nep-cfn New Economics Papers
on Corporate Finance
Issue of 2017‒04‒09
nine papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Management and Resolution methods of Non-performing loans: A Review of the Literature By Anastasiou, Dimitrios
  2. Econometric modeling of systemic risk: going beyond pairwise comparison and allowing for nonlinearity By Jalal Etesami; Ali Habibnia; Negar Kiyavash
  3. Empirics of the Oslo Stock Exchange. Basic, descriptive, results 1980-2016 By Odegaard, Bernt Arne
  5. How long do equity owners hang on to their stocks? By Odegaard, Bernt Arne
  6. Bank Capital Redux: Solvency, Liquidity, and Crisis By Jorda, Oscar; Richter, Björn; Schularick, Moritz; Taylor, Alan M.
  7. Access to Financing and Firm Growth: Evidence from Ethiopia By Dereje Regasa; David Fielding; Helen Roberts
  8. The Effects of Audit Firms Rotation: An Event Study in Chile By Antonio Aninat; Álvaro Bustos; Julio Riutort
  9. The Investment CAPM By Lu Zhang

  1. By: Anastasiou, Dimitrios
    Abstract: In the financial crisis of 2007, many banks with high level of Non-performing loans (NPLs) found their sources of capital dried up, which occurred because of bad management. Huge amounts of NPLs imply both a lack of management methods and lack of capital. Also, high NPL levels have resulted to negative effects to banks’ lending activity, making bank officers-managers more concern for the future of the whole banking system. The purpose of this study is twofold. First, to present some NPL management methods that already exist in the literature and second, to make a clear distinction between the ex-post and ex-ante management of NPLs. I tried to collect in one paper what other researchers suggested for the proper management and fight against NPLs for different kinds of banking systems around the world. Hopefully, by examining these methods, banks will be able to cope with the problem of NPLs.
    Keywords: Non-performing loans; NPL management; bank restructuring; economic policy reform; financial stability; macroprudential policy; poor credit risk management
    JEL: G21 G28 G38
    Date: 2016
  2. By: Jalal Etesami; Ali Habibnia; Negar Kiyavash
    Abstract: Financial instability and its destructive effects on the economy can lead to financial crises due to its contagion or spillover effects to other parts of the economy. Having an accurate measure of systemic risk gives central banks and policy makers the ability to take proper policies in order to stabilize financial markets. Much work is currently being undertaken on the feasibility of identifying and measuring systemic risk. In principle, there are two main schemes to measure interlinkages between financial institutions. One might wish to construct a mathematical model of financial market participant relations as a network/graph by using a combination of information extracted from financial statements like the market value of liabilities of counterparties, or an econometric model to estimate those relations based on financial series. In this paper, we develop a data-driven econometric framework that promotes an understanding of the relationship between financial institutions using a nonlinearly modified Granger-causality network. Unlike existing literature, it is not focused on a linear pairwise estimation. The method allows for nonlinearity and has predictive power over future economic activity through a time-varying network of relationships. Moreover, it can quantify the interlinkages between financial institutions. We also show how the model improve the measurement of systemic risk and explain the link between Granger-causality network and generalized variance decompositions network. We apply the method to the monthly returns of U.S. financial Institutions including banks, broker and insurance companies to identify the level of systemic risk in the financial sector and the contribution of each financial institution.
    Keywords: Systemic risk; Risk Measurement; Financial Linkages and Contagion; Nonlinear Granger Causality; Directed Information Graphs
    JEL: C14 C51 D8 D85 G1 G14 G21 G28 G31
    Date: 2017–03
  3. By: Odegaard, Bernt Arne (UiS)
    Abstract: We give some basic empirical characteristics of the Oslo Stock Exchange in the period after 1980. We give statistics for number of firms, the occurences of IPO's, dividend payments, trading volume, and concentration. Returns for various market indices and portfolios are calculated and described. We also show the well known calendar anomalies, the link between number of stocks in a portfolio and its variance and industry characteristics of the OSE.
    Keywords: Oslo Stock Exchange;
    JEL: G10
    Date: 2017–02–01
  4. By: Širůček, Martin; Čajka, Ondřej
    Abstract: This paper is dedicated to venture capital as a way of company funding in IT sector. The aim of the thesis is to analyze and evaluate an impact of using venture capital financing on selected businesses (IT companies in Czech Republic) according to changes in selected indicators financial analysis. The evaluation is provided also by using alternative indicators. Literature review focuses on the ways of company funding, description of the current venture capital trend and its history. Empirical analysis evaluate the influence of venture capital is examined by selected financial analysis indices, bankruptcy models, and alternative indicators recommended by investors themselves. The results of this thesis are stated in conclusion where they are also discussed and compared with other studies conducted on this topic.
    Keywords: alternative sources, business financing, financial indicators, investment, private equity, venture capital.
    JEL: G24 G34
    Date: 2016
  5. By: Odegaard, Bernt Arne (UiS)
    Abstract: We characterize the equity holding periods for all equity owners in a stock market over a 15 year period. The median holding period is 0.75 years. The hazard function for equity ownership is characterized by negative aging, an equity owner is less and less likely to realize a position as time passes. There are clear differences between owner types, where private individuals have the longest holding periods, and financial owners are the least patient. Wealthier households have shorter holding periods. Using turnover to estimate holding periods severely over-estimates actual holding periods.
    Keywords: Equity Holding period; Duration; Failure Time; Survival
    JEL: D14 G11 G12
    Date: 2017–03–30
  6. By: Jorda, Oscar (Federal Reserve Bank of San Francisco); Richter, Björn (University of Bonn); Schularick, Moritz (University of Bonn); Taylor, Alan M. (University of California, Davis)
    Abstract: Higher capital ratios are unlikely to prevent a financial crisis. This is empirically true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between countries. We reach this startling conclusion using newly collected data on the liability side of banks’ balance sheets in 17 countries. A solvency indicator, the capital ratio has no value as a crisis predictor; but we find that liquidity indicators such as the loan-to-deposit ratio and the share of non-deposit funding do signal financial fragility, although they add little predictive power relative to that of credit growth on the asset side of the balance sheet. However, higher capital buffers have social benefits in terms of macro-stability: recoveries from financial crisis recessions are much quicker with higher bank capital.
    JEL: E44 G01 G21 N20
    Date: 2017–03–28
  7. By: Dereje Regasa (Department of Accountancy and Finance, University of Otago, New Zealand); David Fielding (Department of Economics, University of Otago, New Zealand); Helen Roberts (Department of Economics, University of Otago, New Zealand)
    Abstract: Using Ethiopian firm-level data, we model the effect of different types of financing on firm growth. The form of financing is potentially endogenous to firm growth, and one contribution of this paper is to introduce a new instrumental variable which captures local variation in financial depth. Unlike previous studies of firms in low-income countries, we find evidence for a negative relationship between the use of external finance and firm growth, which suggests that there are substantial cross-country differences in the finance-growth nexus. We discuss possible explanations for this phenomenon and its implications for development policy.
    Keywords: Ethiopia; firm growth; external financing
    JEL: D24 G31 O55
    Date: 2017–04
  8. By: Antonio Aninat; Álvaro Bustos; Julio Riutort
    Abstract: In order to determine the market reaction to an announcement of a change in the audit firm, we carry on an event study between 2004 and 2013 that includes 130 publicly traded Chilean Companies. We find that the market reacted positively when a company announced that it will keep its audit firm that year. We rule out possible biases in the informational content of the event. This suggests that overall, the costs associated to a change of an audit firm (start-up cost and know how loss) would dominate the benefits of the same change (reduction in the probability of a value destroying event such as a fraud or an error). We discuss the implications of this result for the potential implementation of a rule of mandatory rotation in a developing country such as Chile. We also discuss the possibility of identifying the specific costs and benefits behind the audit firm change.
    JEL: M42 G34
    Date: 2016
  9. By: Lu Zhang
    Abstract: A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual firms. Conceptually as "causal"' as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a leading asset pricing paradigm. Firms do a good job in aligning investment policies with costs of capital, and this alignment drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies literature in finance and accounting with neoclassical economics, the investment CAPM succeeds in mounting an efficient markets counterrevolution to behavioral finance in the past 15 years.
    JEL: E13 E22 G12 G14 G31
    Date: 2017–03

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