nep-cfn New Economics Papers
on Corporate Finance
Issue of 2015‒10‒25
five papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. The supply of long-term credit after a funding shock: evidence from 2007-2009 By Pierre Pessarossi; Frédéric Vinas
  2. State-Owned Banks: Acquirers in M&A deals By Emanuele BACCHIOCCHI; Matteo FERRARI; Massimo FLORIO; Daniela VANDONE
  3. Are classroom games useful for teaching 'sticky' finance concepts? Evidence from a swap game By Alexandr Akimov; Mirela Malin
  4. Who are the controlling shareholders? Degree and seniority of control, and CEO pay monitoring By Lionel Almeida
  5. Initial Public Offering and Financing of Biotechnology Start-ups: Evidence from Japan By HONJO, Yuji; NAGAOKA, Sadao

  1. By: Pierre Pessarossi (Autorité de Contrôle Prudentiel et de Résolution - Banque de France); Frédéric Vinas (Paris School of Economics and Autorité de Contrôle Prudentiel et de Résolution - Banque de France)
    Abstract: We study banks supply of long-term credit after a negative funding shock. Thanks to a unique database at bank-firm level, we take advantage of the exogenous interbank market freeze in 2007-2008 to assess the causal relation between French banks' liquidity risk and their lending. We find that banks with higher funding risk and more maturity transformation provided a lower supply of long-term loans after the shock, even controlling for credit demand. Short-term lending supply is however unaffected. These findings help explain the severity of the recession that followed the liquidity crisis. And they support Basel III liquidity regulation. This regulation should have a stabilising effect on long-term lending in times of funding stress
    Keywords: financial institution; liquidity risk; loan maturity
    JEL: G01 G21 G28
    Date: 2015–09
  2. By: Emanuele BACCHIOCCHI (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Matteo FERRARI (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Massimo FLORIO (Department of Economics, Management and Quantitative methods,University of Milan, Italy); Daniela VANDONE (Department of Economics, Management and Quantitative methods,University of Milan, Italy)
    Abstract: Between 2003 and 2013, according to Zephyr (BvD) data, 22% of M&A deals between banks have involved state-owned banks, either as targets (12%) or as acquirers (10%). The behavior of state-owned banks in the market control is, however, underresearched.The standard Inefficient Management Hypothesis suggests that more efficient managerial teams target less performing firms. The IMH, however, has never been tested for deals involving state-owned banks, nor the pre-deal operating characteristics of state-owned banks involved as acquirers in M&A deals. We build up a unique dataset of 3,682 deals between banks that allows us to classify M&As into four categories, depending on the ownership of the acquirer and the target: 1) public re-organization (deals between two state-owned banks), 2) publicization (a stateowned bank acquiring a private bank), 3) privatization and 4) private re-organization (deals between two private banks). Our findings confirms for the first time the IMH also for state-owned banks. We also find that state-owned banks active as acquirers in the market for corporate control have a better pre-deal performance compared to the private benchmark; this evidence is stronger for development banks.
    Keywords: Inefficient Management Hypothesis, Mergers & Acquisitions,State-owned banks, Ownership
    JEL: G32 G34 L32
    Date: 2015–08
  3. By: Alexandr Akimov; Mirela Malin
    Keywords: Experimental learning, in-class games, role-playing, finance, swap
    JEL: G23 G32 A22
    Date: 2015–09
  4. By: Lionel Almeida
    Abstract: Based on CEO pay monitoring in French listed companies, this study first searches for the relevant metric of controlling shareholdings. The equity share held by the largest shareholder directly or indirectly represented on the board of directors, plus shareholders acting in concert with it, is associated with effective control – while other blockholders, whether or not they sit on the board, and deviations from “one share-one vote”, do not enhance monitoring. Second, a panel threshold regression (PTR) model allows to identify various regimes of control. Four regimes are found in the degree of control. A threshold at about 10% of equity separates out “non-controlled” from effectively-controlled firms; three regimes of effective control are then identified. They are termed as “influential” (from about 10% to one-third of equity), “dominant” (up to about 45%), and “majority” (over 45%) controls. Specifically, CEO pay packages provide evidence of entrenchment for dominant controlling shareholders. Then, this study introduces seniority of control as a second criterion for effective control. The PTR model allows to distinguish two regimes termed as “new” and “long-term” control: new controlling shareholders need about six to eight years to reduce asymmetries of information and no longer rely on alternative monitoring devices. The study lastly discusses the relevance of discontinuous threshold effects compared to some continuous specifications found in the literature on ownership.
    Keywords: Corporate control, CEO compensation, Panel threshold regression(PTR).
    JEL: G32 G34 L22
    Date: 2015
  5. By: HONJO, Yuji; NAGAOKA, Sadao
    Abstract: This paper explores the initial public offering (IPO) and financing of biotechnology start-ups in Japan. Using a unique data set, we find that biotechnology start-ups initially backed by venture capital (VC) firms and those originating from universities are more likely to go public within a shorter period. Moreover, we examine whether two investment methods used by VC firms?staged financing and syndication?affect the market value of equity at the IPO. The results reveal that these methods do not create a higher value of biotechnology start-ups at the IPO. Furthermore, we provide evidence that the timing of IPOs does not depend on market conditions in the biotechnology industry, whereas the market value of equity tends to depend on market conditions.
    Keywords: Biotechnology, Initial public offering, Market value, Staged financing, Start-up, Syndication
    JEL: G32 M13 L65
    Date: 2015–09

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