nep-cfn New Economics Papers
on Corporate Finance
Issue of 2015‒09‒26
nineteen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Cost of Crowdfunding as a Source of Capital for the Small Company By Anna Motylska - Kuzma
  2. Government ownership, informed trading, and private information By Borisova, Ginka; Yadav, Pradeep K.
  3. Could the global financial crisis improve the performance of the G7 stocks markets? By Vieito, João Paulo; Wong, Wing-Keung; Zhu, Zhenzhen
  4. The Roles of Risk Governance on Islamic Banking Systems By Fauziah Mahat; Noor Azman Ali
  5. Not a Coincidence: Sons-in-Law as Successors in Successful Japanese Family Firms By Blind, Georg; Lottanti von Mandach, Stefania
  6. The Institutional Determinants of Private Equity Involvement in Business Groups: The Case of Africa By Hearn, Bruce; Oxelheim, Lars; Randøy, Trond
  7. Le rôle de la syndication des capital-investisseurs dans le financement de l’innovation, The Role of Venture Capitalists Syndication in the Financing of Innovation By Philippe DESBRIERES
  8. Bank Risk Proxies and the Crisis of 2007/09: A Comparison By Felix Noth; Lena Tonzer
  9. Board Overlaps in Mutual Fund Families By Elif Sisli Ciamarra; Abigail Hornstein
  10. Banks’ Internal Capital Markets and Deposit Rates By Itzhak Ben-David; Ajay Palvia; Chester Spatt
  11. The diversity of carmakers\' behaviors vis-a-vis the Corporate Venture Capital By Vincent FRIGANT; Marina FLAMAND
  12. Shareholder activism in banking By Roman, Raluca
  13. Competition between high-frequency traders, and market quality By Breckenfelder, Johannes
  14. Search for Yield By Martinez-Miera, David; Repullo, Rafael
  15. Tobacco Settlement Bonds: A Look At The Effect Of Securitization on the Credit of Sttates Using Capital Appreciation Bonds By James Estes;
  16. Institutions and investment in South and East Asia & Pacific region: Evidence from meta-analysis By Hawkes, Denise Donna; Yerrabati, Sridevi
  17. The Impact of the Magyar Nemzeti Bank's Funding for Growth Scheme on Firm Level Investment By Marianna Endresz; Peter Harasztosi; Robert P. Lieli
  18. Credit Market Information Feedback By Balasubramanyan, Lakshmi; Craig, Ben R.; Thomson, James B.; Zaman, Saeed
  19. The bank lending channel: An empirical analysis of EU accession countries from 2004-2013 By Khosravi, Taha

  1. By: Anna Motylska - Kuzma (Wroclaw School of Banking)
    Abstract: The main object of this paper is to analyse advantages and disadvantages of capital deriving from crowdfunding compared to other sources of capital used in a company, especially in the SMEs. As the main factor used for comparison I take the cost of capital, because it is crucial in the decision process of choosing the source of financing. The explored data is mainly obtained from the Polish economy, but I use the European and World context, too. To contrast the capital from crowdfunding I have chosen debt funds (i.e. bank loans, commercial papers and leasing or hire-purchase) and equity funds (i.e. issue of shares, venture capital or private equity funds, business angels) as the more traditional sources used to finance innovative projects in the company. Although the conventional sources of capital could be cheaper or easier to raise, they have many limitation to use, especially for SMEs and earlystage enterprises. Additionally, they are not able to ensure and provide demand for the new ideas offered by firms. This fact definitely changes the cost of used capital, especially when it should finance an innovative project
    Keywords: crowdfunding, cost of capital, innovative project, SME, financial strategy
    JEL: G24 G30 G32
  2. By: Borisova, Ginka; Yadav, Pradeep K.
    Abstract: We investigate the nature and extent of information asymmetry among traders in companies with government ownership. Consistent with a less transparent information environment, we find relatively less informed trading in the shares of firms with government presence, and specifically, fewer informed trades related to the skilled analysis of public information. At the same time, we also find that firms with government presence have a significantly higher proportion of informed trading that arises from explicitly private information, consistent with the literature on the self-serving influence of government stakeholders not necessarily committed to maximizing firm value.
    Keywords: Government ownership,Privatization,Information asymmetry,Informed trading,Private information
    JEL: G32 D82 L33
    Date: 2015
  3. By: Vieito, João Paulo; Wong, Wing-Keung; Zhu, Zhenzhen
    Abstract: Financial crises are normally associated with negative effects on financial markets. In this paper, we investigate whether the most recent Global Financial Crisis (GFC) had any positive impact on the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) indices. We carry out our investigation by employing mean-variance (MV) analysis, CAPM statistics, a runs test, a multiple variation ratio test, and stochastic dominance (SD) tests. Our MV and CAPM results conclude that most of the G7 stock indices are significantly less volatile and have a higher beta, higher Sharpe ratios and a higher Treynor’s index after the GFC. Run tests and multiple variation ratio results confirm that efficiency improved in the post-GFC period. Finally, SD results conclude that there is no arbitrage opportunity and the markets are efficient due to the GFC, and, in general, investors prefer investing in the indices after the GFC. Overall, we conclude that the GFC led to markets that are more efficient and mature, confirming that crises can also have positive impacts on stock markets.
    Keywords: Market Performance; the Global Financial Crisis; Randomness; Market Efficiency; Stochastic Dominance
    JEL: G14 G15
    Date: 2015–09–09
  4. By: Fauziah Mahat (Universiti Putra Malaysia); Noor Azman Ali (Universiti Putra Malaysia)
    Abstract: The role financial institutions sector in economic activities with higher capitalization ratio have the impact to alleviate credit and market risks including measuring in loan-to-deposit ratio. Good risk governance cannot be denied when the failure of financial systems does not exempt the Islamic financial institutions. Some of the recent examples for the collapses of Ihlas Finance House of Turkey, the Islamic Bank of Africa, Dubai Islamic Bank and Investment Companies of Egypt. The failure of financial market in OECD countries demonstrate Islamic banks are not much different from conventional banks. Another issues raised in this paper is the financial crisis which reveals risk-related issues resulted from mismanagement of risk at organizational level including various stakeholders. The aim of this paper is to discuss the significant roles of risk governance as the mediating variables between the risk management initiatives and the banks corporate performance. Early empirical study define risk management as a process which managers capabilities identifying and mitigate risk. There are vast reason of explaining the necesity of governance to avoid risk-related failure of financial marketis due to systems complexity and high risk exposures. The risk governance concept is founded from the agency theory, stakeholder-based governance theory, and delegated monitoring theory. The stakeholder based governance present the ideas whereby banks need to provide multiple benefits relationship include customer, supplier, distributors and employees. This research explores the secondary data relevant to analyze the risk governance effects of the 50 international Islamic banks between the periods of 2008-2013. The necessary statistical testing was explained for hypothesis testing and the model development. The expected outcome from the analysis is to tightened the construct to ensure level of risk monitoring is sufficient, minimizing moral hazard and prompt corrective action framework by incorporating the elements of corporate governance.
    Keywords: Financial Risk Management; Corporate Governance; Risk Governance; Islamic Banking
    JEL: G38
  5. By: Blind, Georg; Lottanti von Mandach, Stefania
    Abstract: Vikas Mehrotra, Randall Morck, Jungwook Shim and Yupana Wiwattanakantang (2013; hereafter MMSW) observe that listed family firms on average outperform non-family firms in Japan between 1962- 2000. They suggest that this finding can be explained by the practice of adult adoptions and, to a lesser degree, by arranged marriages. Their argument centers on a positive performance differential between non-blood and blood heirs. We cannot exactly replicate MMSW's research, because the authors do not share their data. However, we identify methodological concerns with the evidencing of this differential and show how conceptual considerations reduce their argument to that of arranged marriages. Regardless of any differential we propose another interpretation for the superior performance of businesses run by non-blood heirs and identify indicative evidence for this.
    Keywords: Japan; family firms; outperformance; adoptions; arranged marriages
    JEL: G3 J12 N25 Z13
    Date: 2015–06–09
  6. By: Hearn, Bruce (Sussex University); Oxelheim, Lars (Research Institute of Industrial Economics (IFN)); Randøy, Trond (Agder University)
    Abstract: This study examines the governance attributes of post-IPO (initial public offering) retained ownership of private equity in business group constituent firms in contrast to their unaffiliated counterparts, in 202 newly listed firms in 22 emerging African economies. We adopt an actor centred institutional-theoretic perspective in rationalizing institutional voids and the advantages of maintained governance by both business angels (BA) and venture capital (VC) private equity. Our findings reveal private equity retain higher post-IPO ownership in business group constituents compared to unaffiliated firms and that this is inversely moderated in the context of improving institutional quality. Our result adds to the literature on multifocal corporate governance mechanisms.
    Keywords: G10; G30; G32; G34; G38; K00
    JEL: G10 G30 G32 G34 G38 K00
    Date: 2015–09–08
  7. By: Philippe DESBRIERES (IAE DIJON - Université de Bourgogne (CREGO))
    Abstract: (VF) La pratique de la syndication est notablement développée dans le métier du capital-investissement, quel que soit le stade de développement, le secteur d’activité et la nationalité de l’entreprise financée. La syndication s’explique autant par des arguments financiers (partage des risques entre capital-investisseurs ; gouvernance du management de l’entreprise financée...) que par la nécessité d’une part, d’accéder à des ressources (informations, compétences) en matière de sélection et de surveillance des investissements et, d’autre part, de partager, voire créer, des connaissances. L’objectif de cette synthèse de la littérature est d’étudier dans quelle mesure cette pratique favorise ou contraint l’innovation et son financement dans les firmes entrepreneuriales. (VA) Syndication is a highly developed practice in the venture capital industry, whatever are the stage of development, the industry sector and the nationality of the financed company. It can be explained by financial arguments (sharing of risks between venture capitalists; governance of managemers of the financed firm) as well as by the necessity, on the one hand, to reach resources (information, skills) regarding selection and control of the investments and, on the other hand, to share or create knowledge. The objective of this survey is to study to what extent this practice favor or limit innovation and its financing within entrepreneurial firms.
    Keywords: capital-investissement, syndication, innovation, financement;Venture Capital, Syndication, Innovation, Financing
    JEL: G24 L26 O31
    Date: 2015–05
  8. By: Felix Noth; Lena Tonzer
    Abstract: Motivated by the variety of bank risk proxies, our analysis reveals that nonperforming assets are a well-suited complement to the Z-score in studies of bank risk.
    Keywords: banking, financial institutions, risk proxie
    JEL: G21 G28 G32
    Date: 2015–09
  9. By: Elif Sisli Ciamarra (Brandeis University); Abigail Hornstein (Wesleyan University)
    Abstract: We examine a unique characteristic of mutual fund governance: a common set of di- rectors serving simultaneously on the boards of multiple funds within a fund family. At …rst glance, this governance structure appears to bene…t investors because it is associated with higher fund returns and better fund manager quality. However, funds with higher degrees of board overlap also charge higher marketing and distribution fees, which have been criticized as being the least transparent cost component for mutual fund investors. Board overlaps are also associated with detrimental unobserved actions by fund managers: window dressing and strategic performance transfer between funds occur more often in mutual fund families with greater degrees of director overlap. We conclude that director oversight of multiple funds is a mixed blessing.
    Keywords: mutual funds, mutual fund families, board of directors
    JEL: G23 G11 G34
    Date: 2015–09
  10. By: Itzhak Ben-David; Ajay Palvia; Chester Spatt
    Abstract: A common view is that deposit rates are determined primarily by supply: depositors require higher deposit rates from risky banks, thereby creating market discipline. An alternative perspective is that market discipline is limited (e.g., due to deposit insurance and/or enhanced capital regulation) and that internal demand for funding by banks determines rates. Using branch-level deposit rate data, we find little evidence for market discipline as rates are similar across bank capitalization levels. In contrast, banks’ loan growth has a causal effect on deposit rates: e.g., branches’ deposit rates are correlated with loan growth in other states in which their bank has some presence, suggesting internal capital markets help reallocate the bank's funding.
    JEL: G21
    Date: 2015–09
  11. By: Vincent FRIGANT; Marina FLAMAND
    Abstract: This paper wishes to contribute to the literature about the industrial firms\' motivations to invest in Corporate Venture Capital programs. In a first part, we build a typology on CVC objectives based on a literature review. Then we apply this typology to carmakers’ CVC programs. We study 13 worldwide car manufacturers. Results show a poor interest of car makers vis-à-vis CVC programs. However, the existing programs show that strategic objectives are the most common objectives even if some others objectives are also pursued, like the “relational objective”. Summarizing the results, we identify four typical behaviors of carmakers vis-à-vis CVC programs. We conclude by a discussion about the automotive industry specificity, and we call upon other sectoral studies based on a qualitative method.The diversity of carmakers\' behaviors vis-a-vis the Corporate Venture Capital
    Keywords: Corporate Venture Capital, CVC, Innovation, Automotive, Investment strategy, Entrepreneurial Finance
    JEL: G3 G34 L62 M13
    Date: 2015
  12. By: Roman, Raluca (Federal Reserve Bank of Kansas City)
    Abstract: This paper conducts the first assessment of shareholder activism in banking and its effects on risk and performance. The focus is on the conflicts among bank shareholders, managers, and creditors (e.g., regulators, deposit insurer, taxpayers, depositors). This paper finds activism may generally be a destabilizing force, increasing bank risk-taking, but creating market value for shareholders, and leaving operating returns unchanged, consistent with the empirical dominance of the Shareholder-Creditor Conflict. However, during financial crises, the increase in risk disappears, suggesting activism risk incentives may be muted. From a public perspective, creditors (including the government) may lose during normal times, but not during financial crises.
    Keywords: Banking; Financial crises; Financial stability; Shareholder activism
    JEL: G01 G21 G28 G38
    Date: 2015–08–01
  13. By: Breckenfelder, Johannes
    Abstract: This is the first empirical evidence on the competition between high-frequency traders (HFTs) and its influence on market quality. We exploit the first entries of international HFTs into the Swedish equity market in 2009 and conduct a difference-in-differences analysis using trade-by-trade data. To further identify the effect, we use the Federation of European Securities Exchanges (FESE) tick size harmonization as an exogenous event that caused HFTs to start trading in stocks. When HFTs compete for trades their liquidity consumption increases. As a result, liquidity deteriorates significantly and short-term volatility rises.
    Keywords: competition, high-frequency trading, tick size harmonization, FESE, changes in competition
    JEL: G11 G12 G14 G21 G23
    Date: 2013–03
  14. By: Martinez-Miera, David; Repullo, Rafael
    Abstract: We present a model of the connection between real interest rates, credit spreads, and the structure and the risk of the banking system. Banks intermediate between entrepreneurs and investors, and choose the monitoring intensity on entrepreneurs' projects. We characterize the equilibrium for a fixed aggregate supply of savings, showing that safer entrepreneurs will be funded by nonmonitoring (shadow) banks and riskier entrepreneurs by monitoring (traditional) banks. We also show that a savings glut reduces interest rates and spreads, increases the relative size of the shadow banking system and the probability of failure of the traditional banks. The model provides a framework for understanding the emergence of endogenous boom and bust cycles, as well as the procyclical nature of the shadow banking system, the existence of countercyclical risk premia, and the low levels of interest rates and spreads leading to the buildup of risks during booms.
    Keywords: bank monitoring; banking crises; boom and bust cycles; credit spreads; financial stability; real interest rates; savings glut; shadow banks
    JEL: E44 G21 G23
    Date: 2015–09
  15. By: James Estes (California State University San Bernardino);
    Abstract: Tobacco Settlement bonds have been issued by several states to obtain early use of funds awarded to them in the Tobacco Master Settlement Agreement (MSA) of 1998. The MSA awarded monies in perpetuity to states to settle claims and lawsuits against the tobacco industry that had been ongoing for over a decade. Nine states, and Washington, DC, Puerto Rico, and Guam, have chosen to cash in on future MSA payments by issuing capital appreciation bonds in order to receive funds immediately and postpone any type of repayment for 55 years. This paper critically analyzes how using capital appreciation bonds backed by diminishing future MSA revenue streams will inevitably lead to default and higher borrowing costs in all bonds for these states and territories.
    Keywords: tobacco settlement bonds, capital appreciation bonds, default, securitization
    JEL: G11 G18 G35
  16. By: Hawkes, Denise Donna; Yerrabati, Sridevi
    Abstract: Given the important role inward FDI can play in accelerating economic growth and transformation, developing countries are interested in attracting it. This study contributes to evidence based policy making and to academic research on governance FDI relationship by meta synthesising 771 estimates from 48 empirical studies published from 1980 - 2012. In comparison to less regulated and high corrupt countries meta-regression results show that countries with high regulation and low levels of corruption are able to attract more FDI. Countries with stronger legal systems are positively related to inward FDI. As expected, aggregate governance is found to have a positive effect on inward FDI.
    Keywords: FDI,governance,meta-regression analysis,systematic literature review,South and East Asia & Pacific countries
    JEL: C2 G21 O53
    Date: 2015
  17. By: Marianna Endresz (Magyar Nemzeti Bank (the Central Bank of Hungary)); Peter Harasztosi (Magyar Nemzeti Bank (the Central Bank of Hungary)); Robert P. Lieli (Magyar Nemzeti Bank (the Central Bank of Hungary))
    Abstract: The Magyar Nemzeti Bank (the Central Bank of Hungary) introduced a “funding for lending” type loan program aimed at small and medium sized enterprises (SMEs) in mid-2013. We combine firms’ balance sheet data with two loan data sets to study the program’s impact on firm level investment in 2013. We start from a simple difference-in-differences (DID) estimator, but argue that the parallel trend assumption that underlies the method is likely violated. Therefore, we propose a correction based on the idea that the selection process involved in securing a market loan in a pre-program year is similar to the selection process into the program. Our results indicate that the program succeeded in generating extra investment in the SME sector that would not have taken place otherwise; specifically, we attribute to the program about 30% of the total investment undertaken by participating firms. Nevertheless, the effect is markedly heterogeneous with respect to firm size, being proportionally larger for smaller firms.
    Keywords: funding for lending, program evaluation, difference-in-differences estimation, unconventional monetary policy.
    JEL: D04 G38 E58
    Date: 2015
  18. By: Balasubramanyan, Lakshmi (Federal Reserve Bank of Cleveland); Craig, Ben R. (Federal Reserve Bank of Cleveland); Thomson, James B. (University of Akron); Zaman, Saeed (Federal Reserve Bank of Cleveland)
    Abstract: We examine how a combination of credit market and asset quality information can jointly be used in assessing bank franchise value. We find that expectations of future credit demand and future asset quality explain contemporaneous bank franchise value, indicative of the feedback in credit market information and its consequent impact on bank franchise value.
    Keywords: bank franchise value; asset quality; credit demand; information; expectations
    JEL: E52 G01 G28
    Date: 2015–09–18
  19. By: Khosravi, Taha
    Abstract: In this paper a methodical empirical analysis of the bank lending channel of monetary transmission in the European Union’s 10 new member states is conducted. We specifically investigate the influence of monetary policy changes on bank lending activity and if this potential influence is contingent on bank characteristics, such as banks’ size, capital, liquidity and risk factor. Panel data compiled from a large number of banks from 2004 to 2013, and dynamic panel estimation methods are used. The results indicate the existence of a bank lending channel through bank liquidity; however, while liquidity and GDP growth maintain a beneficial and substantial impact on bank loan growth, the other bank characteristics are not considered to be important factors. Additionally, there is an indication of the effect of bank risk and liquidity from 2008 to 2010. Nevertheless, the lending channel has been weakened, serving as an additional refutation of bank-specific traits in allowing banks to maintain lending activity and growth during a financial crisis.
    Keywords: Bank lending channel, EU-10 countries, Monetary policy transmission, Panel data.
    JEL: C23 E51 E52 G21
    Date: 2015–09–19

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