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on Corporate Finance |
| By: | Kjell Bjørn Nordal (Norges Bank); Randi Næs (Norwegian Ministry of Trade and Industry) |
| Abstract: | The presence of mean reversion in profitability at the firm level is important for valuation and prediction of growth and earnings. We investigate the mean reversion in accounting profitability for Norwegian non-listed firms for the period 1988-2006. We find a mean reversion rate of about 0.44. This is higher than found in other studies. We also find that small firms have a higher mean reversion rate than large firms. Previously, price-to-book ratios have been used to investigate changes in profitability over time for listed firms. We examine bankruptcy risk as an alternative variable for unlisted firms. We find that bankruptcy risk may help explain changes in profitability, but the results are not as strong as found in previous work. |
| Keywords: | Non-listed firms, protability, mean reversion |
| JEL: | G10 G30 |
| Date: | 2009–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2009_29&r=cfn |
| By: | Gollier, Christian; Pouget, Sébastien |
| Abstract: | We examine the functioning of financial markets when firms can invest in socially responsible activities that produce an externality at a cost. We examine a model in which some investors are altruistic in the sense that they internalize the assets' extra-financial performance when they value their portfolio. There are two mechanisms by which these pro-social investors can influence firm's decisions. They can vote with their feet, thereby raising the cost of capital of non-responsible firms. They can also try to get the majority of shares to impose their view to the management. We also examine a model in which there exists a large investor who can act strategically to influence the beliefs of atomistic investors about his vote. We show that an increase in the degree of pro-social motivation of the large investor may raise its purely financial profit. |
| JEL: | G34 H23 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:21367&r=cfn |
| By: | Cerasi, Vittoria; Chizzolini, Barbara; Ivaldi, Marc |
| Abstract: | This paper analyses the relation between competition and concentration in the banking sector. The empirical answer is given by testing a monopolistic competition model of bank branching behaviour on individual bank data at county level (départements and provinces) in France and Italy. We propose a measure of the degree of competiveness in each local market that is function also of market structure indicators. We then use the econometric model to evaluate the impact of horizontal mergers among incumbent banks on competition and discuss when, depending on the pre-merger structure of the market and geographic distribution of branches, the merger is anti-competitive. The paper has implications for competition policy as it suggests an applied tool to evaluate the potential anti-competitive impact of mergers. |
| JEL: | G21 L13 L59 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:21614&r=cfn |
| By: | Albert Banal-Estañol; Marco Ottaviani |
| Abstract: | Which projects should be financed through separate non-recourse loans (or limited- liability companies) and which should be bundled into a single loan? In the pres- ence of bankruptcy costs, this conglomeration decision trades off the benefit of co- insurance with the cost of risk contamination. This paper characterize this tradeoff for projects with binary returns, depending on the mean, variability, and skewness of returns, the bankruptcy recovery rate, the correlation across projects, the number of projects, and their heterogeneous characteristics. In some cases, separate financing dominates joint financing, even though it increases the interest rate or the probability of bankruptcy. |
| Keywords: | Bankruptcy, conglomeration, mergers, spin-offs, project finance |
| JEL: | G32 G34 |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1191&r=cfn |
| By: | Janda, Karel; Svárovská, Barbora |
| Abstract: | In this paper we first introduce microfinance institutions as an alternative investment instrument. We argue that beside socially responsible features of microfinance, there exists also significant portfolio enhancement opportunity in microfinance investments. Then we provide an overview of possible ways how to evaluate the correlation between microfinance related financial instruments and conventional financial market measures of risk and return. |
| Keywords: | Microfinance; Investment; Funds |
| JEL: | G11 G21 |
| Date: | 2009–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19486&r=cfn |
| By: | Sasidharan, Anand |
| Abstract: | This paper finds evidence that the Indian stock market has become weak-form efficient, off-late. We proceed by, first, locating structural breaks in the index using Bai-Perron's method for endogenous multiple structural changes. Four structural breaks are identified for the period 1991 to 2008 for the S&P CNX Nifty series -- December 1994, July 1999, June 2003 and January 2006. For this period the behaviour of returns approximates a Stable Paretian distribution. This would mean that the market risk will be beyond that can be predicted by measures build on the assumption of normality of returns. The property of infinite population variance of a stable paretian distribution makes variance based estimators redundant. Therefore, using non-parametric methods the paper tests the efficiency of the market across the periods of structural breaks. It is found that the markets have become weak-form efficient only since the second half of 2003, corresponding to the period of the third structural break. |
| Keywords: | Efficient Markets Hypothesis; Indian Stock Market; Structural Break; Bai-Perron; Paretian Distribution; Runs test; |
| JEL: | G14 C16 C14 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19433&r=cfn |
| By: | Corduneanu , Carmen; Milos, Laura Raisa |
| Abstract: | This paper outlines the existing connection between the development of the financial system and the economic growth of an economy. Along the time, many authors have tried to bring empirical prove that this connection exists on the long term, and it is very strong especially for the developing countries being explained through the channel of investment and productivity. Beside giving the theoretical arguments for this connection, the authors make an empirical analysis using pool data regressions, taking into consideration the old member states and the new member states of the European Union, with a special focus on the Romanian case. |
| Keywords: | G10; G20 |
| JEL: | G10 G20 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19877&r=cfn |
| By: | Gopalan, Sasidaran; Rajan, Ramkishen. S |
| Abstract: | Over the last decade many emerging Asian economies have been liberalizing their financial sectors, including opening up of their banking systems to foreign competition. This paper examines the extent of de jure and de facto policies in Asia with regard to the introduction of greater foreign competition. To preview the main conclusion, while there has clearly been greater international financial liberalization in the region, Asia lags behind emerging Europe and Latin America when it comes to the relative significance of foreign banks in their respective domestic economies. The paper goes on to discuss possible reasons behind Asia’s relatively cautious approach towards this policy. |
| Keywords: | Financial sector de-regulation; Foreign bank entry; Emerging Asia |
| JEL: | G34 F36 |
| Date: | 2009–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19592&r=cfn |