nep-cfn New Economics Papers
on Corporate Finance
Issue of 2009‒08‒22
three papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. SME finance in Europe: introduction and overview By Wagenvoort, Rien
  2. Financing the German Mittelstand By Hommel, Ulrich; Schneider, Hilmar
  3. Do Standard Real Option Models Overestimate the Required Rate of Return of Real Estate Investment Opportunities? By Luis H.R. Alvarez; Jukka Lempa; Elias Oikarinen

  1. By: Wagenvoort, Rien (European Investment Bank, Economic and Financial Studies)
    Abstract: Introducing the topic of SME finance and summarising the main findings of the contributions to this edition of the EIB Papers, this overview stresses the importance of relationship banking for the supply of SME credit; points out the differences and similarities in the capital structure of firms across size classes and across Europe; observes that while there is little evidence of widespread SME credit rationing, financial market imperfections may nevertheless curb SME growth; and highlights that the changes in Europe's financial landscape - including bank consolidation and Basel II - promise to foster SME finance.
    Keywords: SME finance and credit; relationship banking; Capital structure of firms
    JEL: G30 G32
    Date: 2009–08–12
  2. By: Hommel, Ulrich (European Business School); Schneider, Hilmar (European Business School)
    Abstract: Based on a survey conducted among German Mittelstand firms and capital structure data on the Mittelstand, this paper sheds light on the current and future financing situation of the Mittelstand. The paper documents the equity shortage and dependence on bank debt typically associated with the Mittelstand. It further emphasises that - at present - fears of systematic credit rationing are difficult to substantiate (though a lack of alternative sources of finance can be expected to adversely affect future credit supply) and argues that the consolidation of the German banking sector as well as Basel II should not constitute major obstacles to the future growth of the Mittelstand. Still, the paper concludes that a typical Mittelstand firm's access to external finance will remain a key factor and, against that background, comments on specific measures of improvement from the perspective of regulators, banks, and firms.
    Keywords: Mittelstrand firms; Capital structure data; Financing situation; Equity shortage; Bank debt; Systemic credit rationing
    JEL: G32
    Date: 2009–08–12
  3. By: Luis H.R. Alvarez (Department of Economics, Turku School of Economics, 20500 Turku, Finland); Jukka Lempa (University of Oslo, CMA, P.O. Box 1053 Blindern, NO-0316 Oslo, Norway); Elias Oikarinen (Department of Economics, Turku School of Economics, 20500 Turku, Finland)
    Abstract: We consider how the inter-temporal discreteness of the revenue and cost processes affect the optimal timing of a real estate investment opportunity in comparison with the investment timing strategy obtained by relying on the traditional continuous real option model. We characterize both optimal investment rules explicitly and show that the continuous model may lead to a significantly higher required rate of return than the discrete model. Hence, our results show that the use of continuous time models leads to smaller and suboptimal amount of investment. Our numerical illustrations also indicate that this difference grows as volatility increases. Consequently, even though higher volatility decelerates investment in the discrete case as well, it decelerates it less than the continuous model would predict.
    Keywords: Real options, real estate investment timing, exchange option
    JEL: G11 R31 C44
    Date: 2009–08

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