nep-cfn New Economics Papers
on Corporate Finance
Issue of 2018‒03‒26
eleven papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Competition in the Venture Capital Market and the Success of Startup Companies: Theory and Evidence By Hong, Suting; Serfes, Konstantinos; Thiele, Veikko
  2. Effect of Financial Performance on Dividend Policy in Manufacturing Companies in Indonesia Stock Exchange By Zaman, Delfian Rian
  3. The drop in non-financial firms cost of credit: a cross-country analysis By Paolo Finaldi Russo; Fabio Parlapiano
  4. Export Market Exit and Financial Health in Crises Periods By Görg, Holger; Spaliara, Marina-Eliza
  5. Electricity and manufacturing firm profits in Myanmar By Lisa CHAUVET; Alvaro DE MIGUEL TORRES; Alexa TIEMANN
  6. People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis By Mitchell Hoffman; Steven Tadelis
  7. Is trade credit a substitute for relationship lending credit? By Jeremie Bertrand; Pierluigi Murro
  8. Credit Relationships in the Great Trade Collapse. Micro Evidence From Europe By Giovanni Ferri; Raoul Minetti; Pierluigi Murro
  9. Financial bubbles and capital accumulation in altruistic economies By Bosi, Stefano; Ha-Huy, Thai; Le Van, Cuong; Pham, Cao-Tung; Pham, Ngoc-Sang
  10. The labour share and financialisation: Evidence from publicly listed firms By Guschanski, Alexander; Onaran, Özlem
  11. Impact of terrorism on stock markets: empirical evidence from the SAARC region By Chaudhry, Naukhaiz; Roubaud, David; Akhter, Waheed; Shahbaz, Muhammad

  1. By: Hong, Suting (Shanghai Tech University); Serfes, Konstantinos (Drexel University); Thiele, Veikko (Queen's University)
    Abstract: We examine the effect of a competitive supply of venture capital (VC) on the success rates of VC-backed startup companies (e.g. IPOs). We first develop a matching model of the VC market with heterogeneous entrepreneurs and VC firms, and double-sided moral hazard. Our model identifies a non-monotone relationship between VC competition and successful exits: a more competitive VC market increases the likelihood of a successful exit for startups with low quality projects (backed by less experienced VC firms in the matching equilibrium), but it decreases the likelihood for startups with high quality projects (backed by more experienced VC firms). Despite this non-monotone effect on success rates, we find that VC competition leads to higher valuations of all VC-backed startups. We then test these predictions using VC data from Thomson One, and find robust empirical support. The differential effect of VC competition has a profound impact on entrepreneurship policies that promote VC investments.
    Keywords: entrepreneurship; venture capital; matching; double-sided moral hazard; exit; IPO
    JEL: C78 D86 G24 L26 M13
    Date: 2018–02–01
  2. By: Zaman, Delfian Rian
    Abstract: This study aims to examine the effect of cash ratio, debt to equity ratio, and return on the asset to dividend payout ratio on manufacturing companies listed on Indonesia Stock Exchange with observation period 2010-2014. The sampling technique used is purposive sampling so that the number of samples is 27 companies. The analysis technique used in this research is multiple linear regression and hypothesis test using t-statistic to test partial regression coefficient and f-statistic to test the feasibility of research model with a level of significance 5%. Besides, there is also a classic assumption test that includes normality test, multicollinearity test, heteroscedasticity test and autocorrelation test. The result of the analysis shows that the variable of cash ratio and return on asset have positive and significant influence, while the variable of debt to equity ratio has a negative and significant effect to dividend payout ratio.
    Keywords: Cash Ratio, Debt to Equity Ratio, Return On Asset, Dividend Payout Ratio
    JEL: G2 G28
    Date: 2018–01–30
  3. By: Paolo Finaldi Russo (Bank of Italy); Fabio Parlapiano (Bank of Italy)
    Abstract: Following the sovereign debt crisis, bank interest rates charged to non-financial firms declined sharply in the euro area. This work explores the firms’ balance-sheet channel hypothesis on the role played by firms’ characteristics and risk profile in the transmission of monetary policy. Using a European firm-level survey, we find that in all countries changes in borrowers’ characteristics played a non-negligible role. They account for 30 out of 267 basis points of the total interest rate drop in Italy, 36 out of 160 basis points in core European countries and less than 20 out of 306 basis points in other vulnerable economies. The key firm characteristic driving the decline in interest rates in Italy and in other vulnerable countries is the improvement in the financial situation of non-financial firms, whereas in core countries the decline is mainly due to a shift in bank credit towards relatively older and larger borrowers.
    Keywords: interest rates, SAFE, financial constraints, credit rationing
    JEL: G20 G30
    Date: 2018–02
  4. By: Görg, Holger; Spaliara, Marina-Eliza
    Abstract: This paper uses rich firm-level data for the UK to investigate the link between firms' financial health and export exit, paying attention to the ERM currency crisis and the global financial crisis. Our results show that deterioration in the financial position of firms has increased the hazard of export exit during the 2007-09 crisis but has no significant effect on the early 1990s crisis. We also explore the extent to which firms in financially vulnerable industries face greater sensitivity of export exit to financial conditions. We conclude that firms in sectors with great reliance on external finance experience higher hazards of exiting the export market during the 2007-09 crisis.
    Keywords: financial health,financial vulnerability,exports,extensive margin,crises
    JEL: F1 L2 G3
    Date: 2017
  5. By: Lisa CHAUVET (IRD-DIAL); Alvaro DE MIGUEL TORRES (Paris School of Economics.); Alexa TIEMANN (OECD)
    Abstract: We examine the impact of being located in areas with higher availability of electricity on manufacturing firm profits in Myanmar. Using a survey of 497 manufacturing firms conducted in 2014 and covering the whole territory of Myanmar, we investigate whether firms belonging to industries that tend to make more intensive use of electricity show better performance if such firms are located in areas with higher availability of electricity. We find that electricity provided by the national power grid tends to have a positive impact on manufacturing firm profits. Results are robust to reducing the sample to firms that could not have chosen their location endogenously, as well as to the use of an instrumental variable.
    JEL: H4 O13 O14 L60
    Date: 2018–02
  6. By: Mitchell Hoffman; Steven Tadelis
    Abstract: How much do a manager's interpersonal skills with subordinates, which we call people management skills, affect employee outcomes? Are managers rewarded for having such skills? Using personnel data from a large, high-tech firm, we show that survey-measured people management skills have a strong negative relation to employee turnover. A causal interpretation is reinforced by research designs exploiting new workers joining the firm and managers moving jobs. However, people management skills do not consistently improve non-attrition outcomes. Better people managers are themselves more likely to receive higher subjective performance ratings and to be promoted.
    JEL: D23 J24 J33 L23 M50
    Date: 2018–02
  7. By: Jeremie Bertrand (ISA Lille); Pierluigi Murro (LUMSA University)
    Abstract: Despite its importance to the funding of small enterprises (SMEs), the question of how trade credit is used has not been fully answered. Recently, Uchida et al. (2013) showed that trade creditors can act as relationship lenders. To advance this result, we study the use of trade credit as a substitute for relationship lending credit when firms cannot otherwise obtain such credit. Using a sample of SMEs from the Survey of Italian Manufacturing Firms, we show that when opaque firms seeking relationship credit encounter transactional banks, they retain a greater portion of trade credit in their loans. These firms thus substitute trade credit for their missing relationship credit, because trade creditors are better evaluators of firms than are transactional lenders. The results depend on the size and age of the firm, the nature of the bank, and the size of the firm’s banking pool.
    Keywords: Banks, Lending Technologies, Small Business, Trade Credit
    JEL: G21 L14 L22
    Date: 2018–03
  8. By: Giovanni Ferri (LUMSA University); Raoul Minetti (Michigan State University); Pierluigi Murro (LUMSA University)
    Abstract: Using a rich sample of small and medium-sized European firms, we study how banks' lending technologies affected firms' export activities during the 2009 great trade collapse. We find that bank-firm relationships mitigated the contraction of firms' export by easing banks' access to inside, "soft" information on export prospects. However, relationship banks with strong past experience on firms' domestic activities were less inclined to protect exporters. Bank-firm relationships appear to be a buffer especially for young and small exporters and for exporters at an early stage of internationalization.
    Keywords: Bank-Firm Relationships, Lending Technologies, Trade
    JEL: G21 D82 F10
    Date: 2018–03
  9. By: Bosi, Stefano; Ha-Huy, Thai; Le Van, Cuong; Pham, Cao-Tung; Pham, Ngoc-Sang
    Abstract: We consider an overlapping generations model à la Diamond (1965) with two additional ingredients: altruism and an asset (or land) bringing non-stationary positive dividends (or fruits). We study the global dynamics of capital stocks and asset values as well as the interplay between them. Asset price bubbles are also investigated.
    Keywords: Forward altruism, overlapping generations, capital accumulation, financial asset, positive dividends, rational bubbles
    JEL: C62 D50 D53 D64 E21 E44 G12
    Date: 2018–02–07
  10. By: Guschanski, Alexander; Onaran, Özlem
    Abstract: This paper provides international evidence for the effect of financialisation on the labour share at the firm level. We test different hypotheses about the impact of financialisation on functional income distribution, while also controlling for the effect of technological change, market concentration, labour market institutions and globalisation. We use panel data for publicly listed non-financial companies globally and with a particular focus on the EU15 for the period of 1995-2016. We find a negative effect of financialisation on the labour share due to increased shareholder value orientation in all countries, while there is also evidence of a negative effect due to an increase in mark-ups in France and the UK. Additionally, our findings cast doubt on the hypotheses that the decline in the labour share in European publicly listed firms is due to technological change. Similarly, market concentration did not play an important role for the decline in the labour share. In contrast, we find that concentration has declined among publicly listed firms in Europe, and that concentration is not associated with declining labour shares.
    Keywords: labour share; income distribution; financialisation; market concentration; technology
    JEL: J3
    Date: 2018–03–05
  11. By: Chaudhry, Naukhaiz; Roubaud, David; Akhter, Waheed; Shahbaz, Muhammad
    Abstract: This study investigates the impact of terrorism on stock markets in SAARC countries during 2000–2015. An event-study analysis and fixed-effect regression technique are employed to assess whether the impact of various terrorist attacks on the stock market returns of ‘highly affected’ countries differs from that of ‘less affected’ countries in the SAARC region. This study has important implications for policy-makers in relevant countries to combat terrorism and build investor confidence.
    Keywords: event study; SAARC; stock market; terrorism
    JEL: A1
    Date: 2018–02–04

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