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on Corporate Finance |
| By: | Bryson, Alex (University College London); Dale-Olsen, Harald (Institute for Social Research, Oslo); Gulbrandsen, Trygve (Institute for Social Research, Oslo) |
| Abstract: | Using nationally representative Norwegian data we show family-owned workplaces are less likely to close than observationally similar non-family-owned workplaces. But this changed during the Crisis when the family businesses' closure hazard soared. This hike in 2009 was not related to performance or the observed capital structure. Whereas bad performance has a tendency to kill non-family businesses regardless of the equity level, a need for fresh capital has a tendency to kill family businesses regardless of performance. We conclude that family firms suffered from a lack of credit during the Crisis, something that policy-makers should address before the next economic downturn. |
| Keywords: | family ownership, closure, financial performance, debt, leverage |
| JEL: | G32 G34 J65 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9877&r=cfn |
| By: | Liu, Yuna (Department of Economics, Umeå University) |
| Abstract: | This thesis consists of four self-contained papers related to the change of market structure and the quality of equity market. In Paper [I] we found, by using of a Flexible Dynamic Component Correlations (FDCC) model, that the creation of a common cross-border stock trading platform has increased the long-run trends in conditional correlations between foreign and domestic stock market returns. In Paper [II] we study whether the creation of a uniform Nordic and Baltic stock trading platform has affected weak-form information efficiency. The results indicate that the stock market consolidations have had a positive effect on the information efficiency and turnover for an average firm. The merger effects are, however, asymmetrically distributed in the sense that relatively large (small) firms located on relatively large (small) markets experience an improved (reduced) information efficiency and turnover. Although the results indicate that changes in the level of investor attention (measured by turnover) may explain part of the changes in information efficiency, they also lend support to the hypothesis that merger effects may partially be driven by changes in the composition of informed versus uninformed investors following a stock. Paper [III] analyzes whether the measured level of trust in different countries can explain bilateral stock market correlations. One finding is that generalized trust among nations is a robust predictor for stock market correlations. Another is that the trust effect is larger for countries which are close to each other. This indicates that distance mitigates the trust effect. Finally, we confirm the effect of trust upon stock market correlations, by using particular trust data (bilateral trust between country A and country B) as an alternative measurement of trust. In Paper [IV] we present the impact of the stock market mergers that took place in the Nordic countries during 2000 – 2007 on the probabilities for stock price jumps, i.e. for relatively extreme price movements. The main finding is that stock market mergers, on average, reduce the likelihood of observing stock price jumps. The effects are asymmetric in the sense that the probability of sudden price jumps is reduced for large and medium size firms whereas the effect is ambiguous for small size firms. The results also indicate that the market risk has been reduced after the stock market consolidations took place. |
| Keywords: | Time-varying return predictability; Tests for jumps; International financial markets; Market structure; Common trading platform; Integration; Time-varying correlation; C-GARCH; Trust; Portfolio Diversification; Stock Market Participation |
| JEL: | C14 C22 C51 C58 D31 F15 G11 G12 G14 G15 G34 L10 |
| Date: | 2016–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:0926&r=cfn |
| By: | Koji Asano (Graduate School of Economics, Osaka University) |
| Abstract: | This paper presents a model of portfolio management with reputation concerns in imperfect capital markets. Managers with financial constraints raise funds from investors and select a project that is characterized by the degree of risk. Managers differ in their ability to determine the probability of success. Based on past performance, all agents revise beliefs about managers f ability, and the beliefs affect the availability of funds in the future. This provides motivation for managers to build reputation by manipulating their performance through project selection. We show that the quality of investor protection changes fund flows, thereby influencing managers f project selection. Our model predicts that strong investor protection causes risk-taking behavior, whereas weak investor protection leads to risk-averse behavior. |
| Keywords: | reputation, investment decision, risk-taking, investor protection, pledgeability |
| JEL: | G31 G32 |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1612&r=cfn |
| By: | Morellec, Erwan; Nikolov, Boris; Schürhoff, Norman |
| Abstract: | We use a dynamic model of financing decisions to quantify agency conflicts across legal and institutional environments and decompose their effects into wealth transfers among stakeholders and value losses from policy distortions. Our estimates show that agency costs are large and vary widely across and within countries. Legal origin and provisions for investor protection affect agency costs, but they are more relevant for curtailing governance excesses than guarding the typical firm. Agency costs split about equally into wealth transfers and value losses from policy distortions, the latter being larger where ownership is dispersed. Incentive misalignment captures 60% of country variation in leverage. |
| Keywords: | agency conflicts; Capital Structure; corporate governance; structural estimation |
| JEL: | G32 G34 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11243&r=cfn |
| By: | Xueping Wu (City University of Hong Kong) |
| Abstract: | It is commonly believed that market imperfections impose financing constraints on corporate investment and impede economic growth. But neoclassic theory insists that investment opportunities have an overriding effect on corporate investment despite market imperfections. This paper shows that market imperfections do not hinder corporate investment to the extent that growth type compatibility of investment and financing effectively mitigates asymmetric informational problems. Our study deals with listed firms which, unlike private firms, have access to external finance in the capital markets.What we call growth type compatibility characterizes the equilibrium in which investment styles (characterized by R&D versus fixed asset investment) and optimal financing arrangements (equity versus debt financing) go hand in hand with corresponding firm growth types. High-growth type firms have dominant asymmetric information on growth opportunities and low-growth type firms have dominant asymmetric information on assets-in-place. Distinct growth types constitute distinct informational imperfections.Growth type compatibility starts with the premise that firms with a particular growth type attract and accommodate a certain type of competitively available human capital (or knowledge capital). This gives rise to persistently distinct corporate investment styles and optimal financial policies in response. Wu and Au Yeung (2009, 2012) find that growth type compatibility contributes to the persistence in both leverage ratios and propensity to pay dividends.Using Compustat data on US firms, this paper shows that high and low firm growth types constitute persistently distinct informational imperfections. Growth type is positively correlated with investment style (measured by R&D/[Capex+R&D]), both being persistent over time and negatively affecting the sensitivity of investment to cash flow. At the same time, the growth-type-aligned investment style positively affects the sensitivity of equity-and-debt-financing-differential to market conditions, reflecting a growth-type-aligned pecking order in financing. These findings suggest the effect of growth type compatibility rather than that of financing constraints. The persistence of high and low growth types indicates that informational imperfections do not necessarily impose meaningful financing constraints on listed firms in well-functioning capital markets. |
| Keywords: | Investment, Informational Imperfections, Growth Type, Financing Constraints |
| JEL: | D92 G30 G31 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:3606161&r=cfn |
| By: | Ä°skender Peker (GümüÅŸhane University); Tarhan Okan (GümüÅŸhane University); Emine Yılmaz (Osmaniye Korkut Ata University); Åžerife Demirelli (GümüÅŸhane University) |
| Abstract: | In emerging countries like Turkey, where state-dependent characteristics of business system is dominant, the corporate governance principles are expected to be internalized in a larger scale through the political regulative pressures. Also, business groups, that are unrelated-diversified and highly controlled by the owning family members, are the dominating economic actors in many late-developing countries. In Turkey, Capital Markets Board enacted provisions regarding the structure of board of directors under the Communique of Principles Regarding Determination and Application of Corporate Governance Principles published on 30.12.2011. Based on this policy reform, this study aims at analyzing the relationship between firm performance and board structures of business groups and revealing the fact that whether the new policy leads to the outcomes expected. The population of the study consists of the whole business groups registered in Borsa Istanbul (the sole entity of exchange in Turkey). The analyses are conducted in two stages. First, using the Grey Relational Analysis, grey relational grade is obtained from the financial outputs (ROA, ROE, and ROS) of the years 2010-2014. Then, Data Envelopment Analysis-Total Factor Productivity (TFP) is used to obtain efficiency comparisons of the business groups according to their inputs (board size, women board members, independent board members, executive board members) and grey relational grade. The results show that following the policy enactment the efficiency rates are improved in parallel to their improved managerial efficiency. The study results give insight into the embracement of corporate governance principles and future discussions on principle-agent problems in developing countries. |
| Keywords: | corporate governance, board structure, grey relational analysis, data envelopment |
| JEL: | M10 G14 G34 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:3606206&r=cfn |