nep-cfn New Economics Papers
on Corporate Finance
Issue of 2010‒02‒20
five papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Seeking a greater impact: New challenges for business schools By Canals, Jordi
  2. Equity lending markets and ownership structure By Saffi, Pedro A.C.; Sturgess, Jason
  3. Why do (or did?) banks securitize their loans? Evidence from Italy By Massimiliano Affinito; Edoardo Tagliaferri
  4. Seasoned Equity Offerings by Small and Medium-Sized Enterprises By Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
  5. Informed trading in the Euro money market for term lending By Zagaglia, Paolo

  1. By: Canals, Jordi (IESE Business School)
    Abstract: Business schools have made a very important contribution to management education over the past decades. The new economic and social context creates new challenges for them. Their capabilities will have to evolve if they want to have a deeper impact.
    Keywords: Corporate governance;
    Date: 2009–12–05
  2. By: Saffi, Pedro A.C. (IESE Business School); Sturgess, Jason (McDonough School of Business)
    Abstract: Using proprietary data on equity lending supply, loan fees and quantities, we examine the link between institutional ownership structure and the market for equity lending and stock prices. We find that both total institutional ownership and ownership concentration (measured by the Herfindahl index, single largest holding and number of investors) are important determinants of equity lending supply and short sale constraints. More concentrated ownership structures increase short sale constraints (including loan fees, recall risk and arbitrage risk) and force arbitrageurs to decrease demand for equity borrowing and demand greater compensation for borrowing stock. The results suggest that the impact of institutional ownership structure in the equity lending market may create limits to arbitrage.
    Keywords: Equity lending markets; short selling; ownership structure; lending supply;
    JEL: G10 G11 G14 G18 G28 G32
    Date: 2009–11–09
  3. By: Massimiliano Affinito (Banca d'Italia); Edoardo Tagliaferri (Banca d'Italia)
    Abstract: This paper investigates the ex-ante determinants of bank loan securitization by using different econometric methods on Italian individual bank data from 2000 to 2006. Our results show that bank loan securitization is a composite decision. Banks that are less capitalized, less profitable, less liquid and burdened with troubled loans are more likely to perform securitization, for a larger amount and earlier.
    Keywords: securitization, credit risk transfer, capital requirements, liquidity needs
    JEL: G21 G28 C23 C24
    Date: 2010–01
  4. By: Cécile Carpentier; Jean-François L'Her; Jean-Marc Suret
    Abstract: Most of the analyses of small firms’ decision to seek outside equity financing and the conditions thereof have concerned private firms. Knowledge of the risk and return of entrepreneurial ventures for outside investors is consequently limited. This paper attempts to fill this gap by examining the Canadian context, where small and medium-sized enterprises (SMEs) are allowed to list on a stock market. We analyze seasoned equity offerings launched by SMEs over the last decade. These public issuers can be considered low quality firms with poor operating performance. Managers issue equity before a large decrease in operating and stock market performance. Individual investors do not price the stocks correctly around the issue and incur significant negative returns in the years following the issue. This is particularly true for constrained issuers. We confirm that entrepreneurial outside equity attracts lemons, and that individual investors cannot invest wisely in emerging ventures. Probably as a consequence of individual investors’ lack of skill and rationality, the cost of outside equity financing of Canadian public SMEs is abnormally low. <P>La plupart des analyses de la décision et des conditions de financement des petites entreprises portent sur des entités privées. Le risque et le rendement que ces entreprises représentent pour les investisseurs sont donc très mal connus. Ce papier tente de combler cette lacune en utilisant le contexte canadien, où les petites et moyennes entreprises (PMEs) sont autorisées à s’introduire en bourse. Nous analysons les financements par fonds propres levés par ces PMEs au cours de la dernière décennie. Ces émetteurs peuvent être considérés comme des entreprises de faible qualité présentant une piètre performance opérationnelle. Les dirigeants émettent des actions juste avant une forte diminution de la performance comptable et boursière. Les investisseurs individuels n’évaluent pas correctement les actions au moment de l’émission et subissent des rendements négatifs significatifs au cours des années postérieures. Ceci est particulièrement vrai pour les émetteurs contraints financièrement. Nous confirmons que le marché du financement externe des PMEs attire des « citrons », et que les investisseurs individuels ne peuvent pas investir de façon avisée dans les entreprises en développement. Conséquence probable d’un manque d’expérience et de rationalité des investisseurs individuels, le coût des fonds propres externes est anormalement bas pour les PMEs inscrites en bourse au Canada.
    Keywords: financing decision, equity offerings, small business, long-run performance, cost of equity, financial constrain, décision de financement, financement par fonds propres, petites entreprises, coût des fonds propres, performance, contrainte financière
    JEL: G14 G32 L26
    Date: 2010–01–01
  5. By: Zagaglia, Paolo
    Abstract: I address the role of information heterogeneity in the Euro interbank market for unsecured term lending. I use high-frequency quotes of bid and ask prices to estimate probabilities of informed trading for contract maturities from one month to one year. The dataset spans from November 2000 to March 2008, and includes the relevant events that characterize the developments of the Euro area money market. I obtain four main results. First, I show that the loose supply of liquidity of the ECB has not dampened the distortions arising from asymmetric information in the unsecured money market. I also find that the probability of trading with a better informed bank is higher on days when open market operations take place, and at the end of the maintenance period. This effect has strengthened during the turmoil. The results indicate that information is segmented, in the sense that heterogenous knowledge among banks is maturity-specific. Finally, the paper presents some evidence suggesting that the risk of trading with a counterparty that enjoys an enhanced information set is priced.
    Keywords: Market microstructure; PIN model; money markets; term structure
    JEL: G14 E52
    Date: 2010–02–03

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