nep-cfn New Economics Papers
on Corporate Finance
Issue of 2018‒03‒19
thirteen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. The Impact of Good Corporate Governance on Financial Distress in the Consumer Goods Sector By Sri Marti Pramudena
  2. Does CDS trading affect risk-taking incentives in managerial compensation? By Jie Chen; Woon Sau Leung; Wei Song; Davide Avino
  3. Earnings Management, Corporate Governance and Tax Avoidance: The Case in Indonesia By Lulus Kurniasih
  4. How do manager incentives influence corporate hedging? By Bihary, Zsolt; Dömötör, Barbara
  5. The Financing of Companies in Malta By Jude Darmanin
  6. Bank credit supply and firm innovation By Giebel, Marek; Kraft, Kornelius
  7. The Effect of IFRS Convergence on Earnings Quality: Empirical Evidence from Indonesia By Paulina Sutrisno
  8. Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections By Chia-Lin Chang; Michael McAleer; Wing-Keung Wong
  9. Passing the dividend baton: The impact of dividend policy on new CEOs' initial compensation By Jie Chen; Wei Song; Marc Goergen
  10. The Effects of the Days of the Week on the Indonesian Stock Exchange By Christiyaningsih Budiwati
  11. The Prediction of Bankruptcy Using Altman Z-Score Model (Case Study In BRI Bank, BNI Bank, Mandiri Bank, BTN Bank) By Herlin, .
  12. Regulation of crowdfunding in Germany By Tröger, Tobias
  13. Stress Tests and Small Business Lending By Cortes, Kristle Romero; Demyanyk, Yuliya; Li, Lei; Loutskina, Elena; Strahan, Philip E.

  1. By: Sri Marti Pramudena (STIE Binaniaga Bogor, Padjadjaran street No. 100 Bogor, West of Java, Indonesia)
    Abstract: Objective – Financial distress is referred to as a condition in which a company's operations result in insufficient funds to meet its obligations (insolvency). The success or failure of a company greatly depends on the corporate governance of the company. This study aims to identify the relationship between the existence of good corporate governance and the probability of financial distress. Methodology/Technique – This study used secondary data obtained from annual reports from 2009 to 2014. The data is gathered from consumer goods manufacturing companies, that are listed on the Indonesian Stock Exchange (BEI). The sample includes 10 companies. The method of analysis used is multiple linear regressions. Findings – The results of the study show that institutional ownership and managerial ownership adversely affect the possibility of financial distress. On the other hand, the proportion of commissioners and the number of board of directors have a positive effect on the probability of financial distress. Novelty – This study found that institutional ownership (IO) has an inverse effect on the financial distress of a company.
    Keywords: Good Corporate Governance; Financial Distress; Corporate Performance
    JEL: G30 G34 G39
    Date: 2017–12–11
  2. By: Jie Chen (Cardiff Business School, Cardiff University); Woon Sau Leung (Cardiff Business School, Cardiff University); Wei Song (School of Management, Swansea University); Davide Avino (Cardiff Business School, Cardiff University)
    Abstract: We find that managers receive more risk-taking incentives in their compensation packages once their firms are referenced by credit default swap (CDS) trading, particularly in firms with bank debt, greater institutional holdings, and in financial distress. These findings suggest that boards offer pay packages that encourage greater managerial risk taking to take advantage of the reduced creditor monitoring after CDS trade initiation. Further, we find that the onset of CDS trading attenuates the effect of vega on leverage, consistent with the view that the threat of exacting creditors restrains managerial risk appetite.
    Keywords: Credit default swaps, Executive compensation, Risk taking, Leverage
    JEL: G32 G34
    Date: 2018–02–24
  3. By: Lulus Kurniasih (Sebelas Maret, Surakarta, Indonesia Author-2-Name: Sulardi Author-2-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia Author-3-Name: Sri Suranta Author-3-Workplace-Name: Universitas Sebelas Maret, Surakarta, Indonesia)
    Abstract: Objective – This study aims to determine the effect of earning management and corporate governance mechanisms on corporate tax avoidance. Methodology/Technique – Corporate governance mechanisms use institutional ownership, the size of the board of commissioners, the percentage of independent commissioners, auditing committees, and audit quality as proxies. Meanwhile, earnings management uses the modified Jones model. The sample of this study includes non-financial companies that are listed on the Indonesian Stock Exchange (IDX) between 2014 and 2016. Findings – Corporate tax avoidance can be detected by using the effective tax rate (ETR), which is the ratio of income to tax expenses. This sample was chosen using a purposive sampling method, resulting in 871 firms. The results suggest that earnings management has a significant impact on ETR. Novelty – This study identifies that only independent commissioners and audit quality have a significant influence on ETR.
    Keywords: Tax Avoidance; Earnings Management; Corporate Governance; Effective Tax Rate; Audit Quality.
    JEL: G3 G39 G39
    Date: 2017–12–02
  4. By: Bihary, Zsolt; Dömötör, Barbara
    Abstract: We explain the diversity of corporate hedging behavior in a single model. The hedging ratio is obtained by maximizing expected utility that is a combination of the corporate level utility and a component that models the incentives of the financial manager. We derive a theoretical model that gives back the classic result of the literature if the financial manager has no other incentive than to maximize corporate utility. In the case the financial manager expects that his evaluation will be based exclusively on the financial profit (the profit of the hedging transactions), being risk averse, he decides not to hedge at all. The hedging ratio depends on the weight of these contradictory effects. We test our theoretical results on Hungarian corporate survey data.
    Keywords: corporate hedging, corporate utility, manager incentives
    JEL: F13 G32 G34
    Date: 2018–02–26
  5. By: Jude Darmanin
    Abstract: This note examines recent developments in the financing structure of non-financial companies in Malta. The financial liabilities of NFCs are mainly composed of debt, private equity, and trade credit, with evidence pointing to a shift away from bank lending in recent years. This financial disintermediation is driven by a number of factors, including loan supply restrictions on the part of banks, the changing structure of the economy, an improvement in the financial position of NFCs, and higher usage of capital markets by large companies. In this light, the main issue is understanding whether this shift is a choice on the part of firms, or a constraint imposed by a tighter bank lending channel. The analysis in this note suggests that it is a combination of the two.
    JEL: E51 G00 G32
  6. By: Giebel, Marek; Kraft, Kornelius
    Abstract: We analyze the causal effect of the credit supply shock to banks induced by interbank market disruptions in the recent financial crisis 2008/2009 on their business customers' innovation activity. Using a matched bank-firm data set for Germany, we find that having relations with a more severely affected bank seriously hampers firms' current innovation activities due to funding shortages. Furthermore, we find that firms with a relationship to a less severely affected bank are more likely to initiate new product and process innovations and to reallocate human resources to innovation during the financial crisis.
    Keywords: financing of innovations,credit supply,financial crisis,innovative activities
    JEL: G01 G21 G30 O16 O30 O31
    Date: 2018
  7. By: Paulina Sutrisno (Trisakti School of Management Author-2-Name: Indra Arifin Djashan Author-2-Workplace-Name: Trisakti School of Management)
    Abstract: Objective –The purpose of this research is to examine the impact of the International Financial Reporting Standard (IFRS) convergence in Indonesia on earnings quality. Methodology/Technique – Earnings quality is measured on both accrual earnings management and real earnings management. Indonesia began convergence IFRS in 2012. IFRS is considered capable of improving comparability, transparency, and earnings information, which is expected to ultimately improve earnings quality. The sample in this research uses manufacturing firms listed on the Indonesian Stock Exchange that were suspected to avoid loss during the observation period. The data consist of 45 companies examined between 2008 and 2015. Results –This study uses statistical methods and multiple regression linear to analyse the data. The research results show that IFRS convergence in Indonesia has had a negative impact on accrual earnings management and no impact on real earnings management. Novelty –The evidence shows that IFRS convergence in Indonesia has the ability to improve earnings quality related to a decrease in accrual earnings management but not real earnings management.
    Keywords: IFRS; Discretionary Accrual; Abnormal Cash Flow Operation; Abnormal Production; Abnormal Discretionary Expenditure.
    JEL: M40 M41 M49
    Date: 2017–12–09
  8. By: Chia-Lin Chang (National Chung Hsing University); Michael McAleer (Asia University, University of Sydney Business School, Erasmus University Rotterdam); Wing-Keung Wong (Asia University, China Medical University Hospital, Hang Seng Management College)
    Abstract: This paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas.
    Keywords: Decision sciences; economics; finance; business; computing; and big data; theoretical models; econometric and statistical models; applications.
    JEL: A10 G00 G31 O32
    Date: 2018–03–14
  9. By: Jie Chen (Cardiff Business School, Cardiff University); Wei Song (School of Management, Swansea University); Marc Goergen (Cardiff Business School, Cardiff University)
    Abstract: We examine how firms’ dividend policy affects the initial compensation of their new CEOs. We focus on new CEOs to isolate the effect of dividends on compensation and to provide new insights into an aspect largely neglected in compensation research. We show that the dividend payout is positively related to new CEO compensation and that this positive relation remains after addressing potential endogeneity concerns. Further, the positive effect of dividends is stronger for firms with no dividend cuts over the past two, three and four years, firms with relatively high institutional ownership, and those with strong boards, consistent with new CEOs receiving higher pay as compensation for greater dividend pressure.
    Keywords: CEO compensation; New CEOs; Dividend policy; Corporate governance.
    JEL: G30 G35 J33
    Date: 2018–02–24
  10. By: Christiyaningsih Budiwati (Universitas Sebelas Maret, Indonesia Author-2-Name: SE,M.Si,Ak,CA Author-2-Workplace-Name: Universitas Sebelas Maret, Jl. Ir. Sutami 36a, Solo, Indonesia Author-3-Name: Ryan Noor Yudana Author-3-Workplace-Name: Universitas Sebelas Maret, Jl. Ir. Sutami 36a, Solo, Indonesia)
    Abstract: Objective – The study aims to identify the difference of returns that occur on every trading day, to identify the occurrence of the phenomenon of the Day of the Week Effect; to identify the occurrence of Monday Effect on stock trading in the Indonesian Stock Exchange; and to identify the occurrence of Weekend Effect on the Indonesian Stock Exchange. Methodology/Technique – This study examines companies listed in the LQ 45 Index between January 2016 and December 2016. The results are tested using a comparative method. The sample used consists of 41 companies. The hypothesis was testing using a one-way ANOVA and independent sample t-test. Findings – The results show that there is a difference of stock return occuring on every trading, day indicating the occurrence of the day of the week effect phenomenon. Further, there was no Monday Effect phenomenon observed during the study period and there was no Weekend Effect Phenomenon observed during the study period. Novelty – Based on the results, it can be concluded that the phenomenon of the Day of the Week Effect occurred between January 2016 and December 2016, while the phenomenon of Monday Effect and Weekend Effect did not occur during the study period.
    Keywords: Stock Return; The Day of The Week Effect; Monday Effect; Weekend Effect; LQ-45 Index
    JEL: G10 G12
    Date: 2017–12–12
  11. By: Herlin, .
    Abstract: Based on the calculation of the Altman model in predicting bankrupt at PT. Bank Rakyat Indonesia (Persero) Tbk in 2014, 2015, 2016, PT. Bank Mandiri (Persero) Tbk in 2014 and 2015 and is PT.Bank Tabungan Negara (Persero) Tbk in 2014 with a score of Z-score above 2.99 indicates that included in the company healthy or not potential to go bankrupt. Companies included in the category of unhealthy or potential companies to go bankrupt with a Z-score of less than 1.81 ie PT. Bank Tabungan Negara (Persero) Tbk in 2014 with a Z-score of 1.405 (
    Keywords: Altman Model, Financial Distress
    JEL: G21
    Date: 2018–01–30
  12. By: Tröger, Tobias
    Abstract: This paper is the national report for Germany prepared for the to the 20th General Congress of the International Academy of Comparative Law 2018 and gives an overview of the regulation of crowdfunding in Germany and the typical design of crowdfunding campaigns under this legal framework. After a brief survey of market data, it delineates the classification of crowdfunding transactions in German contract law and their treatment under the applicable conflict of laws regime. It then turns to the relevant rules in prudential banking regulation and capital market law. It highlights disclosure requirements that flow from both contractual obligations of the initiators of campaigns vis-à-vis contributors and securities regulation (prospectus regime). After sketching the most important duties of the parties involved in crowdfunding, the report also looks at the key features of the respective transactions' tax treatment.
    Keywords: crowdfunding,crowdsponsoring,crowdlending,crowdinvesting,contract law,conflict of laws,banking regulation,securities regulation
    JEL: G23 G28 G38 K22 K23
    Date: 2017
  13. By: Cortes, Kristle Romero (University of New South Wales); Demyanyk, Yuliya (Federal Reserve Bank of Cleveland); Li, Lei (University of Kansas); Loutskina, Elena (University of Virginia); Strahan, Philip E. (National Bureau of Economic Research)
    Abstract: Post-crisis stress tests have altered banks’ credit supply to small business. Banks affected by stress tests reduce credit supply and raise interest rates on small business loans. Banks price the implied increase in capital requirements from stress tests where they have local knowledge, and exit markets where they do not, as quantities fall most in markets where stress-tested banks do not own branches near borrowers, and prices rise mainly where they do. These reductions in supply are concentrated among risky borrowers. Stress tests do not, however, reduce aggregate credit. Small banks increase their share in geographies formerly reliant on stress-tested lenders.
    Keywords: small business lending; stress test; credit supply; large banks;
    JEL: G2
    Date: 2018–03–01

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