nep-cfn New Economics Papers
on Corporate Finance
Issue of 2010‒10‒16
three papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Credit supply: identifying balance-sheet channels with loan applications and granted loans By Gabriel Jiménez; Steven Ongena; José-Luis Peydró; Jesús Saurina
  2. Risk aversion and stock price volatility By Kevin J. Lansing; Stephen F. LeRoy
  3. Regional Financial Soundness and R&D Activities By GOTO Yasuo

  1. By: Gabriel Jiménez (Banco de España); Steven Ongena (Center–Tilburg University and CEPR); José-Luis Peydró (European Central Bank); Jesús Saurina (Banco de España)
    Abstract: To identify credit availability we analyze the extensive and intensive margins of lending with loan applications and all loans granted in Spain. We find that during the period analyzed both worse economic and tighter monetary conditions reduce loan granting, especially to firms or from banks with lower capital or liquidity ratios. Moreover, responding to applications for the same loan, weak banks are less likely to grant the loan. Our results suggest that firms cannot offset the resultant credit restriction by turning to other banks. Importantly the bank-lending channel is notably stronger when we account for unobserved time-varying firm heterogeneity in loan demand and quality.
    Keywords: non-financial and financial borrower balance-sheet channels, financial accelerator, firm borrowing capacity, credit supply, business cycle, monetary policy, credit channel, net worth, capital, liquidity, 2007-09 crisis
    JEL: E32 E44 E5 G21 G28
    Date: 2010–09
  2. By: Kevin J. Lansing; Stephen F. LeRoy
    Abstract: Researchers on variance bounds tests of stock price volatility recognized early that risk aversion can increase the volatility of prices implied by the present-value model. This finding suggests that specifying risk neutrality may induce a bias toward rejecting the present-value model insofar as real-world investors are risk averse. However, establishing that risk aversion may increase stock price volatility does not, by itself, have implications for the presence or absence of excess volatility. This is so because risk aversion also affects the upper-bound volatility measure computed from "perfect foresight" (or "ex post rational") stock prices. Consequently, while high risk aversion implies high volatility in some settings, it may or may not imply excess volatility. This paper compares price volatility computed from real-world data to model-predicted volatility measures in a setting that allows for risk aversion. Using variance bounds tests based on the price-dividend ratio, we find evidence of excess volatility in long-run U.S. stock price data for relative risk aversion coefficients below 5. For higher degrees of risk aversion, the evidence for excess volatility is less clear. We also ask whether variance bounds for returns can be established in settings involving risk aversion and autocorrelated dividend growth. We show that the answer is no. Except in special cases, the present-value model does not impose bounds on return volatility in our setting.
    Keywords: Stock - Prices
    Date: 2010
  3. By: GOTO Yasuo
    Abstract: In order to explore the impact of financial factors on the real economy, many researchers are analyzing the relationship between finance and real economic activity using new theories and approaches. This paper focuses on the relationship between financial soundness and corporate R&D activities on a regional scale. By measuring regional financial performance using data series including periods of financial crisis and recovery (from the end of the 1990s to the middle of the 2000s), this paper statistically examines the correlation with factors such as corporate R&D expenditure.
    Date: 2010–10

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