nep-cfn New Economics Papers
on Corporate Finance
Issue of 2008‒10‒13
four papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Ownership Structure and Financial Performance: Evidence from Panel Data of South Korea By Sanghoon Lee
  2. The Impact of Financial Structure on Firms' Financial Constraints: A Cross-Country Analysis By Christopher F. Baum; Dorothea Schaefer; Oleksandr Talavera
  3. Corporate Governance, Ownership Structures and Investment in Transition Economies: the Case of Russia, Ukraine and Kyrgyzstan By Olga Lazareva; Andrei Rachinsky; Sergey Stepanov
  4. Derivatives Usage in Risk Management by Non-Financial Firms: Evidence from Greece By KAPITSINAS, SPYRIDON

  1. By: Sanghoon Lee
    Abstract: The study seeks to examine the effect of equity ownership structure on firm financial performance in South Korea. I focus on the role of two main dimensions of the ownership structure- Ownership concentration (i.e., the distribution of shares owned by majority shareholders) and identity of owners (especially, foreign investors and institutional investors). Using panel data for South Korea in 2000--2006, I find that firm performance measured by the accounting rate of return on assets generally improves as ownership concentration increases, but the effects of foreign ownership and institutional ownership are insignificant. I also find that there exists a hump-shaped relationship between ownership concentration and firm performance, in which firm performance peaks at intermediate levels of ownership concentration. The study provides some empirical support for the hypothesis that as ownership concentration increases, the positive monitoring effect of concentrated ownership first dominates but later is outweighed by the negative effects, such as the expropriation of minority shareholders. The empirical findings shed light on the role ownership structure plays in corporate performance, and thus offer insights to policy makers interested in improving corporate governance systems in an emerging economy such as South Korea.
    Keywords: Ownership Structure, Ownership Concentration, South Korea
    JEL: G32 G34
    Date: 2008
  2. By: Christopher F. Baum (Boston College; DIW Berlin); Dorothea Schaefer (DIW Berlin); Oleksandr Talavera (DIW Berlin)
    Abstract: We estimate firms' cash flow sensitivity of cash to empirically test how the financial system's structure and activity level influence their financial constraints. For this purpose we merge Almeida et al. (2004), a path-breaking new design for evaluating a firm's financial constraints, with Levine (2002), who paved the way for comparative analysis of financial systems around the world. We conjecture that a country's financial system, both in terms of its structure and its level of development, influences the cash flow sensitivity of cash of constrained firms but leaves unconstrained firms unaffected. We test our hypothesis with a large international sample of 80,000 firm-years from 1989 to 2006. Our findings reveal that both the structure of the financial system and its level of development matter. Bank-based financial systems provide the constrained firms with easier access to external financing.
    Keywords: financial constraints, financial system, cash flow sensitivity of cash
    JEL: G32 G30
    Date: 2008–10–08
  3. By: Olga Lazareva (CEFIR (Moscow), SSE (Stockholm)); Andrei Rachinsky (MTS (Moscow)); Sergey Stepanov (CEFIR and NES (Moscow))
    Abstract: In this paper we analyze interrelations between ownership structures, corporate governance and investment in three transition countries: Russia, Ukraine and Kyrgyzstan. In contrast to most empirical papers on corporate governance, we study companies with very little exposure to public financial markets. Our empirical analysis is based on two years of data obtained through large-scale surveys of firms. Ukrainian companies appear to have the best corporate governance practices, while Russian companies – the worst. We find that the relationship between ownership concentration and corporate governance is non-linear. In Russia, the relationship between the share of the largest non-state shareholder and corporate governance is either positive or insignificant when the blockholder’s stake is below a certain threshold; however, a further increase in the blockholder’ share is associated with worsening corporate governance. We find a similar effect in Ukraine, but only for managerial ownership. In both countries, corporate governance improves as the combined share of small shareholders grows. No robust effects of the ownership structure are found for Kyrgyz firms. Further we show that the market for corporate control seems to have little relationship to the firms’ corporate governance practices. We find no link between the quality of corporate governance and either the need for outside finance or actual investments financed with outside funds in either of the three countries.
    Keywords: corporate governance, transition, ownership structure, investment
    JEL: G32 G34
    Date: 2008–04
    Abstract: This paper presents evidence on the use of derivative contracts in the risk management process of Greek non-financial firms. The survey was conducted by sending a questionnaire to 110 non-financial firms and its results are compared with the findings of previous surveys: 33.9% of non-financial firms in Greece use derivatives, mainly to hedge their exposure to interest rate risk. The major source of concern for derivatives users is the accounting treatment of the contracts and the disclosure requirement. Non-financial firms in Greece use sophisticated methods of risk assessment and report having a documented corporate policy with respect to the use of derivatives, while at the same time consider the domestic economic environment not to be favorable of derivatives usage. Firms that chose not to use derivatives responded that they do so mainly because of insufficient exposure to risks.
    Keywords: risk management; financial risk; derivatives; corporate finance; Greece.
    JEL: G32
    Date: 2008–09–30

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.