nep-cfn New Economics Papers
on Corporate Finance
Issue of 2014‒07‒05
seven papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  2. Financial Development and Employment: Evidence from Transition Countries By Dorothea Schäfer; Susan Steiner
  3. What Types of Company Have Female and Foreign Directors? By Masayuki Morikawa
  4. Bank-lending Constraints, Trade Credit and Alternative External Finance since the Financial Crisis: Evidence from European SMEs By O'Toole, Conor; Casey, Eddie
  5. Financial benefits, travel costs, and bankruptcy By Mikhed, Vyacheslav; Scholnick, Barry
  6. Stock Market Predictability: Global Evidence and an Explanation By Cheolbeom Park; Dong-hun Shin
  7. What drives heterogeneity of loan loss provisions’ procyclicality in the EU? By Olszak, Małgorzata; Pipień, Mateusz; Kowalska, Iwona; Roszkowska, Sylwia

  1. By: Hernán Herrera Echeverri; Haar, Jerry; Juan Benavides Estévez-Bretón
    Abstract: This paper is an empirical analysis of the effects of foreign direct investment (FDI), institutional quality and the size of a government on venture capital (VC) activity. We conclude that institutional quality, the FDI and public spending have definitive importance as elements for the development of a public policy that increases the quantity and quality of venture capital fund (VCF) investment. Higher institutional quality, higher FDI and lower public spending allow the VCF investment volume to grow. The FDI shows higher level of significance in promoting investment in high-tech companies and institutional quality increases the productivity of FDI investment in the generation of VCF. Government spending dramatically and adversely affects the activity of VCF and institutional quality increases the negative effect of government spending on the activity of VCF in emerging countries. This last result suggests that the higher the institutional quality of a country, the less state intervention it requires to promote investment of VCF. The results are consistent with the hypothesis of the FDI spillover and crowding out of public spending.
    Keywords: Foreign Direct Investment, Venture Capital, Public Expenditure
    JEL: G24 G18
    Date: 2013–08–01
  2. By: Dorothea Schäfer; Susan Steiner
    Abstract: This paper studies the association between a country's level of financial development and firms' employment growth. We employ an incomplete contract model for evaluating this association. The model proposes that a high level of financial development affects the employment of firms with low managerial capital negatively, while firms with high managerial capital benefit from a more developed financial system. We test this proposition with data from the Business Environment and Enterprise Performance Survey covering transition countries in Eastern Europe and Central Asia. We use firm size as a proxy for managerial capital. Our findings confirm a non-linear effect of financial development on firm employment. Specifically, the smallest firms' edge in employment growth over large firms is dampened when the level of financial development is higher, especially in countries at medium levels of financial development.
    Keywords: Financial development, employment, financial constraints, transition
    JEL: G20 G28 G30 J30
    Date: 2014
  3. By: Masayuki Morikawa
    Abstract: This paper analyzes the determinants of the presence and the number of female and foreign directors among Japanese companies. First, listed and long-established companies, subsidiaries, and unionized companies tend not to have female directors. On the other hand, owner-managed companies are likely to have female directors and chief executive officers (CEOs). Company size and foreign shareholdings do not have significant relationships with the presence of female directors. Second, while some past studies in the United States and European countries find evidence of “tokenism,” whereby female-led companies do not appoint additional females as directors, we do not find such evidence among Japanese companies. Third, while foreign-owned companies and companies engaged in overseas activities tend to have foreign directors, other company characteristics, such as size and listing status, do not have systematic relationships with the presence of foreign directors.
    Keywords: female directors, foreign directors, diversity, owner-managed company
    JEL: G32 J51 J71 M12 M51
    Date: 2014–06
  4. By: O'Toole, Conor; Casey, Eddie
    Keywords: crisis/Trade
    Date: 2014–05
  5. By: Mikhed, Vyacheslav (Federal Reserve Bank of Philadelphia); Scholnick, Barry (University of Alberta)
    Abstract: We are the first to show that the cost of personal bankruptcy filers traveling to their bankruptcy trustees affects bankruptcy choices. We use detailed balance sheet, income statement, and location data from 400,000 Canadian bankruptcies. To control for endogenous trustee selection, we use the location of local government offices as an instrument for the location of bankruptcy trustees (while filers interact with trustees, and trustees interact with local government, filers do not interact with the local government). We find that increased travel costs reduce the number of filings. Furthermore, for those individuals who do file, we find that their increased travel costs need to be compensated by increased financial benefits of bankruptcy. Filers without cars (higher travel costs), as well as those with jobs (higher opportunity costs), receive larger per-kilometer financial benefits from bankruptcy.
    Keywords: Bankruptcy; Travel Costs;
    JEL: D14 G23 G33 K35
    Date: 2014–06–01
  6. By: Cheolbeom Park (Department of Economics, Korea University, Seoul, Republic of Korea); Dong-hun Shin (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: Using a comprehensive dataset covering 34 countries from Datastream, we find that dividend-price ratio has a broad spectrum of forecasting abilities internationally. In some countries, such as the US, the dividend-price ratio is a powerful predictor of exclusively stock returns, whereas in others it is a powerful predictor of exclusively dividend growth rates. For many countries, however, the dividend-price ratio has some predictive power for both stock returns and dividend growth rates, although the relative degree of predictive power differs. We have provided an explanation for these differences in stock market predictabilities between countries. When a firm with a dominant shareholder is publicly traded, then the dominant shareholder determines cash-flow policy but the stochastic discount factor contained in the stock price may reflect the minority shareholders¡¯ stochastic discount factor. For this reason, the correlation between cash-flow and stochastic discount factor approaches zero as the disparity between voting rights and cash-flow rights increases. As a result, the stock price becomes more dependent on expected dividends than expected stock returns, and, therefore, the dividend-price ratio has a stronger predictive power for dividend growth. Consistent with our explanation, we find a strong positive relation between dividend growth predictability and disparity, but a significantly negative one between stock return predictability and disparity. These relations are found to be consistent across various robust tests.
    Keywords: Dividend-price ratio, Stock returns, Dividend growth, Predictability, Disparity
    JEL: G12 G32 E44
    Date: 2014
  7. By: Olszak, Małgorzata; Pipień, Mateusz; Kowalska, Iwona; Roszkowska, Sylwia
    Abstract: This paper documents a large cross-bank and cross-country variation in the relationship between loan loss provisions and the business cycle and explores bank management specific, bank-activity specific and country specific (institutional and regulatory) features that explain this diversity in the European Union. Our results indicate that LLP in large, publicly traded and commercial banks, as well as in banks reporting in consolidated statements’ format, are more procyclical. Better investor protection and more restrictive bank regulations reduce the procyclicality of LLP. Additional evidence shows that moral hazard resulting from deposit insurance renders LLP more procyclical. We do not find support for the view that better quality of market monitoring mitigates the risk-taking behavior of banks. Our findings clearly indicate the empirical importance of earnings management for LLP procyclicality. Sensitivity of LLP to the business cycle seems to be limited in the case of banks which engage in more income smoothing and which apply prudent credit risk management.
    Keywords: loan loss provisions, procyclicality, earnings management, investor protection, bank regulation, bank supervision
    JEL: E32 E44 G21
    Date: 2014–06–20

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