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on Corporate Finance |
| By: | Guo, Hong; He, Yinghua; Nielsson, Ulf; Yang, Jiong |
| Abstract: | The paper empirically explores whether more trade transparency improves or deteriorates market liquidity. The analysis takes advantage of a unique setting in which the Shanghai Stock Exchange offered more trade transparency to market participants subscribing to a new software package. First, in contrast to popular policy belief, the paper finds that more transparency need not improve market liquidity. Second, since the effective level of market transparency is bound to depend on how many traders are subscribing to the data, this study is able to empirically estimate the functional form between market-wide transparency and liquidity. The relationship is shown to be non-monotonic, which can explain the lack of consensus in the existing literature where each empirical study is naturally confined to specific parts of the transparency domain. |
| Keywords: | transparency, liquidity, market microstructure, market design |
| JEL: | G14 G28 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:26441&r=cfn |
| By: | Francis, Bill B. (Lally School of Management and Technology, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Sun , Xian (Carey Business School, Johns Hopkins University) |
| Abstract: | This paper examines the determinants of the choice of financial advisors and their impact on the announcement effects of US acquirers in cross-border M&As. Two hypotheses are tested: one pertains to the acquiring firms’ home preference in selecting financial advisors, and the other relates to advisors’ experience in target countries. Evidence supports the home preference hypothesis in the selection of advisors in cross-border M&As, particularly in all-cash paid transactions where acquirers take the entire risk of not realizing the expected synergy value. We also observe home preference among investors as acquirers that picked US advisors experience significantly higher positive abnormal returns in all-cash paid transactions than those without US advisors, even when the chosen US advisors do not have significant experience in the target country. Finally, home preference at the choice of financial advisor may be costly if US acquirers pass by more experienced because of home preference. |
| Keywords: | financial advisors; certification; payment method; cross border mergers and acquisitions |
| JEL: | G14 G15 G24 G32 G34 |
| Date: | 2012–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2012_031&r=cfn |
| By: | Kopsakangas-Savolainen, Maria (Finnish Environment Institute); Takalo, Tuomas (Bank of Finland Research) |
| Abstract: | We build a simple model to study service fee competition between an incumbent and an independent ATM deployer, and its optimal regulation. We use the model to analyze an actual regulation of such a market by competition authorities in Finland. We find that socially optimal first-best fees would imply negative profits for the independent deployer, calling for a Ramsey regulation. While the Finnish regulation pushes the foreign fee downwards towards its socially optimal level, the regulated fees are likely to remain too high from the welfare point of view. In contrast with the actual regulation, it would be essential to regulate the independent deployer's interchange fee, as the incumbent deployer internalizes the effect of its foreign fee on consumer usage of the rival's network and has little incentive for foreclosure. |
| Keywords: | ATM industry; regulation; competition policy; cash availability; retail payments |
| JEL: | G23 K21 L13 L41 L51 |
| Date: | 2012–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofrdp:2012_032&r=cfn |
| By: | Christian Hattendorff; ; ; |
| Abstract: | The finding that industrial sectors differ in their dependence on external nance for sector-specific technological reasons and, thus, rely to a different degree on nancial development has become a major concept in studies conducted on both growth and trade. Although natural resources might play an important role in each of these elds, research on industries' financial dependence has been limited so far to manufacturing. By focusing on the natural resource sectors, the present paper aims to close this gap in its analysis. It rejects the common view that the natural resource industry in particular is less dependent on the financial system, and nds that the results of the analysis depend on the specific measure being applied. Measures relating investment and cash flow indicate high external dependence, while measures accounting for more short-term liquidity needs demonstrate rather low external dependence of natural resource firms. These results do not change considerably over time or across countries. |
| Keywords: | Financial development, external dependence, natural resources |
| JEL: | G20 G30 O13 O14 O16 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2012-050&r=cfn |
| By: | Lizbeth Navas-Alemán; Carlo Pietrobelli; Marco Kamiya |
| Abstract: | The literature on small and medium-sized enterprise (SME) finance highlights linkages with large firms in value chains as a possible way to enhance access to credit. However, much of the literature on value chains emphasizes issues of coordination and governance of those linkages and their effects on industrial upgrading with little mention to the financial implications for SMEs. This paper explores this gap by looking for evidence on the impact of SMEs' access to finance of inter-firm linkages and specifically interactions with large firms. Using original enterprise-level data in three different Latin American and Caribbean sectors and countries (agro-industry in Argentina, furniture in Brazil, and information and communications technologies in Costa Rica), a comparison between the different sources and instruments of finance used by SMEs is presented. A distinction is made between arm's length financial mechanisms based on "hard data" and relationship finance based on "soft data." Findings suggest that chain governance matters for the type of role large firms can play in enhancing SMEs' access to finance. Policies should take into account the type of chain governance between large firms and SMEs across industries and countries when providing incentives to increase the role of large firms as direct financiers or guarantee providers for SMEs. |
| Keywords: | Financial Sector :: Financial Markets, Financial Sector :: Financial Services, Science & Technology :: Research & Development, Global Value Chains, Finance, Small and Medium-sized Enterprises, SMEs, Relationship Finance, |
| JEL: | F23 G21 O14 O16 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:76418&r=cfn |
| By: | Masciantonio, Sergio; Tiseno, Andrea |
| Abstract: | We document the development of the major international banks since the late nineties, analysing balance sheet data for 27 large and complex financial institutions. We argue that balance sheet expansion and business line diversification paved the way to the rise of the universal banking model. This model, apparently sound and efficient in the run-up to the crisis, showed all its shortcomings when the crisis erupted. European banks highlighted greater fragilities in their business models. Moreover the changed financial and regulatory landscape that followed has challenged this model further. Many proposed remedies to the global financial crisis appear to push for a return of a narrower model for banking activity. The first evidence we detected through a set of panel regressions shows that the proposed remedies are likely to change the profitability and riskiness profile of the banking industry, pushing towards a safer, although less profitable, business model. Moreover, the contemporaneous effort by banks to move in this direction is likely to strengthen this shift. |
| Keywords: | banks; banking crises; financial crises; balance sheets |
| JEL: | G21 G01 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42494&r=cfn |