nep-cfn New Economics Papers
on Corporate Finance
Issue of 2014‒05‒24
ten papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. On the design of water markets in the presence of risk aversion By Bontems, Philippe; Nauges, Celine
  2. High-Frequency Trading Competition By Jonathan Brogaard; Corey Garriott; Anna Pomeranets
  3. Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence from Tanzanian MSEs By Thorsten Beck; Haki Pamuk; Burak R. Uras
  4. Business Targets and Compliance By Albers, Felicitas G.
  5. Default Predictors in Credit Scoring - Evidence from France’s Retail Banking Institution By Ha-Thu Nguyen
  6. The Impact of the French Securities Transaction Tax on Market Liquidity and Volatility By Gunther Capelle-Blancard; Olena Havrylchyk
  7. A Tourism Financial Conditions Index By Chang, C-L.; Hsu, H-K.; McAleer, M.J.
  8. Financing capacity investment under demand uncertainty By Francis de Véricourt; Denis Gromb
  9. Dealer financial conditions and lender-of-last resort facilities By Acharya, Viral V.; Fleming, Michael J.; Hrung, Warren B.; Sarkar, Asani
  10. Does Board Gender Diversity Make a Difference? New Evidence from Quantile Regression Analysis By Rey Dang; Duc Khuong Nguyen

  1. By: Bontems, Philippe; Nauges, Celine
    Keywords: Farm Management, Risk and Uncertainty,
    Date: 2014
  2. By: Jonathan Brogaard; Corey Garriott; Anna Pomeranets
    Abstract: We analyze trading dynamics as successive high-frequency trading (HFT) firms begin to trade stocks in an equity market. Entrants compete with incumbents for volume, and there is crowding out. Earlier entry is associated with larger effects. After Passive HFT entry, incumbent spreads tighten. After Aggressive HFT entry, incumbent order flow loses informedness. Revenue datasuggest entry reduces the profitability of HFT activity. The results show that part of the value of HFT comes from its competitiveness.
    Keywords: Financial markets; Market structure and pricing
    JEL: G20 G14 L1
    Date: 2014
  3. By: Thorsten Beck; Haki Pamuk; Burak R. Uras
    Abstract: What is the relationship between entrepreneurial saving practices and reinvestment? We develop a model of entrepreneurial finance and show that entrepreneurial reinvestment decisions depend on the efficiency of saving practices. Utilizing a novel micro & small enterprise survey from Tanzania we test the empirical implications of this theory. We find (1) saving for business purposes and earnings reinvestment are positively related; (2) the practice of saving in a deposit account of a formal financial institution is more likely to facilitate reinvestment compared to the practice of keeping savings within the household. We also show that the negative impact of saving within-the-household on investment is more pronounced for family members with inherently low intra-household bargaining power - such as females and non-head household members. Our work contributes to the recent debate on the implications of saving instruments in developing countries, and suggests informal saving practices as potential barriers to microenterprise performance.
    Keywords: Micro- and small enterprises; savings; reinvestment; Tanzania
    JEL: D14 G21 O12 O16
    Date: 2014
  4. By: Albers, Felicitas G. (Department of Economics of the Duesseldorf University of Applied Sciences)
    Abstract: The finding and setting of a business target is the starting point whenever dealing with corporate governance; the autonomy of companies to define those targets is one constitutive characteristic of any market economy. Regulatory demands as the standardization of the German ‘Unternehmensinteresse’ (interest of the company) in the German stock corporation laws as well as ethical-theoretical approaches in the process of forming targets gain relevance both in theory and practice in the context of the field of research called ‘Compliance’.
    Abstract: Die unternehmerische Zielfindung und Zielsetzung ist Ausgangspunkt jeder Befassung mit Fragen der Unternehmensführung, die Zielautonomie der Unternehmen konstitutives Merkmal einer marktwirtschaftlichen Ordnung. Regulierende Vorgaben, wie die Normierung des ‚Unternehmensinteresses‘ im deutschen Aktienrecht sowie ethisch-normative theoretische Ansätze zur unternehmerischen Zielbildung gewinnen im Zusammenhang mit dem aktuellen betriebswirtschaftlichen Forschungsfeld ‚Compliance‘ in Theorie und Praxis eine neue Bedeutung.
    Keywords: Unternehmensführung, Unternehmensziele, Zielsetzung, Unternehmensinteresse, Russland, Wirtschaftsbeziehungen, Corporate Governance, Business Targets, Targetsetting, Interest of the Company, Compliance, Russia, Economic Relation
    JEL: G34
    Date: 2014–05
  5. By: Ha-Thu Nguyen
    Abstract: The aim of this paper is to present the set-up of a behavioral credit-scoring model and to estimate such a model using the auto loan data set of one of the largest multinational financial institutions based in France. We rely on a logistic regression approach, which is commonly used in credit scoring, to construct a behavioral scorecard. A detailed description of the model building process is provided, as are discussions about specific modeling issues. The paper then uses a number of quantitative criteria to identify the model best suited to modeling. Finally, it is demonstrated that such model possesses the desirable characteristics of a scorecard.
    Keywords: Auto Loans, Credit Risk, Credit Scoring, Logistic Regression.
    JEL: G3 C51 C52
    Date: 2014
  6. By: Gunther Capelle-Blancard; Olena Havrylchyk
    Abstract: In this paper, we assess the impact of the securities transaction tax (STT) introduced in France in 2012 on market liquidity and volatility. To identify causality, we rely on the unique design of this tax that is imposed only on large French firms, all listed on Euronext. This provides two reliable control groups (smaller French firms and foreign firms also listed on Euronext) and allows using difference-in-difference methodology to isolate the impact of the tax from other economic changes occurring simultaneously. We find that the STT has reduced trading volume, but we find no effect on theoretically based measures of liquidity, such as price impact, and no significant effect on volatility. The results are robust if we rely on different control groups (German stocks included in DAX and MDAX), analyze dynamic effects or construct a control group by propensity score matching.
    Keywords: Financial transaction tax, Securities transaction tax, Tobin tax, Volatility,Liquidity, Euronext.
    JEL: G21 H25
    Date: 2014
  7. By: Chang, C-L.; Hsu, H-K.; McAleer, M.J.
    Abstract: __Abstract__ The paper uses monthly data on financial stock index returns, tourism stock sub-index returns, effective exchange rate returns and interest rate differences from April 2005 – August 2013 for Taiwan that applies Chang’s (2014) novel approach for constructing a tourism financial indicator, namely the Tourism Financial Conditions Index (TFCI). The TFCI is an adaptation and extension of the widely-used Monetary Conditions Index (MCI) and Financial Conditions Index (FCI) to tourism stock data. However, the method of calculation of the TFCI is different from existing methods of constructing the MCI and FCI in that the weights are estimated empirically. The empirical findings show that TFCI is estimated quite accurately using the estimated conditional mean of the tourism stock index returns. The new TFCI is straightforward to use and interpret, and provides interesting insights in predicting the current economic and financial environment for tourism stock index returns that are based on publicly available information. In particular, the use of market returns on the tourism stock index as the sole indicator of the tourism sector, as compared with the general activity of economic variables on tourism stocks, is shown to provide an exaggerated and excessively volatile explanation of tourism financial conditions.
    Keywords: Monetary Conditions Index, Financial Conditions Index, model-based tourism, unbiased estimation
    JEL: B41 E44 E47 G32
    Date: 2014–05–01
  8. By: Francis de Véricourt (ESMT); Denis Gromb (INSEAD)
    Abstract: This paper studies the interplay between the operational and financial facets of capacity investment. We consider the capacity choice problem of a firm with limited liquidity and whose access to external capital markets is hampered by moral hazard. The firm must therefore not only calibrate its capacity investment and the corresponding funding needs, but also optimize its sourcing of funds. Importantly, the set of available sources of funds is derived endogenously and includes standard financial claims (debt, equity, etc.). We find that when higher demand realizations are more indicative of high effort, debt financing is optimal for any given capacity level. In this case, the optimal capacity is never below the efficient capacity level but sometimes strictly above that level. Further, the optimal capacity level increases with the moral hazard problem's severity and decreases with the firm's internal funds. This runs counter to the newsve dor logic and to the common intuition that by raising the cost of external capital and hence the unit capacity cost, financial market frictions should lower the optimal capacity level. We trace the value of increasing capacity beyond the efficient level to a bonus effect and a demand elicitation effect. Bh stem from the risk of unmet demand, which is characteristic of capacity decisions under uncertainty.
    Keywords: Capacity, optimal contracts, financial constraints, newsvendor model
    Date: 2014–05–20
  9. By: Acharya, Viral V. (Federal Reserve Bank of New York); Fleming, Michael J. (Federal Reserve Bank of New York); Hrung, Warren B. (Federal Reserve Bank of New York); Sarkar, Asani (Federal Reserve Bank of New York)
    Abstract: We examine the financial conditions of dealers that participated in two of the Federal Reserve’s lender-of-last-resort (LOLR) facilities--the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF)--that provided liquidity against a range of assets during 2008-09. Dealers with lower equity returns and greater leverage prior to borrowing from the facilities were more likely to participate in the programs, borrow more, and--in the case of the TSLF--at higher bidding rates. Dealers with less liquid collateral on their balance sheets before the facilities were introduced also tended to borrow more. There also appear to be some interaction effects between financial performance and balance sheet liquidity in explaining dealer behavior. The results suggest that both financial performance and balance sheet liquidity play a role in LOLR utilization.
    Keywords: lender of last resort; central banking; crises; illiquidity; insolvency; stigma
    JEL: D44 E58 G01 G28
    Date: 2014–05–01
  10. By: Rey Dang; Duc Khuong Nguyen
    Abstract: The under-representation of female directors in the boardroom where corporate strategic decisions are made has recently become not only an ethical business case but also a public pressure to improve this gender imbalance. While there is some practical evidence to suggest that gender-diverse corporate boards have a positive impact on performance, the results from elaborate academic research are not always conclusive and vary across samples and countries. This article examines the relationship between board gender diversity and firm performance from a dynamic perspective through using quantile regression. This method allows us to capture the potential impact of female representation at different points of the distributions of the performance measure. Using a panel of French listed companies (SBF 120) over the period 2009-2011, we uncover that the impact of board gender di- versity on firm performance is not alike over different points of the conditional distribution, and that this impact depends on the measure of performance under consideration. Typically, board gender diversity affects negatively the Tobin’s Q and positively the return on asset when these variables are high and low, respectively. Finally, we show that using traditional OLS and fixed- random-effect estimations may mask the true effect of board gender diversity.
    Keywords: Board of Directors; Gender; Diversity; Corporate Governance
    JEL: G30 G34 J16
    Date: 2014–05–19

This nep-cfn issue is ©2014 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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