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

  1. Understanding Bank Payouts during the Crisis of 2007-2009 By Cziraki, Peter; Laux, Christian; Lóránth, Gyöngyi
  2. Relational capital in lending relationships: Evidence from European family firms By Marco Cucculelli; Valentina Peruzzi; Alberto Zazzaro
  3. A pilot survey of agent securities lending activity By Baklanova, Viktoria; Caglio, Cecilia; Keane, Frank M.; Porter, Burt
  4. Dividend taxation of non-listed companies, resource allocation and productivity By Määttänen, Niku; Ropponen, Olli
  5. The effect of foreign institutional ownership on corporate tax avoidance: international evidence By Hasan, Iftekhar; Kim, Incheol; Teng, Haimeng; Wu, Qiang
  6. Option Pricing Models By Giandomenico, Rossano
  7. Common law and the origin of shareholder protection By Acheson, Graeme G.; Campbell, Gareth; Turner, John D.

  1. By: Cziraki, Peter; Laux, Christian; Lóránth, Gyöngyi
    Abstract: We provide an extensive analysis of the payout policy of U.S. banks in 2007-2008 to identify the main drivers of their payout decisions. We use established models that relate dividends to fundamentals to provide a benchmark for the normal level of payouts. Based on these models, bank dividends appear excessive in 2007, but not in 2008. We exploit cross-sectional heterogeneity to examine why bank payouts change during the crisis. Banks with low capital ratios have low abnormal payouts during the crisis, and banks with high managerial ownership also have lower payouts. Managers of banks that reduce dividends in 2008 buy more shares than before the crisis. Finally, we examine the correlation between dividends and future performance, as well as announcement returns around dividend changes and repurchases. We find that banks that reduce dividends in 2008 perform worse in 2009, but we do not find that announcements of dividend cuts are associated with a significant negative price reaction in 2007-2008. Our results in general do not support the active wealth transfer hypothesis and provide mixed evidence on banks fearing the adverse effect of dividend cuts.
    Keywords: dividends; financial crisis; insider trading; total payout
    JEL: G21 G24 G28 G32 G35
    Date: 2016–08
  2. By: Marco Cucculelli (Università Politecnica delle Marche); Valentina Peruzzi (Università Politecnica delle Marche); Alberto Zazzaro (Università di Napoli Federico II)
    Abstract: In this paper we empirically investigate the effects of active family involvement in the company’s management on bank-firm lending relationships and access to credit. Based on the trade-off between relational and management human capital, we explore whether the relational capital embodied in the family leadership of the company influences the lending relationships with the main bank in terms of information sensitivity and duration. Then, we test whether family firms with family CEOs are more likely to experience a credit restriction from banks than family firms appointing professional CEOs external to the family. Results indicate that family businesses appointing family managers are significantly more likely to maintain soft-information-based and longer-lasting lending relationships. However, having family executives does not have a negative impact on firm’s access to credit, while the creation of soft-information-based and long-lasting lending relationships significantly reduces the likelihood of experiencing credit restrictions. In view of these findings, family relational capital seems to have a univocal beneficial impact on bank-firm relationship in our sample.
    Keywords: Family firm, family CEO, soft-information, relational capital, relationship lending, credit rationing.
    JEL: D22 G21 G22
    Date: 2016–08
  3. By: Baklanova, Viktoria (Office of Financial Research); Caglio, Cecilia (Board of Governors of the Federal Reserve System); Keane, Frank M. (Federal Reserve Bank of New York); Porter, Burt (Securities and Exchange Commission)
    Abstract: This paper reports aggregate statistics on securities lending activity based on a recently concluded pilot data collection by staff from the Office of Financial Research (OFR), the Federal Reserve System, and staff from the Securities and Exchange Commission (SEC). In its annual reports, the Financial Stability Oversight Council identified a lack of data about securities lending activity as a priority for the Council. This pilot data collection was a step toward addressing this critical data need. The voluntary pilot collection included end-of-day loan-level data for three non-consecutive business days from seven securities lending agents. Most but not all participating lending agents were subsidiaries of banks. The dataset of 75 reporting fields provides substantial new information about securities lending activity, including information concerning securities owners, securities borrowers, attributes of securities loans, collateral management, and cash reinvestment practices. However, the pilot data collection was limited in scope and duration. Comprehensive data are still lacking. To close this data gap, a permanent collection of data covering securities lending activity is recommended by the Council.
    Keywords: securities lending; repo; systemic risk
    JEL: G10 G11 G20 G23
    Date: 2016–08–01
  4. By: Määttänen, Niku; Ropponen, Olli
    Abstract: Abstract We consider the taxation of non-listed companies and their owners in Finland. We analyse how the current highly non-linear dividend taxation influences the allocation of labour and capital across different firms, average labour productivity and the equilibrium wage level. To this end, we use a general equilibrium model of firm investment where firms may have different production technologies. We find that the current tax system is likely to distort resource allocation compared to linear dividend taxation. This works to lower the average labour productivity as well as the general wage level.
    Keywords: Dividend taxation, non-listed companies, productivity
    JEL: D92 G35 H24
    Date: 2016–08–26
  5. By: Hasan, Iftekhar; Kim, Incheol; Teng, Haimeng; Wu, Qiang
    Abstract: This study examines whether foreign institutional investors (FIIs) help explain variation in corporate tax avoidance and whether mechanisms such as tax morality, investment horizon, and corporate governance underlie the relation between FIIs and tax avoidance. We find robust evidence that FIIs are negatively associated with corporate tax avoidance. Moreover, this negative association is dominated by FIIs from countries with high tax morality, FIIs with long-term investment horizons, and FIIs from countries with high corporate governance quality. We conclude that FIIs play an active role in shaping corporate tax avoidance policy.
    Keywords: tax avoidance, foreign institutional ownership, tax morale, investment horizon, corporate governance
    JEL: G23 G32 H26 M41
    Date: 2016–08–23
  6. By: Giandomenico, Rossano
    Abstract: The study faces the problem of the skew for American and European options by using stochastic volatility and optimal stopping problem by simulating till Asian options in binomial model. The problem of local volatility is also faced with geometrical applications for option pricing with implications for the smile phenomenon.
    Keywords: Contingent Claim, Stochastic Volatility, Optimal Stopping, Levy Process
    JEL: C63 G13
    Date: 2016–09
  7. By: Acheson, Graeme G.; Campbell, Gareth; Turner, John D.
    Abstract: This paper examines the origins of investor protection under the common law by analysing the development of shareholder protection in Victorian Britain, the home of the common law. In this era, very little was codified, with corporate law simply suggesting a default template of rules. Ultimately, the matter of protection was one for the corporation and its shareholders. Using c. 500 articles of association and ownership records of publicly-traded Victorian corporations, we find that corporations afforded investors with just as much protection as is present in modern corporate law and that firms with better shareholder protection had more diffuse ownership.
    Keywords: law and finance,ADRI,shareholder protection,corporate ownership,common law
    JEL: G32 G34 G38 K22 N23 N43 N83
    Date: 2016

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