nep-cfn New Economics Papers
on Corporate Finance
Issue of 2015‒02‒11
six papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Risk Aggregation with Copula for Banking Industry By Toshinao Yoshiba
  2. Empirics of the Oslo Stock Exchange. Basic, descriptive, results 1980-2014 By Odegaard, Bernt Arne
  3. Law, Stock Markets, and Innovation By Brown, James R.; Martinsson, Gustav; Petersen, Bruce C.
  4. Moral hazard and debt maturity By Gur Huberman; Rafael Repullo
  5. Who lends to riskier and lower-profitability firms? Evidence from the syndicated loan market By Iosifidi, Maria; Kokas, Sotirios
  6. Can Innovation Help U.S. Manufacturing Firms Escape Import Competition from China? By Hombert , Johan; Matray , Adrien

  1. By: Toshinao Yoshiba (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: This paper surveys several applications of parametric copulas to market portfolios, credit portfolios, and enterprise risk management in the banking industry, focusing on how to capture stressed conditions. First, we show two simple applications for market portfolios: correlation structures for returns on three stock indices and a risk aggregation for a stock and bond portfolio. Second, we show two simple applications for credit portfolios: credit portfolio risk measurement in the banking industry and the application of copulas to CDO valuation, emphasizing the similarity to their application to market portfolios. In this way, we demonstrate the importance of capturing stressed conditions. Finally, we introduce practical applications to enterprise risk management for advanced banks and certain problems that remain open at this time.
    Keywords: copula, multivariate distribution, tail dependence, risk aggregation, economic capital
    JEL: G17 G21 G32
    Date: 2015–01
  2. By: Odegaard, Bernt Arne (UiS)
    Abstract: We give some basic empirical characteristics of the Oslo Stock Exchange in the period 1980-2014. We give statistics for number of firms, the occurences of IPO's, dividend payments, trading volume, and concentration. Returns for various market indices and portfolios are calculated and described. We also show the well known calendar anomalies, the link between number of stocks in a portfolio and its variance and industry characteristics of the OSE.
    Keywords: Oslo Stock Exchange; Descriptive
    JEL: G10
    Date: 2015–01–22
  3. By: Brown, James R. (Department of Finance, Iowa State University); Martinsson, Gustav (Institute for Financial Research (SIFR), Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology); Petersen, Bruce C. (Department of Economics, Washington University in St. Louis)
    Abstract: We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long-run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D. These findings connect law and stock markets with innovative activities key to economic growth, and show that legal rules and financial developments affecting the availability of external equity financing are particularly important for risky, intangible investments not easily financed with debt.
    Keywords: Financial development; Investor protection; Stock markets; R&D; Innovation; Economic growth
    JEL: G32 K20 O16 O30
    Date: 2015–01–21
  4. By: Gur Huberman; Rafael Repullo
    Abstract: We present a model of the maturity of a bank’s uninsured debt. The bank borrows funds and chooses afterwards the riskiness of its assets. This moral hazard problem leads to an excessive level of risk. Short-term debt may have a disciplining effect on the bank’s risk-shifting incentives, but it may lead to inefficient liquidation. We characterize the conditions under which short-term and long-term debt are feasible, and show circumstances under which only short-term debt is feasible and under which short-term debt dominates long-term debt when both are feasible. Thus, short-term debt may have the salutary effect of mitigating the moral hazard problem and inducing lower risk-taking. The results are consistent with key features of the common narrative of the period preceding the 2007-2009 financial crisis.
    Keywords: Short-term debt; long-term debt; optimal financial contracts; risk-shifting; rollover risk; inefficient liquidation.
    JEL: F3 G3
    Date: 2014–06–13
  5. By: Iosifidi, Maria; Kokas, Sotirios
    Abstract: This paper exploits a unique data set on bank-firm relationships based on syndicated loan deals to examine the effect of banks’ credit risk and capital on firms’ risk and performance. Our data set is a multilevel cross-section, which essentially allows controlling for all bank and firm characteristics through respective fixed effects, thus avoiding concerns regarding omitted variables. We find that banks with higher credit risk are associated with more risky firms, with lower profitability and market value. In turn, we find that banks with higher risk-weighted capital ratios lend to riskier firms with less market value. Our results are indicative of a strong adverse selection mechanism and highlight the need to monitor the risky banks more closely, especially as we consider large and influential syndicated loan deals.
    Keywords: Bank-firm relationships; Risk; Performance; Syndicated loans
    JEL: G20 G21 G30 G32
    Date: 2015
  6. By: Hombert , Johan; Matray , Adrien
    Abstract: The authors study whether R&D-intensive firms are more resilient to trade shocks. They correct for the endogeneity of R&D using tax-induced changes to the cost of R&D. On average across US manufacturing firms, rising imports from China lead to slower sales growth and lower profitability. These effects are, however, significantly smaller for firms with a larger stock of R&D -- by about half when moving from the 25th percentile to the 75th percentile of the R&D stock distribution. As a result, while the average firm in import-competing industries cuts capital expenditures and employment, R&D-intensive firms downsize considerably less.
    Keywords: R&D; Innovation; Product Market Competition; Trade Shocks
    JEL: F14 G31 O33
    Date: 2014–12–24

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