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on Corporate Finance |
| By: | Claudio Loderer; René Stulz; Urs Waelchli |
| Abstract: | As firms have more assets in place, more of management’s limited attention is focused on managing assets in place rather than developing new growth options. Consequently, as firms grow older, they have fewer growth options and a lower ability to generate new growth options. This simple theory predicts that Tobin’s q falls with age. Further, competition in the product market is expected to slow down the decrease in Tobin’s q because it forces firms to look for alternative sources of rents. Similarly, greater competition in the labor market reduces the decrease in Tobin’s q with age because old firms are in a better position to hire employees that can help with innovation. In contrast, competition in the market for corporate control should accelerate the decline because it forces management to focus more on managing assets in place whose performance is more directly observable than on developing growth options where results may not be observable for some time. We find strong support for these predictions in tests using exogenous variation in competition. |
| JEL: | G30 L20 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19428&r=cfn |
| By: | Morgan, Horatio M. |
| Abstract: | Although the size of the informal economy is relatively large across Latin America and the Caribbean, it is not completely understood how deficiencies in the institutional environment may be related either to the propensity for entrepreneurship or the performance of entrepreneurs in the informal economy. Focusing on institutional heterogeneity, this paper characterizes external finance (i.e. local family-based equity, remittances, bank credit, business angel finance and venture capital) in terms of (1) the mix of finance, business consulting and contacts, (2) governance mechanisms (i.e. reputational capital versus formal contracts) and (3) fungibility (i.e. discretion to use funds borrowed or received for alternative purposes); and develop a number of propositions. The outcome is a finance-performance nexus that provides a basis for a theoretically grounded empirical investigation of the relationship between the financial aspects of the institutional environment and both the propensity for entrepreneurship and the performance of entrepreneurs in the informal economy. |
| Keywords: | Bank Credit; Entrepreneurship; Family-based Equity; Informal Economy; Latin America and the Caribbean; Remittances. |
| JEL: | G21 L26 M13 O17 O43 |
| Date: | 2013–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49856&r=cfn |
| By: | Francisca Bremberger; Carlo Cambini; Klaus Gugler and Laura Rondi |
| Abstract: | We study the impact of different regulatory and ownership regimes on the dividend policy of regulated firms. Using a panel of 106 publicly traded European electric utilities in the period 1986-2010, we link payout and smoothing decisions to the implementation of different regulatory mechanisms (cost plus vs. incentive regulation) and to firm ownership (state vs. private). After controlling for the potential endogeneity of the regulatory mechanism, our results show that utilities subject to incentive regulation smooth their dividends less than firms subject to cost-based regulation and present higher impact effects and target payout ratios. This suggests that when managers are more sensitive to competition-like efficiency pressures following the adoption of incentive regulation, they adopt a dividend policy more responsive to earnings variability and more consistent with optimal cash management. These results, however, apply only to private utilities. If the state still has ultimate control, smoothing of dividends remains irrespective of the regulatory mechanism. It seems that corporate governance (i.e. state control) trumps regulation when it comes to dividend payout policy. |
| Keywords: | Dividends, Lintner model, incentive regulation, electricity |
| JEL: | G35 G38 L51 L94 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2013/53&r=cfn |