nep-cfn New Economics Papers
on Corporate Finance
Issue of 2017‒05‒21
four papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. The Impact Of Corporate Environmental Performance Of Market Risk On Tropicana Corporation Berhad By Zainal Abidin, Fazlini
  2. Channels of Sovereign Risk Spillovers and Investment in the Manufacturing Sector By Sebastian Deininger; Dietmar Maringer
  3. Multilateral Development Bank Credit Rating Methodology: Overcoming the Challenges in Assessing Relative Credit Risk in Highly Rated Institutions Based on Public Data By David Xiao Chen; Philippe Muller; Hawa Wagué
  4. Does employment protection legislation affect credit access? Evidence from Europe By Moro, Andrea; Maresch, Daniela; Ferrando, Annalisa; Udell, Gregory F.

  1. By: Zainal Abidin, Fazlini
    Abstract: The purpose of this study is to examine the overall performance of Tropicana Corporation Berhad with specific risk factors and macroeconomic factor on profitability performance. The data obtained from annual report of Tropicana Corporation Berhad is starting from year 2011 until year 2015. The measurement of liquidity ratio, operating ratio and leverage ratio is used to see the overall performance of Tropicana Corporation Berhad in 5 years which allegedly beyond benchmark. The additional measurement is the asset size, this variable has a negative and no significant relationship with liquidity risk. To see the relationship of risks factors to the profitability, this paper is utilizing liquidity (current ratio), leverage ratio and operating ratio. Data was analyzed by utilizing regression and bivariate correlation. The regression analysis and bivariate correlation shows only one factor of profitability is significant to leverage ratio which is ROA with the highest impact to the profitability. However, the liquidity and operational is not significant to profitability with low impact to the profitability.
    Keywords: Specific Risk, Liquidity Risk, Operational Risk, Leverage Risk, Profitability
    JEL: G0 G3 G32 G33
    Date: 2017–04–19
  2. By: Sebastian Deininger; Dietmar Maringer (University of Basel)
    Abstract: This paper identifies endogenous and exogenous indicators of firms' investment activity, and examine, in particular, the effect that these variables have in co-determining firms' investment decisions. Two channels of spillovers from sovereign risk to firms' capital expenditures are defined. The first channel, the "direct channel", describes responses in capital expenditures from an innovation in sovereign risk. The second channel, the "indirect channel", is a transmission mechanism in which spillovers from changes in sovereign risk indirectly affect a firm's capital expenditures via its capital market risk and profitability. While we observe that the direct risk channel is of major importance in Emerging and Developing Economies, it is comparatively small in Advanced Economies. In the case of the latter, contagion from changes in sovereign risk on firms' capital market risk plays a much more important role.
    Keywords: Capital expenditures, Risk spillovers, Panel VARX, Differential Evolution
    JEL: C63 D81 E22 G31
    Date: 2017
  3. By: David Xiao Chen; Philippe Muller; Hawa Wagué
    Abstract: The investment of foreign exchange reserves or other asset portfolios requires an assessment of the credit quality of counterparties. Traditionally, foreign exchange reserve managers and other investors have relied on credit rating agencies (CRAs) as the main source for credit assessments. The Financial Stability Board issued a set of principles in support of financial stability to reduce reliance on CRA ratings in standards, laws and regulations. To support efforts to end mechanistic reliance on CRA ratings and instead establish stronger internal credit assessment practices, this paper provides a detailed technical description of a methodology developed to assign an internal credit rating to multilateral development banks (MDBs), using only publicly available data. The methodology relies on fundamental credit analysis that produces a forward-looking assessment of the investment entity’s capacity and willingness to pay its financial obligations, resulting in an opinion on the relative credit standing or likelihood of default. This methodology proposes four key innovations: (i) a simple way of estimating the capital adequacy ratio, (ii) new metrics to evaluate the liquidity and funding profile of an MDB, (iii) a straightforward approach to evaluating the exceptional support from shareholders, and (iv) a new criterion related to corporate governance, which provides a high level of objectivity in assessing some of the qualitative indicators. The methodology is a key component of the joint Bank of Canada and Department of Finance Canada initiative to develop internal credit assessment capabilities and is currently used to assess eligibility and inform investment decisions in the management of Canada’s foreign exchange reserves.
    Keywords: Credit risk management, Foreign reserves management
    JEL: G24 G28 G32 F31
    Date: 2017
  4. By: Moro, Andrea; Maresch, Daniela; Ferrando, Annalisa; Udell, Gregory F.
    Abstract: We investigate the impact of employment protection on firms credit access by looking at both credit obtained from banks and firms’ decision to apply for a loan. We find that greater flexibility in structuring the employees’ working hours and in dismissing employees increases the probability that firms obtain credit and that greater flexibility in dismissing employees decreases the probability that firms are discouraged from applying for credit. However, our findings also reveal that firms perceive regulations providing flexibility with regard to the employees’ working hours differently from banks, leading to a situation in which firms are more likely to be discouraged from applying for a loan, even though the probability to obtain a loan increases. Our results are robust to confounding, endogeneity, selection bias as well as to alternative specifications. JEL Classification: D22, G21, G32, J41
    Keywords: credit access, discouraged borrower, employment protection legislation, labour market
    Date: 2017–05

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