nep-cfn New Economics Papers
on Corporate Finance
Issue of 2016‒01‒29
nine papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. NManagement Board Composition of Banking Institutions and Bank Risk-Taking: The Case of the Czech Republic By Diana Zigraiova
  2. Was the Crisis Due to a Shift from Stakeholder to Shareholder Finance? Surveying the Debate By Giovanni Ferri; Angelo Leogrande
  3. Firm survival, uncertainty and financial frictions: Is there a financial uncertainty accelerator? By Joseph P. Byrne; Marina-Eliza Spaliara; Serafeim Tsoukas
  4. European lending channel: differences in transmission mechanisms due to the global financial crisis By Tomáš Heryán; Panayiotis G. Tzeremes; Roman Matousek
  5. High frequency characterization of Indian banking stocks By Sayaeed, Mohammad Abu; Dungey, Mardi; Yao, Wenying
  6. The impact of post-IPO changes in corporate governance mechanisms on firm performance: evidence from young Australian firms By Chowdhury, Biplob; Dungey, Mardi; Pham, Thu Phuong
  7. How does long-term finance affect economic volatility ? By Demirguc-Kunt,Asli; Horvath,Balint Laszlo; Huizinga,Harry P.
  8. Analysis of the economic behaviour of financial organisations By Janusz J. Tomidajewicz
  9. Multiple banking relationships: do SMEs mistrust their banks? By Catherine Refait-Alexandre; Stéphanie Serve

  1. By: Diana Zigraiova (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Czech National Bank)
    Abstract: The paper investigates how management board composition of banking institutions impacts their risk-taking behavior in the Czech Republic. More specifically, we examine the effect of average director age, proportion of female directors, non-national directors and proportion of their attained education on four different bank risk proxies. We build a unique data set comprising selected biographical information on management board members of the Czech financial institutions holding a banking license over 2001-2012 period. For the Czech banking sector overall, we find that higher proportions of non-national directors increase bank risk measured by profit volatility and decrease bank stability captured by Z-score. Similarly, a larger proportion of directors holding an MBA raises bank riskiness measured by profit volatility. On the other hand, the presence of directors holding a PhD on boards of large Czech banks enhances bank stability captured by Z-score. Moreover, we detect risk-enhancing implications of board size for the segments of building savings societies and small and midsized banks. As for average board tenure, its effect on risk-taking varies depending on bank characteristics. We find mixed evidence on the effect of female directors and do not find any strong effect of directors' age on risk in the Czech banking sector.
    Keywords: Management board composition, banks, risk-taking, panel data
    JEL: C33 G21 G34 J16
    Date: 2016–01
  2. By: Giovanni Ferri; Angelo Leogrande
    Abstract: We discuss the literature on the shift from stakeholder to shareholder finance behind the Great Financial Crisis (GFC). Traditional banks generally maximized stakeholder value (STV). But before the GFC also many of them started maximizing shareholder value (SHV). Moving from STV to SHV often meant shifting credit management from Originate-to-Hold (OTH) to Originate-toDistribute (OTD). Moving from STV-OTH to SHV-OTD increased systemic risk damaging the common good of financial stability. STV-oriented banks seemed to weather the GFC relatively better with more heterogeneous systems proving more resilient. Heterogeneity in banking governance-orientations/ownership-structures seems to add value reducing the probability of financial crises.
    Keywords: Financial and Banking Crises, Bank Governance, Financial Regulation, Financial Institutions and Organizations
    JEL: G0 G01 G14 G15 G18 G21 G20 G24 G28 G30 G32
    Date: 2015
  3. By: Joseph P. Byrne; Marina-Eliza Spaliara; Serafeim Tsoukas
    Abstract: Using a large panel of unquoted UK firms over the period 2000-09, we examine the impact of firm-specific uncertainty on corporate failures. In this context we also distinguish between firms which are likely to be more or less dependent on bank finance as well as public and non-public companies. Our results document a significant effect of uncertainty on firm survival. This link is found to be more potent during the recent financial crisis compared with tranquil periods. We also uncover significant firm-level heterogeneity since the survival chances of bank-dependent and non-public firms are most affected by changes in uncertainty, especially during the recent global financial crisis.
    JEL: E44 F32 F34 G32
    Date: 2015–02
  4. By: Tomáš Heryán (Department of Finance and Accounting, School of Business Administration, Silesian University); Panayiotis G. Tzeremes (Department of Economics, University of Thessaly); Roman Matousek (University of Kent, Kent Business School)
    Abstract: This study focuses on the bank lending channels and transmission mechanisms of monetary policy in European Union (EU) countries. In accordance with previous empirical studies, we deploy the generalized method of moments (GMM) with pooled annual data. We examine the period from 1999 to 2012. We extend the current research on the transmission mechanisms of monetary policy in the following way: first, we compare the differences between the ‘old’ Economic Monetary Union (EMU) and ‘new’ EU countries. Second, we examine the interaction terms between bank characteristics and both monetary policy indicators. In particular, we examine the impact of short-term interest rates and monetary aggregate M2 on bank behaviour. Assuming a more obvious transmission mechanism, we argue that, in the group of ‘old’ EMU countries, the lending channel is affected by smaller banks that are less liquid or are strongly capitalized. For ‘new’ EU countries, we find similar results, i.e., the lending channel affects smaller banks. However, in terms of liquidity and capital adequacy and assuming a more obvious transmission mechanism, we find an opposing result. Those countries’ lending channel is affected by smaller banks with higher levels of liquidity and lower bank capital. Third, we describe how transmission mechanisms changed during the crises period.
    Keywords: lending channel, transmission mechanism, crisis times, old EMU and new EU countries
    JEL: C58 G01 G21 G28
    Date: 2016–01–04
  5. By: Sayaeed, Mohammad Abu (Tasmanian School of Business & Economics, University of Tasmania); Dungey, Mardi (Tasmanian School of Business & Economics, University of Tasmania); Yao, Wenying (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: Using high-frequency stock returns in the Indian banking sector we find that the beta on jump movements substantially exceeds that on the continuous component, and that the majority of the information content for returns lies with the jump beta. We contribute to the debate on strategies to decrease systemic risk, showing that increased bank capital and reduced leverage reduce both jump and continuous beta - with slightly stronger effects for capital on continuous beta and stronger effects for leverage on jump beta. However, changes in these firm characteristics need to be large to create an economically meaningful change in beta.
    Keywords: CAPM, jump, high frequency, India
    JEL: C58 G21 G28
    Date: 2015–02–03
  6. By: Chowdhury, Biplob (University of Tasmania, Tasmanian School of Business and Economics); Dungey, Mardi (University of Tasmania, Tasmanian School of Business and Economics); Pham, Thu Phuong (University of Tasmania, Tasmanian School of Business and Economics)
    Abstract: This paper examines the potential impact of governance mechanisms (top management team structure and board composition) on post-IPO performance of young Australian firms from 2002-2007. We find that change in board of directors and TMT membership significantly affects firm performance. The higher proportion of the IPO original board remains, the better performance. An analogous relationship between the proportion of original TMT members and firm performance is also documented. Our study reveals that both original TMT and board members have a significant effect on both short-term and long-term IPO performance. We conclude that the retention of both the original directors and TMT members is favourable to young IPO firms and their post-IPO performance.
    Keywords: Corporate governance, board composition, top management teams, young firms, post-IPO performance
    JEL: G30 G32 L25
    Date: 2014–10–04
  7. By: Demirguc-Kunt,Asli; Horvath,Balint Laszlo; Huizinga,Harry P.
    Abstract: This paper examines how the ability to access long-term debt affects firm-level growth volatility. The analysis finds that firms in industries with stronger preference to use long-term finance relative to short-term finance experience lower growth volatility in countries with better-developed financial systems, as these firms may benefit from reduced refinancing risk. Institutions that facilitate the availability of credit information and contract enforcement mitigate the refinancing risk and therefore growth volatility associated with short-term financing. Increased availability of long-term finance reduces growth volatility in crisis as well as non-crisis periods.
    Keywords: Debt Markets,Banks&Banking Reform,Access to Finance,Emerging Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2016–01–19
  8. By: Janusz J. Tomidajewicz (Poznan University of Economics, Department of Economic and Local Government Policy)
    Abstract: The general objective of this study is to highlight the differences in the economic behaviour of financial organisations and, in particular, in the structure and nature of financial services provided by institutions with different forms of ownership. We assume that their economic behaviour manifests itself through decisions about: selecting the type and scope of the functions performed for the real economy, determining the market segment (target customer group) for services provided and methods of and criteria for making decisions about the way to conduct financial activities. We try to determine the economic behaviour of financial entities belonging to the following ownership forms: public financial institutions, collectively-owned financial institutions and private financial institutions.
    Keywords: economic behaviour, financial institutions, ownership forms
    JEL: L33 G18 E02
    Date: 2015–07–01
  9. By: Catherine Refait-Alexandre (Université de Bourgogne Franche-Comté, CRESE); Stéphanie Serve (Université de Cergy-Pontoise, THEMA)
    Abstract: This article focuses on the use of multiple banking relationships by SMEs, a key issue given their strong dependence on bank financing in a context of increasing financial constraints and higher risk of credit rationing since the crisis. We investigate whether the use of multiple banking relationships is explained by firms’ characteristics or by the quality of the banking relationship. We exploit the results of an original survey conducted on a sample of French SMEs in December 2012. According to the traditional theoretical framework of multiple banking, we find that older, bigger, and betterperforming firms are more likely to access multiple banking relationships. We further find that innovative firms are more likely to engage in multiple banking relationships. We also highlight the explanatory power of an alternative model based on the quality of banking relationship: when the manager trusts its main bank, or when he is closer to his loan officer, the firm will be less likely to engage in multiple banking relationships.
    Keywords: multiple banking relationships, trust, credit rationing, financial crisis
    JEL: G21 G32
    Date: 2016–01

This nep-cfn issue is ©2016 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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