nep-cfn New Economics Papers
on Corporate Finance
Issue of 2011‒02‒26
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Corporate Ownership and Initial Training in Britain, Germany and Switzerland By Paul Ryan; Karin Wagner; Silvia Teuber; Uschi Backes-Gellner
  2. How Does the Institutional Setting for Creditor Rights Affect Bank Lending and Risk-Taking? By Mlambo, Kupukile; Murinde, Victor; Zhao, Tianshu

  1. By: Paul Ryan (King's College Cambridge); Karin Wagner (Hochschule für Technik und Wirtschaft Berlin); Silvia Teuber (Department of Business Administration, University of Zurich); Uschi Backes-Gellner (Department of Business Administration, University of Zurich)
    Abstract: This paper considers whether listed companies with dispersed ownership invest less in training than do other firms, as part of a short-termist stance caused by pressure from the stock market. An analytical framework that supports the proposition involves three factors: high agency costs between the shareholders and managers of listed firms that have dispersed ownership; the use of highly geared performance-related pay to reward top managers; and accounting conventions that distort performance measures by requiring that spending on intangible assets be expensed not amortised. Managers then have the incentive and ability to restrict spending on training in order to increase their remuneration. Countervailing factors, including institutions of corporate governance, may however weaken or destroy such effects. Evidence is presented concerning the initial training programmes of 56 companies in engineering and retailing in Britain, Germany and Switzerland. The evidence is consistent with ownership effects in both sectors, but those effects are at most moderate in both incidence and strength. The skill requirements of competitive success in product markets appear more important than ownership.
    Date: 2011–02
  2. By: Mlambo, Kupukile; Murinde, Victor; Zhao, Tianshu
    Abstract: This paper investigates how the institutional setting for protection of creditor rights affects bank lending and risk-taking. An analytical model is specified to underpin banks‟ portfolio decisions, between loans and other earning assets such as government securities. The model is augmented with various metrics, which proxy the institutional setting for creditor rights, and is estimated and tested on an unbalanced three-dimensional dataset of commercial banks in 20 African countries for 1995-2008. It is found that three specific metrics induce banks to allocate a high proportion of their earning assets to loans: legal creditor rights; the efficient enforcement of creditor rights; and availability of information sharing mechanisms among banks. However, the three metrics appear to work through different channels. The enforceability of legal rights works not only through mitigating credit risks, but also through a composite effect of market competition and lower costs of information acquisition and contract enforcement. The legal rights metric and information sharing metric exclusively rely on the composite effect.
    Keywords: Africa; Bank risk-taking; Bank lending; Information sharing; Law enforcement; Creditor rights
    Date: 2011–02

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