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on Corporate Finance |
| By: | Francesco Manaresi (Bank of Italy, Structural Economic Department); Nicola Pierri (Stanford University) |
| Abstract: | This paper studies the impact of credit constraints on manufacturers' production. We exploit a matched firm-bank panel data covering all Italian companies over the period 1998-2012 to derive a measure of supply-side shock to rm speci c credit constraints, and study how it affects input accumulation and value added productivity. We show that an expansion in the credit supply faced by a firm increases both input accumulation (size effect) and its ability to generate value added for a given level of inputs (productivity effect). Results are robust to various productivity estimation techniques, and to an alternative measure of credit supply shock that uses the 2007-2008 interbank market freeze to control for assortative matching between firms and banks. We discuss different potential channels for the estimated e ect and explore their empirical implications. |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:137&r=cfn |
| By: | Marco Di Maggio (Harvard Business School and National Bureau of Economic Research (NBER)); Francesco A. Franzoni (University of Lugano and Swiss Finance Institute); Amir Kermani (University of California and National Bureau of Economic Research (NBER)); Carlo Sommavilla (University of Lugano and Swiss Finance Institute) |
| Abstract: | This paper shows that the network of relationships between brokers and institutional investors shapes the information diffusion in the stock market. We exploit trade-level data to show that trades channeled through central brokers earn significantly positive abnormal returns. This result is not due to differences in the investors that trade through central brokers or to stocks characteristics, as we control for this heterogeneity; nor is it the result of better trading execution. We find that a key driver of these excess returns is the information that central brokers gather by executing informed trades, which is then leaked to their best clients. We show that after large informed trades, a significantly higher volume of other investors execute similar trades through the same central broker, allowing them to capture higher returns in the first few days after the initial trade. The best clients of the broker executing the informed trade, and the asset managers affiliated with the broker, are among the first to benefit from the information about order flow. This evidence also suggests that an important source of alpha for fund managers is the access to better connections rather than superior skill. |
| Keywords: | broker networks, institutional investors, asset prices, information |
| JEL: | G12 G14 G24 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1663&r=cfn |
| By: | Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University); Satoshi Mizobata (Institute of Economic Research, Kyoto University); Alexander A. Muravyev (Department of Economics, Higher School of Economics in St. Petersburg, Russia Institute of Labor Economics (IZA)) |
| Abstract: | This paper provides a meta-analysis of studies on the effect of ownership on the performance of Russian firms over 20 years of rapid institutional and economic changes. We review 29 studies extracted from the EconLit and Web of Science databases with a total of 877 relevant estimates. We find that the government negatively affects company management regardless of its administrative level. In contrast, private ownership is positively associated with firm performance. The effect size and statistical significance are notably varied among different types of private ownership. While the effect of insider (employee and management) ownership is comparable to that of foreign investors, the effect of domestic outsider investors is considerably smaller. Our assessment of publication selection bias reveals that the existing literature does not contain genuine evidence for a series of ownership types and, therefore, some of the findings have certain limitations. |
| Keywords: | Privatization, Corporate Ownership, Firm Performance, Meta-analysis, Publication Selection Bias, Russia |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:955&r=cfn |
| By: | Bergner, Sören Martin; Bräutigam, Rainer; Evers, Maria Theresia; Spengel, Christoph |
| Abstract: | This paper discusses the impact and the appropriateness of tax incentives for small and medium-sized enterprises (SMEs) in the European Union. First, we provide a survey of implemented tax incentives specifically targeted at SMEs in the 28 EU Member States. Building hereon, we measure the impact of these regimes on the effective tax burdens of targeted companies. We find that SME tax incentives are a commonly used measure among European policy makers. The vast majority of regimes, however, only marginally reduce the tax liability of SMEs. If major reliefs are available, they mostly stem from special tax rates whereas tax credits and special allowance play a minor role. In the second main part of the analysis, we examine the arguments potentially justifying the usage of SME tax incentives. As a main result, small firms per se do not create more jobs and innovations nor do they face insurmountable financing constraints. The existence of market failures commonly associated with SMEs - and possibly warranting the use of SME tax incentives - can therefore not be confirmed. Instead, disproportionate tax compliance costs for small entities constitute the most compelling argument for a special tax treatment. These compliance costs can most appropriately be addressed by administrative reliefs. Special tax rates, tax credits and allowances, in contrast, are not only inefficient but also ineffective in this regard. Instead of improving the neutrality of the overall tax system, the latter are likely to add further distortions and unnecessary complexity. Altogether, the focus of policy-makers should thus shift from providing discriminatory incentives to the design of a generally neutral and simple tax system, which would benefit small as well as large enterprises. |
| Keywords: | SME,Tax Policy,European Union |
| JEL: | H24 H25 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17006&r=cfn |
| By: | Phiri, Andrew |
| Abstract: | The global financial crisis of 2008 sparked an ongoing debate concerning the interlink between monetary policy and equity returns. This study contributes to the debate by examining whether the South African Reserve Bank (SARB) repo rate responds asymmetrically to changes in the returns on four equity indices on the Johannesburg Stock Exchange (JSE). Our empirical model is the momentum threshold autoregressive (MTAR) model which is applied to monthly data corresponding to periods before the financial crisis (2002:01 - 2008:08) and periods after the crisis (2008:08 - 2016:12). There are three main findings which can be derived from our empirical analysis. Firstly, we significant negative relationship between equity prices to the repo rate before the crisis and this relationship turns insignificant in periods after the crisis. Secondly, we find that the Reserve Bank mainly monitored positive disturbances to equity indices before the crisis whereas after the crisis the Reserve Bank appears to be more responsive to negative equity deviations. Lastly, we find significant error correcting behaviour in periods before the crisis but not afterwards. Overall, our results indicate that the SARB appears to have been responsive to equity returns prior to the crisis but not for subsequent periods. |
| Keywords: | Repo rate; Stock market returns; Monetary Policy; South African Reserve Bank (SARB); Johannesburg Stock Exchange (JSE); Financial crisis; South Africa. |
| JEL: | C22 C51 C52 E52 G10 |
| Date: | 2017–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:76542&r=cfn |
| By: | Fabio Berton (University of Torino); Sauro Mocetti (Bank of Italy); Andrea F. Presbitero (International Monetary Fund and MoFiR); Matteo Richiardi (Institute for New Economic Thinking, University of Oxford; Nuffield College, and Collegio Carlo Alberto) |
| Abstract: | We analyze the employment effects of financial shocks using a rich data set of job contracts, matched with the universe of firms and their lending banks in one Italian region. To isolate the effect of the financial shock we construct a firm-specific time-varying measure of credit supply. The contraction in credit supply explains one fourth of the reduction in employment. This result is concentrated in more levered and less productive firms. Also, the relatively less educated and less skilled workers with temporary contracts are the most affected. Our results are consistent with the cleansing role of financial shocks. |
| Keywords: | Bank lending channel; Job contracts; Employment; Financing constraints; Cleansing effect. |
| JEL: | G01 G21 J23 J63 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:136&r=cfn |
| By: | Rong, Zhao; Wu, Xiaokai; Boeing, Philipp |
| Abstract: | Monitoring by institutional investors can act as an important mechanism to promote firm innovation. By investigating Chinese listed firms' patenting between 2002 and 2011, we find that the presence of institutional investors enhances firm innovation. Consistent with the monitoring view, we further find that (1) the effect of institutional investors on firm patenting mainly comes from mutual funds; (2) the effect is more pronounced when market competition is more intense; (3) the effect exists among private- and minor state-owned enterprises, but not among major state-owned enterprises. The above findings are robust when innovation quality is examined. |
| Keywords: | Institutional investor,Firm innovation,Patenting,Mutual funds,China |
| JEL: | G20 G32 O31 O32 O33 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17005&r=cfn |
| By: | Heidi L. Williams |
| Abstract: | While patent systems have been widely used both historically and internationally, there is nonetheless a tremendous amount of controversy over whether patent systems – in practice – improve the alignment between private returns and social contributions. In this paper, I describe three parameters – how the disclosure function affects research investments, how patent strength affects research investments in new technologies, and how patents on existing technologies affect follow-on innovation – needed to inform the question of how patents affect research investments, and review the available evidence which has attempted to empirically estimate these parameters. |
| JEL: | H41 K0 O3 O34 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23088&r=cfn |
| By: | Francesco D’Acunto; Ryan Liu; Carolin Pflueger; Michael Weber |
| Abstract: | The frequency with which firms adjust output prices helps explain persistent differences in capital structure across firms. Unconditionally, the most flexible-price firms have a 19% higher long-term leverage ratio than the most sticky-price firms, controlling for known determinants of capital structure. Sticky-price firms increased leverage more than flexible-price firms following the staggered implementation of the Interstate Banking and Branching Efficiency Act across states and over time, which we use in a difference-in-differences strategy. Firms' frequency of price adjustment did not change around the deregulation. |
| JEL: | E12 E44 G28 G32 G33 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23066&r=cfn |
| By: | Chen, Peter (University of Chicago); Karabarbounis, Loukas (Federal Reserve Bank of Minneapolis); Neiman, Brent (University of Chicago) |
| Abstract: | The sectoral composition of global saving changed dramatically during the last three decades. Whereas in the early 1980s most of global investment was funded by household saving, nowadays nearly two-thirds of global investment is funded by corporate saving. This shift in the sectoral composition of saving was not accompanied by changes in the sectoral composition of investment, implying an improvement in the corporate net lending position. We characterize the behavior of corporate saving using both national income accounts and firm-level data and clarify its relationship with the global decline in labor share, the accumulation of corporate cash stocks, and the greater propensity for equity buybacks. We develop a general equilibrium model with product and capital market imperfections to explore quantitatively the determination of the flow of funds across sectors. Changes including declines in the real interest rate, the price of investment, and corporate income taxes generate increases in corporate profits and shifts in the supply of sectoral saving that are of similar magnitude to those observed in the data. |
| Keywords: | Corporate saving; Profits; Labor share; Cost of capital |
| JEL: | E21 E25 G32 G35 |
| Date: | 2017–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:736&r=cfn |
| By: | Florent Gallien (Swissquote Bank); Serge Kassibrakis (Swissquote Bank); Semyon Malamud (Ecole Polytechnique Fédérale de Lausanne, Swiss Finance Institute, and Centre for Economic Policy Research (CEPR)); Filippo Passerini (Swissquote Bank) |
| Abstract: | We solve the problem of optimal inventory management for a CARA market-maker who faces proportional transaction costs and marking to market. Our explicit solution accommodates inventory shocks following an arbitrary compound Poisson process, and allows us to explicitly link the optimal policy to the moment-generating function of the shock distribution. We show that the no-trade region is always wider in the presence of shocks, increases with the order imbalance, and usually decreases with the markups charged by the market-maker. We use our explicit solution to derive several comparative statics results and calibrate our solution to inventory data of Forex clients of a bank. Our findings suggest that optimal accounting for inventory shocks leads to significant utility gains. |
| Keywords: | Inventory Management, Market Making, Transaction Costs |
| JEL: | G24 G32 G11 D92 C61 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp1648&r=cfn |