nep-cfn New Economics Papers
on Corporate Finance
Issue of 2008‒05‒05
six papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. The IPR System, Venture Capital and Capital Markets – Contributions and Distortions of Small Firm Innovation? By Jesper Lindgaard Christensen
  2. The Political Economy of Financial Systems By Stephen Haber; Enrico Perotti
  3. Corporate Debt Maturity Choice in Transition Financial Markets By Andreas Stephan; Oleksandr Talavera; Andriy Tsapin
  4. A credit contagion model for the dynamics of the rating transitions in a SME bank loan portfolio By Antonella Basso; Riccardo Gusso
  5. The Determinants of Capital Structure: Some Evidence from Banks By Gropp, Reint Eberhard; Heider, Florian
  6. Foreign bank entry, institutional development and credit access: firm-level evidence from 22 transition countries By Rueda Maurer, Maria Clara

  1. By: Jesper Lindgaard Christensen
    Abstract: This study explores how capital markets, exemplified by venture capital, and recent trends in the patent system may influence innovation activity and the financing of small businesses. Specifically it is evaluated if there are costs and distortions of incentives related hereto. Additionally, the positive contribution of venture capital in the patenting process is investigated. It is found that trends at a macro economic level is nowadays of major importance for the patenting and innovation behaviour and financing of firms. Patenting has increased in scale, scope and trade volume, patents have become a strategic asset to an extent that may de-link it from innovation activities. The IPR-system may render distortions of innovation activities facilitated by these trends. These distortions may impose costs on the overall function of the innovation system, costs that are unequally distributed among firms as small firms are bearing most of the burdens. The results points to new perspectives on strategy that are important to management of firms and investment funds.
    Keywords: Small firms; venture capital; IPR
    JEL: O34 G24
    Date: 2008
  2. By: Stephen Haber (Stanford University); Enrico Perotti (University of Amsterdam)
    Abstract: This survey reviews the literature on the political economy of financial structure, broadly defined to include the size of capital markets and banking systems as well as the distribution of access to external finance across firms. The theoretical literature on the institutional basis for financial development and the recent evidence suggests that unconstrained political power undermines financial accumulation. Even under limited government, unaccountable institutions lead to regulatory capture, favor connected interests, and undermine finance access and entry. Thus the degree of access to political rights by citizens thus strongly affects their access to finance. Finally, we review the recent literature on the time variation of financial development across democracies during the XX century.
    Keywords: political institution; property rights; investor protection; financial development; access to finance; entry; banking
    JEL: G21 G28 G32 P16
    Date: 2008–04–25
  3. By: Andreas Stephan; Oleksandr Talavera; Andriy Tsapin
    Abstract: This paper investigates the determinants of liability maturity choice in transition markets. We formulate a model of firm value maximization that describes managers' choice of optimal debt structure. The theoretical predictions are tested using a unique panel of 4,300 Ukrainian firms during the period 2000-2005. Our estimates confirm the importance of liquidity, signaling, maturity matching, and agency costs for the liability term structure of firms operating in a transition economy. In addition, we find that companies do not react uniformly to determinants of debt maturity. Firms that mainly rely on external funds are sensitive to signaling and they consider the variability of firm value an important determinant of their debt maturity choice. For less constrained companies that rely more on internal funding, asset maturity is an essential determinant of debt structure.
    Keywords: Debt maturity, capital structure, transition period, Ukraine
    JEL: G32 G30 D24
    Date: 2008
  4. By: Antonella Basso; Riccardo Gusso (Department of Applied Mathematics, University of Venice)
    Abstract: In this work we analyze the effects of credit contagion on the credit quality of a portfolio of bank loans issued to SMEs. To this aim we start from the discrete time model proposed in Barro and Basso (2005), that considers the counterparty risk generated by the business relations in a network of firms, and we modify it by introducing different rating classes in order to manage the case of firms with different credit qualities. The transitions from a rating class to another occurs when a proxy for the asset value of the firm crosses some rating specific thresholds. We assume that the initial rating transition matrix of the system is known, and compute the thresholds using the probability distribution of the steady state of the model. A wide Monte Carlo simulation analysis is carried out in order to study the dynamic behaviour of the model, and in particular to analyze how the default contagion present in the model affects the output rating transition matrix of the portfolio.
    JEL: G33 G21 C15
    Date: 2008–04
  5. By: Gropp, Reint Eberhard; Heider, Florian
    Abstract: This paper documents that standard cross-sectional determinants of firm leverage also apply to the capital structure of large banks in the United States and Europe. We find a remarkable consistency in sign, significance and economic magnitude. Like non-financial firms, banks appear to have stable capital structures at levels that are specific to each individual bank. The results suggest that capital requirements may only be of second-order importance for banks’ capital structures and confirm the robustness of current corporate finance findings in a holdout sample of banks.
    Keywords: capital structure, corporate finance, leverage, bank capital, banking regulation
    JEL: G21 G32
    Date: 2008
  6. By: Rueda Maurer, Maria Clara (Swiss National Bank)
    Abstract: In this paper I examine how the protection of creditors' rights influence the way in which foreign bank entry affects the access to credit of firms. Using a sample of more than 6000 firms in 22 transition countries I find that as bankruptcy proceedings become more inefficient foreign bank entry is more likely to crowd-out small and opaque firms. Conversely, as the protection of creditors' rights improve, the positive association between foreign banks and firms' credit constraints diminishes. These results are robust to controls for endogeneity of foreign banks. The interaction of foreign banks and the protection of creditors rights would explain the disparity of results obtained by previous studies: In countries with an adequate protection of creditor rights foreign bank entry may benefit all firms; By contrast, in countries with weak protection of creditor rights foreign bank entry is likely to result in a credit crunch.
    Keywords: Institutional development; Transition; Foreign Bank Entry; Information asymmetries; Small Business Lending.
    JEL: D82 G10 G21 G31
    Date: 2008–04–29

This nep-cfn issue is ©2008 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.