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on Corporate Finance |
| By: | Mascia, Danilo V. (Asian Development Bank Institute) |
| Abstract: | By employing a sample of 20,956 observations of nonfinancial small and medium-sized enterprises (SMEs) headquartered in the euro area, between 2009 and 2015, we test whether young businesses are more likely to face credit rejections from lenders than their older peers. Our findings appear to confirm our suspicions that new enterprises consistently experience higher denials from banks compared with more established businesses. Such a result is stable to different model specifications and is also confirmed once we handle the issue of sample selection bias potentially affecting our data. Additional tests also reveal that credit constraints are particularly difficult for young SMEs located in Southern and Central Europe, as well as for those operating in the “trade” industry. Overall, our evidence suggests that actions from the policy maker could be desirable to support the viability of credit and, thus, ensure the growth of young businesses in the euro area. |
| Keywords: | SMEs; young enterprises; bank loans; credit rationing |
| JEL: | D82 G20 G21 G30 L26 M13 |
| Date: | 2018–05–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0844&r=cfn |
| By: | Jagtiani, Julapa (Federal Reserve Bank of Philadelphia); Maingi, Ramain Quinn (Federal Reserve Bank of Philadelphia) |
| Abstract: | We investigate the shrinking community banking sector and the impact on local small business lending (SBL) in the context of mergers and acquisitions. From all mergers that involved community banks, we examine the varying impact on SBL depending on the local presence of the acquirers’ and the targets’ operations prior to acquisitions. Our results indicate that, relative to counties where the acquirer had operations before the merger, local SBL declined significantly more in counties where only the target had operations before the merger. This result holds even after controlling for the general local SBL market or local economic trends. These findings are consistent with an argument that SBL funding has been directed (after the mergers) toward the acquirers’ counties. We find even stronger evidence during and after the financial crisis. Overall, we find evidence that local community banks have continued to play an important role in providing funding to local small businesses. The absence of local community banks that became a target of a merger or acquisition by nonlocal acquirers has, on average, led to local SBL credit gaps that were not filled by the rest of the banking sector. |
| Keywords: | community banks; small business lending; bank mergers |
| JEL: | G21 G28 G34 |
| Date: | 2018–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:18-18&r=cfn |
| By: | Afrifa, Godfred; Tingbani, Ishmael |
| Abstract: | Purpose – The paper presents comprehensive evidence on the relationship between Working Capital Management (WCM) and SMEs’ performance by taking into consideration the plausible effect of cash flow. Design/methodology/approach – The paper adopts a panel data regression analysis on a sample of 802 British quoted small and medium enterprises listed on the Alternative Investment Market for the period from 2004 to 2013. Findings – The results of the study demonstrate the importance of cash flow on SMEs’ WCM and performance. According to our findings, WCM has a significantly negative impact on SME performance. However, with available cash flow, we find a significantly positive relationship. Additionally, our evidence revels that cash flow constrained (non-constrained) SMEs are able to enhance their performance through decreased (increased) investment in WCM. Practical implications – Overall, the results demonstrate the importance of cash flow availability on SMEs’ working capital needs. Our findings suggest that in an event of cash flow unavailability (availability) managers should strive to reduce (increase) the investment in working capital in order to improve performance. Originality/value – This current study incorporates the relevance of cash flow in assessing the association between WCM and firm performance. |
| Keywords: | Working Capital Management, Performance, SMEs, Cash Flow |
| JEL: | G3 G31 G32 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82894&r=cfn |
| By: | Briana Chang; Harrison Hong |
| Abstract: | Measuring the value of labor-market hires for stock prices, be it underwriters when firms go public (IPOs) or chief executive officers (CEOs), is difficult due to selection. Opaque firms with higher costs of capital benefit more from prestigious underwriters, while productive firms benefit more from talented CEOs. Using assignment models, we show that the importance of talent (or agent heterogeneity) relative to selection (or firm heterogeneity) is measured by wage increases across agents of different compensation ranks divided by changes in output across their firms. The median of this ratio is 0.5% for underwriters and 2% for CEOs. |
| JEL: | G20 G24 G30 G34 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24672&r=cfn |
| By: | Yi-Hsuan Chen, Cathy; Fengler, Matthias; Härdle, Wolfgang Karl; Liu, Yanchu |
| Abstract: | We distill sentiment from a huge assortment of NASDAQ news articles by means of machine learning methods and examine its predictive power in single-stock option markets and equity markets. We provide evidence that single-stock options react to contemporaneous sentiment. Next, examining return predictability, we discover that while option variables indeed predict stock returns, sentiment variables add further informational content. In fact, both in a regression and a trading context, option variables orthogonalized to public and sentimental news are even more informative predictors of stock returns. Distinguishing further between overnight and trading-time news, we find the first to be more informative. From a statistical topic model, we uncover that this is attributable to the differing thematic coverage of the alternate archives. Finally, we show that sentiment disagreement commands a strong positive risk premium above and beyond market volatility and that lagged returns predict future returns in concentrated sentiment environments. |
| Keywords: | investor disagreement, option markets, overnight information, stock return predictability, textual sentiment, topic model, trading-time information |
| JEL: | C58 G12 G14 |
| Date: | 2018–06 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2018:08&r=cfn |
| By: | Ibadoghlu, Gubad (Asian Development Bank Institute) |
| Abstract: | We discuss the status of financial inclusion, education, and literacy in Azerbaijan as well as measures to foster the development of small and medium-sized enterprises, which currently have inadequate access to financial resources. The Government of Azerbaijan is facing the primary challenge of defining its role in creating broader access to financial products and services. We highlight the barriers to financial inclusion, recommend solutions to overcoming the challenges, and discuss lessons learned and a potential way forward. |
| Keywords: | financial inclusion; financial education; financial literacy; SME; household; Azerbaijan |
| JEL: | D14 D18 G21 G28 I28 |
| Date: | 2018–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0842&r=cfn |
| By: | Klein, Paul-Olivier; Weill, Laurent |
| Abstract: | This paper analyses the effect of bank profitability on economic growth. While policymakers have shown major concerns for low levels of bank profitability, there are no empirical studies on the growth effects of bank profitability. To fill this gap, we investigate the impact of bank profitability on economic growth using a sample of 133 countries during the period 1999–2013 with several empirical approaches. Our first major conclusion is that a high current level of bank profitability contributes positively to economic growth. Our second conclusion is that the past level of bank profitability exerts a negative influence on economic growth leading to the absence of significance for the overall bank profitability. Hence, the positive impact of bank profitability on economic growth is short-lived. These findings are robust to a battery of robustness checks, including those using alternative measures for profitability and growth. |
| JEL: | G21 O16 O40 |
| Date: | 2018–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_015&r=cfn |
| By: | Filippo Di Mauro; Fadi Hassan; Gianmarco I. P. Ottaviano |
| Abstract: | The efficient allocation of credit is a key element for the success of an economy. Traditional measures of allocative efficiency focus on the Q-theory of investment and, in particular, on the elasticity of finance to investment opportunities proxied by firm real value added. This paper introduces a theory-based alternative measure that focuses instead on the elasticity of credit to firm productivity. In doing so, it develops a simple theoretical framework that delivers clear predictions for the elasticity of credit to current and future productivity depending on capital market frictions. When applied to the novel firm-level dataset of the Competitiveness Research Network (CompNet) set up by the EU System of Central Banks, the proposed measure leads to normative statements about the efficiency of credit allocation across the largest Eurozone economies, changing the conclusions that one would reach based on traditional empirical applications of Q-theory. |
| Keywords: | bank credit, capital allocation, productivity, credit constraints |
| JEL: | G10 G21 G31 D92 F3 O16 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1555&r=cfn |
| By: | Rebecca Dizon-Ross |
| Abstract: | Does holding schools accountable for student performance cause good teachers to leave low-performing schools? Using data from New York City, which assigns accountability grades to schools based on student achievement, I perform a regression discontinuity analysis and find evidence of the opposite effect. At the bottom end of the school grade distribution, I find that a lower accountability grade decreases teacher turnover and increases joining teachers’ quality. A likely channel is that accountability pressures induce increases in principal effort at lower-graded schools, especially among high-quality principals, and teachers value these changes. In contrast, at the top end of the school grade distribution, where accountability pressures are lower, low accountability grades may negatively impact joining teachers’ quality. |
| JEL: | I2 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24658&r=cfn |