to maximize her benefit subject to requirements imposed by investors and rating agencies. An important issue in these transactions is the information asymmetry between the originator and the investors. First Loss Positions are the most important instrument to mitigate conflicts due to information asymmetry. We analyse the optimal size of the First Loss Position in a model and the actual size in a set of European collateralized debt obligation transactions. We find that the asset pool quality, measured by the weighted average default probability and the diversity score of the pool, plays a predominant role for the transaction design. Characteristics of the originator play a small role. A lower asset pool quality induces the originator to take a higher First Loss Position and, in a synthetic transaction, a smaller Third Loss Position. The First Loss Position bears on average 86 % of the expected default losses, independent of the asset pool quality. This loss share and the asset pool quality strongly affect the rating and the credit spread of the lowest rated tranche. |
| Keywords: | Securitization, collateralized debt obligations, asset pool quality, First Loss Position, synthetic transactions, tranching |
| JEL: | G10 G21 G24 |
| Date: | 2007–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:knz:cofedp:0710&r=cfn |
| By: | Elie Appelbaum (York University, Canada) |
| Abstract: | This paper considers the effects multilateral opportunistic behaviour on the firm’s capital structure. We show that multiple parties introduce greater incompleteness, because the firm cannot control future contracts in potential opportunistic coalitions. A higher debt-equity ratio increases the probability of opportunistic coalitions, hence increasing the costs of opportunistic behaviour. By choosing equity financing, the firm can avoid the costs of opportunistic behaviour altogether. Thus, in the absence of all other motives for using debt, the firm will be equity financed. Since, in general, there are other motives for holding debt, this implies that under these conditions, the debt-equity ratio will tend to be lower. We also show that if the firm can be franchised, equity financing yields a first best outcome. On the other hand, if debt is used (for other motives), or if the firm cannot be franchised, the first best solution cannot be achieved. The results in this paper suggest that, in general, the firm’s debt equity ratio will decrease with the number of interdependent contracts, the difficulty in writing contracts with the provider of the non-contractible input and his importance in an opportunistic coalition. |
| Keywords: | Incomplete Contracts, Opportunistic Behaviour, Bankruptcy, Capital Structure |
| JEL: | D0 C7 G3 L2 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:yca:wpaper:2008_01&r=cfn |