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on Corporate Finance |
| By: | Barkó, Tamás (Tilburg University, Center For Economic Research); Cremers, M.; Renneboog, Luc (Tilburg University, Center For Economic Research) |
| Abstract: | We study investor activism promoting environmental, social and governance (ESG) improvements using a proprietary dataset covering 660 companies globally over 2005-2014. Targets have a higher market share, analyst coverage, stock returns, and liquidity. The engagements lead to significant ESG rating adjustments. Activism is more likely to succeed for companies with a good ex ante ESG track record, and with lower ownership concentration and growth. Successful engagements positively affect sales growth, without changing profitability. Targets outperform matched firms by 2.7% over 6 months postengagement, while the (ex ante) lowest ESG quartile earns an extra 7.5% over 1 year. |
| Keywords: | investor activisim; Corporate social responsibility; socially responsible investing; environmental; social and governance (ESG) |
| JEL: | G15 G23 G32 G34 G39 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:bb1f0349-1f6f-49a4-9d62-1c5a1240a1a8&r=cfn |
| By: | Feito Ruiz, Isabel (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research) |
| Abstract: | We study if a CEO’s equity-based compensation affects the expected value generation in takeovers. When the objectives of management and shareholders are more aligned, as proxied by the use of equity-based compensation, more value-maximizing acquisitions are expected. Whereas in widely-held firms the decision power is with the management, in firms with concentrated ownership the decision power may be with major blockholders. This may entail that ownership concentration and equity-based pay are substitutes. We find a strongly positive relation between equity-based compensation and cumulative abnormal announcement returns at take-overs, but this relation is eroded when dominant share blocks are held by corporations, which confirms the substitution effect. Powerful CEOs in companies with weak boards and without actively monitoring shareholders may set their own pay which could lead to excesses. We relate excess pay to how takeover decisions are received by the market, and demonstrate that excess compensation negatively affects the acquirer’s stock valuation at a takeover announcement. The market is thus able to identify firms with agency problems and is cautious in its expectations about potential value creation by means of acquisitions. |
| Keywords: | equity-based compensation; Mergers and acquisitions (M&As); takeover; shareholder protection; ownership concentration |
| JEL: | G30 G32 G34 F30 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:bc25bf54-3420-49cc-8452-c71c4ce625a5&r=cfn |
| By: | Anna Siekelova ("Faculty of Operation and Economics of Transport and Communications, University of Zilina, Slovak Republic" Author-2-Name: Erika Spuchlakova Author-2-Workplace-Name: "Faculty of Operation and Economics of Transport and Communications, University of Zilina, Slovak Republic") |
| Abstract: | "Objective – Trade credit is the most important source of external finance for many companies. It appears on every balance sheet and represents more than 50 percent of company’s short-term liabilities and a third of all company’s total liabilities in OECD countries. Late payment of invoices may suffer firm’s solvency. The European economies are now putting the years of financial turmoil and debt crisis behind them and several macro-economic indicators are pointing towards a brighter future. The aim of this paper is to assess creditworthiness of companies. Methodology/Technique – Assessment of client creditworthiness carried out using predictive methods based on multivariate discriminant analysis Findings – The situation in the enterprise can be characterized as stable. An enterprise that chooses this client to provide it a trade credit should also consider supplementing the predictive models by complex financial and economic analysis and review of available. If the firm provides trade credit to more clients, it is necessary to consider that the terms of trade credits may not be the same for everyone but also it is not in the power of company to approach to each client individually. Novelty – The study suggests that client groups can be created by using cluster analysis. Thus, the company may increase efficiency in the provision of trade credit." |
| Keywords: | "Trade Credit; Trade Credit Receivables; Late Payment; Predictive Model; Z Score; IN 01; Taffler Model; G Index; SAF 2002." |
| JEL: | E51 G21 G33 |
| Date: | 2017–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr123&r=cfn |
| By: | Nadia Azalia Putri (University of Jember, Indonesia. Author-2-Name: Tatang Ary Gumanti Author-2-Workplace-Name: University of Jember, Indonesia. Author-3-Name: Isti Fadah Author-3-Workplace-Name: University of Jember, Indonesia. Author-4-Name: Supriyadi Author-4-Workplace-Name: Jember State Polytechnic, Indonesia) |
| Abstract: | "Objective –The purpose of this study was to analyze the effect of Intellectual Capital (IC), Corporate Social Responsibility (CSR) disclosure, and Good Corporate Governance (GCG) on the value of mining companies (as measured by Tobin's Q) listed in Indonesia Stock Exchange period 2011-2015. Methodology/Technique – Intellectual capital was measured by Value Added Capital Employed (VACA), Value Added Human Capital (VAHU), and Structural Capital Value Added (STVA). CSR disclosure was measured using Global Reporting Initiative index. GCG was proxied using independent commissioner, managerial ownership, audit committee, and institutional ownership. Empirical analysis was conducted using linear multiple regression analysis. The samples consisted 15 mining firms. Findings –The results showed that VACA, VAHU, and institutional ownership had a positive and significant effect on company value. STVA and independent commissioner have a positive but insignificant effect on company value. Audit committee and managerial ownership have a negative and insignificant effect on company value. Novelty – The study suggests managers to improve the company value by investing IC subcomponents; that is, physical capital and human capital and also add the number of shares held by institutions." |
| Keywords: | Company Value; Corporate Social Responsibility; Good Corporate Governance; Intellectual Capital. |
| JEL: | M14 M41 M51 |
| Date: | 2017–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr134&r=cfn |
| By: | Kick, Thomas; Nehring, Inge; Schertler, Andrea |
| Abstract: | Banks in bad financial shape are more likely to appoint executive directors from the outside than those in good shape. It is, however, not clear whether all of these appointments necessarily lead to the desired turnaround. We analyze the performance effects of new board members with external boardroom experience (outsiders) by distinguishing between good and bad managerial abilities of executives based on either ROA or risk-return effciency of their previous employers. Our results show that banks appointing bad outsiders underperform other banks while those appointing good outsiders do so to a lesser extent. The performance differentials are highly pronounced in high-risk banks and in the post-crisis period. |
| Keywords: | executive directors,outside appointments,bank performance,managerial ability |
| JEL: | G21 G32 G34 C23 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:272017&r=cfn |
| By: | Hansen Viriya (Universitas Multimedia Nusantara, Indonesia Author-2-Name: Rosita Suryaningsih Author-2-Workplace-Name: Universitas Multimedia Nusantara, Indonesia) |
| Abstract: | "Objective – The objective of this study is to observe the effects of managerial ownership, institutional ownership, dividend policy, firm growth, business risk, liquidity, and profitability on debt policy. Methodology/Technique – Using the purposive sampling method, secondary data were retrieved from 16 firms that fulfil the criteria of this study. Analysis was made through the multiple regression method. Findings – The results of this research indicate that: (1) managerial ownership has a significantly negative effect on debt policy, (2) institutional ownership has no positive effect on debt policy, (3) dividend policy has no negative effect on debt policy, (4) firm growth has no positive effect on debt policy, (5) business risk has a significantly positive effect on debt policy, (6) liquidity policy has a significantly negative effect on debt policy, (7) profitability has no negative effect on debt policy, (8) managerial ownership, institutional ownership, dividend policy, firm growth, business risk, liquidity, and profitability, simultaneously, have a significant effect on debt policy. Novelty – This study implies that all the independent variables are related to debt policy, simultaneously. This shows that the regression model has an appropriate fit in estimating the accrual value of the model." |
| Keywords: | "Business Risk, Debt Policy, Dividend Policy, Liquidity and Profitability, Managerial and Institutional Ownership." |
| JEL: | G32 G35 |
| Date: | 2017–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr117&r=cfn |
| By: | Paulina Sutrisno (Department of Accounting, Trisakti School of Management, Indonesia) |
| Abstract: | "Objective – The purpose of this research is to examine the consequences of accrual based earnings management and real earnings management on future operating performance. The firms studied engage in accrual-based earnings management with discretionary accrual measures using the modified Jones model and some of the following real earnings management activities, (1) Sales manipulation that accelerates the timing of sales through increased price discounts or cutting prices to boost sales in the current period; and/or (2) cutting of discretionary expenditures to increase income in the current period. Furthermore, the study examines the extent to which discretionary accrual and real earnings management affects subsequent operating performance (as measured by both return on assets and operating cash flows). Methodology/Technique – The sample manufacturing firms that engage in financial statement were listed on the Indonesian Stock Exchange between 2012 and 2014. The hypothesis testing method used in this research is multiple regression linear. Findings – The results suggest that accrual-based earnings management, with discretionary accrual measures, and real earnings management through sales manipulation and discretionary expenditures are positively associated with return on assets after one and two years. Meanwhile, accrual-based earnings management and real earnings management through sales manipulation enhances subsequent operating cash flows. However, real earnings management through discretionary expenditures does not influence operating cash flows. Novelty – This research contributes to the existing literature on the subsequent impact of accrual-based earnings management and real earnings management" |
| Keywords: | "Discretionary Accrual; Sales Manipulation; Discretionary Expenditure; Return on Assets; Operating Cash Flows" |
| JEL: | M21 M41 |
| Date: | 2017–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr135&r=cfn |
| By: | Raffaello Bronzini (Bank of Italy); Giampaolo Caramellino (London School of Economics); Silvia Magri (Bank of Italy) |
| Abstract: | Italian startups financed by venture capitalists (VCs) experience a faster growth in size and become more innovative compared with other startups. VC-backed firms also show a much larger increase in equity and a reduction in their leverage. This evidence is obtained by comparing a representative sample of firms financed by private VCs in the period 2004-2014 with a sample of firms rejected by VC at the very last stage of the screening process or in the due diligence phase. These firms narrowly lost the contest and before VC financing have very similar observable and unobservable characteristics to the VC-backed firms; self-selection is specifically taken into account. The effects on firms' size and innovation are not exclusively explained by equity financing. The results hold when we restrict the comparison to firms in the control group that also increase their equity from investors other than VCs: this suggests that VC effects can also be linked to their managerial expertise and network connection. Finally, the results are exclusively driven by independent VC investors compared with captive VCs. |
| Keywords: | venture capital, innovation, firm financial structure, differences-in-differences |
| JEL: | G21 G24 G32 O30 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1131_17&r=cfn |
| By: | Farida Titik Kristanti (Faculty of Economics & Business, Telkom University, Indonesia. Author-2-Name: Aldrin Herwany Author-2-Workplace-Name: Faculty of Economics & Business, Universitas Padjadjaran, Indonesia) |
| Abstract: | ".Objective – The objective of this study was to investigate the factors like corporate governance, financial ratios, and political risk and their impacts on company’s survival. Methodology/Technique – Collecting data of Indonesian Stock Exchange from 2000 to 2014 and employing purposive random sampling, this research collects samples of 58 companies undergoing financial distress and 275 others which do not. Findings – The research eventually proves that agency theory and Asymmetric Information theory do occur in Indonesia. With Cox Proportional Hazard model, it then proves that all two models employed: independence commissioners, leverage, operating risk, size, return on asset and control of corruption, are variables which consistently affect financial distress of the company. Novelty – The study uses original data and gives supported suggestion for the researched issues." |
| Keywords: | Financial Distress; Financial Ratios; Corporate Governance; Political Risk. |
| JEL: | G01 G34 M48 |
| Date: | 2017–04–12 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr130&r=cfn |
| By: | C. Cahn; M. Girotti; A. Landier |
| Abstract: | We analyze how public information on past entrepreneurial failure affects entrepreneurs’ ability to borrow. We exploit a policy shock from 2013 in France, which eliminated a highly salient public reporting to banks of managers involved in non-fraudulent corporate liquidations. We find that the flag removal makes failed entrepreneurs significantly more likely to restart a business or to borrow from a surviving business, despite the fact that bankers can find the failure information from other public sources for a small cost. Restarters create companies that have a higher probability of default. |
| Keywords: | Entrepreneurship, Access to credit, Bankruptcy. |
| JEL: | G33 L26 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:644&r=cfn |
| By: | Karami, Moein; Cumming, Douglas; Hornuf, Lars; Schweizer, Denis |
| Abstract: | Using Kickstarter and Indiegogo, the two largest crowdfunding platforms, we conduct an exhaustive search of all fraud cases from 2010 through 2015. We present evidence that fraudsters in crowdfunding markets have specific characteristics: they are less likely to have engaged in prior crowdfunding activities, they are less likely to have a social media presence, and they are more likely to provide poorly worded and confusing campaign pitches. |
| JEL: | G21 G24 G32 K22 L26 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168120&r=cfn |
| By: | Banerjee, Ryan; Gambacorta, Leonardo; Sette, Enrico |
| Abstract: | This paper studies the real consequences of relationship lending on firm activity in Italy following Lehman Brothers' default shock and Europe's sovereign debt crisis. We use a large data set that merges the comprehensive Italian Credit and Firm Registers. We find that following Lehman's default, banks offered more favourable continuation lending terms to firms with which they had stronger relationships. Such favourable conditions enabled firms to maintain higher levels of investment and employment. The insulation effects of tighter bank-firm relationships was still present during the European sovereign debt crisis, especially for firms tied to well capitalised banks. |
| Keywords: | credit supply; real effects of credit; relationship banking |
| JEL: | E44 G21 |
| Date: | 2017–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12340&r=cfn |
| By: | Markonah (Faculty of Economics and Business, University of Brawijaya, Indonesia Author-2-Name: Achmad Sudiro Author-2-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia Author-3-Name: Surachman Author-3-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia Author-4-Name: Mintarti Rahayu Author-4-Workplace-Name: Faculty of Economics and Business, University of Brawijaya, Indonesia) |
| Abstract: | "Objective – Insurance companies in Indonesia are considered an important part of society by the Indonesian government. Corporate governance was a major problem during the post-financial crisis period, particularly in emerging markets in Indonesia. Financial Institutions considered the possibility of increasing insurance premiums to cover their operating costs and increase their profits. The purpose of this study is to measure the effect of corporate governance and preium growth on the performance of the insurance sector, to determine the characteristics of good corporate governance. Technique/Methodology – The samples used in this study include insurance companies listed on the Indonesia Stock Exchange between 2011 and 2015. The data used in the study is derived from the Indonesian Stock Exchange Corner. The method of analysis used is descriptive statistics and linear regression. The research objectives are to analyze the influence of the independent variables on the dependent variable. A purposive sampling method is used to determine the sample size of the study. This method generated a sample of 9 commercial insurance companies. Findings – The findings show that corporate governance is significantly and positively related to ROA whereas Insurance Premiums are not significantly related to ROA. Novelty – Study suggests that the insurance companies must aim to improve corporate governance structures by finding solutions to existing problems and improving the management structures of the company, in order to attract future investment which will ultimately lead to an increase in ROA and ROE." |
| Keywords: | Corporate Governance; Insurance Premium; Corporate Performance; Growth. |
| JEL: | G22 L25 M41 |
| Date: | 2017–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr123&r=cfn |
| By: | Abdalla Geth Abdussalam (Faculty of Industrial Management, University Malaysia Pahang, Malaysia Author-2-Name: Mohd Ridzuan Darun Author-2-Workplace-Name: Faculty of Industrial Management, University Malaysia Pahang, Malaysia) |
| Abstract: | "Objective – This paper explores the relationship between working capital management (WCM), profitability and capital structure. A preliminary framework provides an understanding of the role of WCM components with capital structure and profitability. Methodology/Technique – From the review of empirical studies it is confirmed that WCM is a main component in the financial aspects of the firms as even though WCM is targeted for the short-term decisions it has effect on the firm for the long-run. Findings – Companies need to use working capital policy and procedures in order to navigate performance. Emphasizing on WCM would lead to formal cost controls and performance together with firm’s growth and productivity. The framework is set to help financial manager of the firms to balance the costs and benefits of debt and equity and reduce common obstacles on managing cash flows for long-term fixed investment. Novelty – The preliminary framework is original and unique that will contribute towards the enrichment of relevant literature. Practically, this study contributes to provide a better understanding of the managers and enable them to apply WCM strategies and make sure the firm is able to meet the stakeholder requirements." |
| Keywords: | Working Capital Management; Capital Structure; Profitability; |
| JEL: | O16 M41 |
| Date: | 2017–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:afr126&r=cfn |
| By: | Nico Alexander (Trisakti school of Management, Indonesia. Author-2-Name: Hengky Author-2-Workplace-Name: Trisakti school of Management, Indonesia.) |
| Abstract: | "Objective – The purpose of this research is to analyze the effect of growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence toward earnings management. Methodology/Technique – The population of this research consist of various sectors of non-financial companies that were listed on the Indonesian Stock Exchange (IDX) between 2013 and 2015. The research uses three recent years of data and tests variables that have not been used by prior research. The sample was chosen by using a purposive sampling method. The hypothesis is tested using multiple regression with an SPSS program to investigate the influence of each independent variable to earnings management. Findings – The research results show that return on assets influences earnings management and growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence do not influence earnings management. Novelty – The study supports that the manager in a company will engage in earnings management to receive a bonus from investors because they have received a higher profit." |
| Keywords: | "Earnings Management; Growth; Leverage; Fixed Asset Turnover; Profitability; Firm Size; Firm Age; Audit Quality; Auditor Independence; Industry" |
| JEL: | L25 M12 M41 |
| Date: | 2017–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr124&r=cfn |
| By: | Ginglinger, Edith; Hébert, Camille (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research) |
| Abstract: | Conglomerates, multinational corporations and business groups are non-exclusive forms of complex firms. Often organized as corporate networks, complex firms control a myriad of firms connected through ownership links. We investigate whether parent-subsidiary links within corporate networks enhance transparency because the investors in a listed parent company and in its listed subsidiary now receive information about these two firms from each these firms. Alternatively, the corporate network complexity could bring about more opacity when investors are unable to detect the connections between the corporate entities. We examine the share price reactions to information releases by various entities of the corporate network. We find that parent’s investors benefit from enhanced transparency in case the parent announces surprise earnings first, whereas subsidiaries’ investors seem mostly unaware of ownership links and are myopic. |
| Keywords: | Ownership structures; corporate complexity; myopia surprise earnings announcements; business groups; conglomerates; inattention; post-earnings announcement drift; market frictions |
| JEL: | G14 G32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:179a4c42-9368-41f0-bc40-4ff14c03faeb&r=cfn |