nep-cfn New Economics Papers
on Corporate Finance
Issue of 2014‒08‒28
seven papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Bank bonds: size, systemic relevance and the sovereign By Andrea Zaghini
  2. Professors in the boardroom and their impact on corporate governance and firm performance By Francis, Bill B.; Hasan, Iftekhar; Wu, Qiang
  3. Are female CFOs less tax aggressive? Evidence from tax aggressiveness By Francis, Bill B.; Hasan, Iftekhar; Wu, Qiang; Yan, Meng
  4. Innovation in the supply and procurement of rig services By Osmundsen, Petter
  5. Almost Stochastic Dominance for Risk-Averse and Risk-Seeking Investors By Guo, Xu; Wong, Wing-Keung; Zhu, Lixing
  6. Do dividend taxes affect corporate investment? By Alstadsæter, Annette; Jacob, Martin
  7. Quantifying the components of the banks' net interest margin By Busch, Ramona; Memmel, Christoph

  1. By: Andrea Zaghini (Bank of Italy)
    Abstract: I analyze the risk premium on bank bonds at origination with special focus on the role of implicit and explicit public guarantees and the systemic relevance of issuing institutions. Looking at the asset swap spread on 5,500 bonds, I find that explicit guarantees and sovereign creditworthiness have a substantial effect on the risk premium. In addition, while large institutions still enjoy lower issuance costs linked to the TBTF framework, I find evidence of enhanced market discipline for systemically important banks which have faced an increased premium on bond placements since the onset of the financial crisis.
    Keywords: Too-big-to-fail, market discipline, sovereign guarantees, G-SIFIs
    JEL: G21 G18 G01
    Date: 2014–07
  2. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute)
    Abstract: Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998–2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.
    Keywords: academic directors; professors; firm performance; advising; monitoring
    JEL: G30 G34 M41
    Date: 2014–07–09
  3. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Wu, Qiang (Lally School of Management, Rensselaer Polytechnic Institute); Yan, Meng (Fordham University)
    Abstract: This paper investigates the effect of CFO gender on corporate tax aggressiveness. Focusing on firms that experience a male-to-female CFO transition, the paper compares those firms’ degree of tax aggressiveness during the pre- and post-transition periods. Using the probability of tax sheltering, the predicted unrecognized tax benefits, and the discretionary permanent book-tax differences to measure tax aggressiveness, we find that female CFOs are associated with less tax aggressiveness as compared to their male counterparts. The main findings are supported by additional tests based on propensity score matching, difference-in-difference tests, and tests with a female-to-male CFO transition sample. Overall, our study establishes CFO gender as an important determinant of tax aggressiveness.
    Keywords: tax aggressiveness; tax avoidance; gender; CFO; risk-aversion
    JEL: H26 J16 M41
    Date: 2014–07–09
  4. By: Osmundsen, Petter (UiS)
    Abstract: Substantial elements of innovation have been observable during recent years in rig supply, in particular regarding contracts and organisation. This trend has been driven by the fact that rising costs over many years have put profitability under pressure. On the basis of theory and available empirical insights, the paper outlines the conditions where specific organisational and contractual solutions are best suited. Optimum rig procurement will depend in part on whether the oil companies have time-critical drilling targets, the ability and willingness of the parties to bear risk and the purchaser's competence and capacity to manage and follow up procurement.
    Keywords: Innovation in the supply and procurement of rig services Rig services; contracts; organisation; innovation
    JEL: G34 L60 M10
    Date: 2014–08–01
  5. By: Guo, Xu; Wong, Wing-Keung; Zhu, Lixing
    Abstract: In this paper we first develop a theory of almost stochastic dominance for risk-seeking investors to the first three orders. Thereafter, we study the relationship between the preferences of almost stochastic dominance for risk-seekers with that for risk averters.
    Keywords: Almost Stochastic Dominance, expected-utility maximization, risk averters, risk seekers.
    JEL: C0 D81 G11
    Date: 2014–02–01
  6. By: Alstadsæter, Annette; Jacob, Martin
    Abstract: We test whether dividend taxes affect corporate investments. We exploit Sweden's 2006 dividend tax cut of 10 percentage points for closely held corporations and five percentage points for widely held corporations. Using rich administrative panel data and triple-difference estimators, we find that this dividend tax cut affects allocation of corporate investment. Cashconstrained firms increase investment after the dividend tax cut relative to cash-rich firms. Reallocation is stronger among closely held firms that experience a larger tax cut. This result is explained by higher nominal equity in cash-constrained firms and by higher dividends in cash-rich firms after the tax cut. The heterogeneous investment responses imply that the dividend tax cut raises efficiency by improving allocation of investment. --
    Keywords: Investment,Dividend Taxation,Private Firms
    JEL: G30 G31 H25
    Date: 2014
  7. By: Busch, Ramona; Memmel, Christoph
    Abstract: Using unique data sets on German banks, we decompose their net interest margin and quantify the different components by estimating the costs of the various functions they perform. We investigate three major functions: namely, liquidity and payment management for the customers, the bearing of credit risk, and term transformation. For the year 2012, the costs of liquidity and payment management correspond, in the median, to 47%, the bearing of credit risk to 16%, and earnings from term transformation to 35% of the net interest margin, respectively. However, looking at the period 2005-2012, earnings from term transformation seem to account for a much smaller share (about 20%) of the median bank's net interest margin. --
    Keywords: net interest margin,credit risk,term transformation,liquidity and payment management
    JEL: G21
    Date: 2014

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