nep-cfn New Economics Papers
on Corporate Finance
Issue of 2016‒04‒09
six papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Organisational mergers: a behavioural perspective on identity management By Giessner, S.R.
  2. Does gender-balancing the board reduce firm value? By Eckbo, B Espen; Nygaard, Knut; Thorburn, Karin S
  3. The Risk Anomaly Tradeoff of Leverage By Malcolm Baker; Mathias F. Hoeyer; Jeffrey Wurgler
  4. The Impact of Unconventional Monetary Policy on Firm Financing Constraints : Evidence from the Maturity Extension Program By Foley-Fisher, Nathan; Ramcharan, Rodney; Yu, Edison
  5. Concerns Related to the Internationalisation of State-Owned Enterprises: Perspectives from regulators, government owners and the broader business community By Sara Sultan Balbuena
  6. Financing Constraints and Firms' Growth in the European Union: Has the Financial Crisis Made Them Worse? By Siedschlag, Iulia; O'Toole, Conor; Murphy, Gavin; O'Connell, Brian

  1. By: Giessner, S.R.
    Abstract: Organisational mergers are one of the most extreme forms of organisational change processes. Consequently, they often result in difficulties for employees to adjust to the altered organisational conditions. This is often reflected in low levels of employee identification with the post-merger organisation. As a result, merging organisations experience more conflict, less employee motivation, higher turnover and lower performance levels. These low levels of post-merger identification thus often put the strategic and financial goals of the merger at risk. I argue that an organisational behaviour perspective focusing on the management of identity levels during an organisational merger provides important practical insights for employee management. I will first explain why I am personally so fascinated by this topic. I will then present an identity management perspective on organisational mergers. Here, I will consider three key aspects: (1) Identity processes; (2) Intergroup structure; and (3) Leadership. I will conclude by giving an overview of the potential challenges and directions for future research in this field.
    Keywords: mergers, acquisitions, esprit de corps, identity management, post-merger identification, social identity, human resource management, employee adjustment, uncertainty
    JEL: G34 L22 M12 M14
    Date: 2016–04–01
  2. By: Eckbo, B Espen; Nygaard, Knut; Thorburn, Karin S
    Abstract: A board gender quota reduces firm value if it forces the appointment of under-qualified female directors. We examine this costly constraint hypothesis using the natural experiment created by Norway's 2005 board gender-quota law. This law drove the average fraction of female directors from 5% in 2001 to 40% by 2008, producing a large exogenous shock to director experience and independence. However, statistically robust analyses of quota-induced shareholder announcement returns, and of long-run stock and accounting performance, fail to reject the hypothesis of a zero valuation effect of this shock to board composition. Moreover, firms did not expand board size, nor is there significant evidence of quota-induced corporate conversions to a (non-public) legal form exempted from the quota law. Finally, our evidence on female director turnover and a novel network-based measure of director gender-power gap also fails to suggest that qualified female directors were in short supply.
    Keywords: ;ong-run performance; busy directors; corporate conversion; director independence; director network power; Gender quota; valuation effect
    JEL: G34 G35
    Date: 2016–03
  3. By: Malcolm Baker; Mathias F. Hoeyer; Jeffrey Wurgler
    Abstract: Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications for corporate leverage. The risk anomaly generates a simple tradeoff theory: At zero leverage, the overall cost of capital falls as leverage increases equity risk, but as debt becomes riskier the marginal benefit of increasing equity risk declines. We show that there is an interior optimum and that it is reached at lower leverage for firms with high asset risk. Empirically, the risk anomaly tradeoff theory and the traditional tradeoff theory are both consistent with the finding that firms with low-risk assets choose higher leverage. More uniquely, the risk anomaly theory helps to explain why leverage is inversely related to systematic risk, holding constant total risk; why leverage is inversely related to upside risk, not just downside risk; why numerous firms maintain low or zero leverage despite high marginal tax rates; and, why other firms maintain high leverage despite little tax benefit.
    JEL: G32
    Date: 2016–03
  4. By: Foley-Fisher, Nathan; Ramcharan, Rodney; Yu, Edison
    Abstract: This paper investigates the impact of unconventional monetary policy on firm financial constraints. It focuses on the Federal Reserve’s maturity extension program (MEP), intended to lower longer-term rates and flatten the yield curve by reducing the supply of long-term government debt. Consistent with those models that emphasize bond market segmentation and limits to arbitrage, around the MEP’s announcement, stock prices rose most sharply for those firms that are more dependent on longer-term debt. These firms also issued more long-term debt during the MEP and expanded employment and investment. These responses are most pronounced for those firms that are larger and older, and hence less likely to be financially constrained. There is also evidence of “reach for yield” behavior among some institutional investors, as the demand for riskier corporate debt also rose during the MEP. Our results suggest that unconventional monetary policy might have helped to relax financial constraints for some types of firms in part by inducing gap-filling behavior and affecting the pricing of risk in the bond market.
    Keywords: unconventional monetary policy ; firm‐financial constraints ; bond markets
    JEL: E52 G23 G32
    Date: 2016–02
  5. By: Sara Sultan Balbuena
    Abstract: The rise in state-owned enterprises (SOEs) as growing actors in international trade and investment has received renewed attention in recent years, not least due to controversy that has arisen over SOE foreign investments. This has raised the profile of these issues with policy makers and tilted much of the public debate in one direction. Some concerns revolve around the intentions of these companies, or any potential competitive distortions that could be caused by them which would differentiate them from privately-owned enterprises operating under like circumstances. With a view to keeping the trade and investment environment open, this paper draws attention to particular perceptions of concerns or challenges that arise when SOEs internationalise. Although perceptions are not verifiable facts, they reveal important trends that may inform the debate and shape future government policies towards foreign trade and investment by SOEs. The information in the report is primarily drawn from findings emerging from a three-part perception-based OECD survey addressed to public officials responsible for enterprise ownership, competition enforcement, investment regulation and trade policy in addition to departments of government with broader responsibility for the enterprise and competition landscape, and/or cross-border trade and investment regulation.
    Keywords: trade policy, state-owned enterprises, investment policy, international investment, competition, competitive neutrality, corporate governance
    JEL: F21 F23 G3 G30 G38 G39 L32 L33
    Date: 2016–04–06
  6. By: Siedschlag, Iulia; O'Toole, Conor; Murphy, Gavin; O'Connell, Brian
    Keywords: crisis/European Union/growth
    Date: 2015–05

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