nep-cfn New Economics Papers
on Corporate Finance
Issue of 2009‒02‒07
five papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Financing obstacles and growth: An analysis for euro area non-financial corporations By Chiara Coluzzi; Annalisa Ferrando; Carmen Martínez-Carrascal
  2. The equity premium in 100 textbooks By Fernandez, Pablo
  3. Persistence of outstanding performance and shareholder value among diversified firms: The impact of past performance, efficient internal capital market, and relatedness of business segments By Marinelli, Federico
  4. Financial Leverage and Corporate Taxation : Evidence from German Corporate Tax Return Data By Nadja Dwenger; Viktor Steiner
  5. How financialisation shapes productive models in pharmaceutical industry: the domination and contradictions of the blockbuster conception of control (In French) By Matthieu MONTALBAN (GREThA-GRES)

  1. By: Chiara Coluzzi (University of Rome Tor Vergata); Annalisa Ferrando (European Central Bank); Carmen Martínez-Carrascal (Banco de España)
    Abstract: This paper investigates whether financial obstacles, and, more generally, financial pressure faced by firms, significantly affect firm growth. For this purpose, we use an unbalanced panel of about 1,000,000 observations for around 155,000 non-financial corporations in five euro area countries. In addition to the balance sheet information in this panel, we also rely on firm level survey data. In this way we are able to work out a direct measure of the firms’ probability of facing financing obstacles. Our results indicate that, though based on few variables, this measure appears to be relevant in explaining firm growth in four out of the five countries considered. Other firm-level variables related to the financial pressure faced by firms, such as cash flow (debt burden) are found to exert a positive (negative) impact on firm growth, while the results for leverage are less clear-cut.
    Keywords: Financing Constraints, Firm Growth, Panel Data
    JEL: C23 E22 G32 L11 L25
    Date: 2009–01
  2. By: Fernandez, Pablo (IESE Business School)
    Abstract: I review 100 finance and valuation textbooks published between 1979 and 2008 by authors such as Brealey and Myers, Copeland, Damodaran, Merton, Ross, Bruner, Bodie, Penman, Weston, Brigham and Arzac and find that their recommendations regarding the equity premium range from 3% to 10%. I also find that several books use different equity premia on different pages. Some of the confusion arises from not distinguishing among the four concepts that the term equity premium designates: historical equity premium, expected equity premium, required equity premium and implied equity premium. Finance textbooks should clarify the equity premium by providing distinguishing definitions of these four concepts and conveying a clearer message about their sensible magnitudes.
    Keywords: equity premium; equity premium puzzle; required market risk premium; historical market risk premium; expected market risk premium; risk premium; market risk premium; market premium;
    JEL: G12 G31 G32
    Date: 2008–07–13
  3. By: Marinelli, Federico (IESE Business School)
    Abstract: The research domain that attempts to study the relationship between diversification and performance has not yet reached definitive and interpretable findings, and recent studies challenge the existence of a "diversification discount" and explain it partially by a data artefact. None of these studies centred their research on the question: does there exist a specific performance pattern among diversified firms? This research aims to identify persistence in performance heterogeneity by measuring the shareholder value creation of diversified firms using alternative indicators other than the excess value methodology. It also aims to measure the impact on the performance according to the degree of efficiency of the internal capital market and the degree of relatedness among business segments. A sample of 164 diversified firms with turnover higher than 1$ billion during the period 1999-2006 is examined. Because of the presence of the firm's specific effect and the length of the time series, the persistence performance is tested through the instrumental variables (IV) system generalized method of moments (GMM) dynamic panel data and the persistence of shareholder value creation and destruction is estimated according to different estimators from top tercile and lower tercile portfolios of diversified firms. Some diversified firms persistently create value as well as beat the market index while others persistently underperform. Finally, if the efficiency of the internal capital market gives certain explanatory power of the performance pattern, but limited compared to the past performance, important insights might be drawn from the findings that diversified firms with segments in many unrelated industries perform better than others in few industries or with a high number of segments; hence the inverted-U curvilinear relationship between diversification and performance is here not confirmed.
    Keywords: diversification; performance persistence; internal capital market; relatedness obusiness segments;
    Date: 2008–07–15
  4. By: Nadja Dwenger; Viktor Steiner
    Keywords: financial leverage, financial structure, debt ratio, corporate income taxation, corporate tax return data
    JEL: G32 G38 H25 H32
    Date: 2009
  5. By: Matthieu MONTALBAN (GREThA-GRES)
    Abstract: This article analyses the interaction between competition, productive models and financialisation of the main pharmaceutical companies. After having studied the institutional specificities and the constraints that shape productive models, we analyze how transformations of ownership structures and corporate governance are connected with institutional relationships of the industry, leading to the emergence of a conception of control inciting dominant firms to adopt models focused on the most profitable dugs (blockbusters). This article converges with the conclusion of Palpacuer et al. (2007) on the agrofood industry case. Finally, the article analyzes the main causes of the recent crisis of these models.
    Keywords: financialisation, productive model, pharmaceutical industry
    JEL: L65 G32 G34
    Date: 2009

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