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on Corporate Finance |
| By: | Egger, Peter; Erhardt, Katharina; Keuschnigg, Christian |
| Abstract: | This paper introduces a stylized theoretical framework to identify five different firm types depending on their financial situation and their ownership structure. Based on these firm types, the model explains the heterogeneous tax sensitivity of firm-level investments. Guided by the theoretical model, we empirically identify these partly latent firm types using a threshold estimation approach. The empirical analysis uses a large firm database for 17 countries allowing for a quantification of the regime-specific investment responses to taxation. We find important differences in the tax sensitivity of investment across firm-types for dividend as well as for corporate taxation. The impact of corporate taxation is up to 70% higher for entrepreneurial firms than for managerial firms. In contrast, dividend taxation has a comparable negative effect for cash-constrained managerial firms and entrepreneurial firms but no significant impact on their unconstrained counterparts. |
| Keywords: | Access to capital; corporate tax; Firm Heterogeneity; Manager-shareholder conflicts; Personal taxes |
| JEL: | D22 G32 H25 L21 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13341&r=cfn |
| By: | Tomáš Heryán (Department of Finance and Accounting, School of Business Administration, Silesian University) |
| Abstract: | The paper has focused on financial management of medium-sized hotels and travel agencies in eight selected Central and Eastern European (CEE) countries. According to a business finance theory, there should be inverse relation between liquidity and profitability of companies. In general, if managers decrease firm's liquidity through investing into the fixed assets they should increase firm's profitability, which is caused by possible higher earnings from those investments. The aim of the study is to estimate how is profitability of those profitable tourism companies affected by selected financial variables, and decide whether the business finance theory is valid also within tourism industry among selected CEE countries. Annual data from Amadeus, the international statistical database are obtained from 1,957 hotels and 785 travel agencies from Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, Slovakia, and Slovenia. General Methods of Moments (GMM) with panel data is used as the main estimation method for period from 2006 to 2015. However, results of the paper have shown that the business finance theory is not valid either within both types of tourism companies nor among all selected CEE countries. Furthermore, it is obvious that a conflict between managers of tourism companies and their owners should have been paid more attention. A creating of retained earnings within the stockholders' funds when owners had reinvested the earnings back to the business had particular significance for tourism companies' profitability within the period affected by the global financial crisis, even in the case of those profitable companies. |
| Keywords: | CEE countries, tourism, financial management, cash conversion cycle, stockholders' funds |
| JEL: | C50 D20 |
| Date: | 2018–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:opa:wpaper:0062&r=cfn |
| By: | Mário Augusto (CeBER and Faculdade de Economia, Universidade de Coimbra); José Murteira (jmurt@fe.uc.pt); António Pedro Pinto (CI&DETS and Escola Superior de Tecnologia e Gestão de Viseu, Instituto Politécnico de Viseu) |
| Abstract: | The present study examines the impact of family involvement on the debt structure of family businesses. Family corporate involvement is considered in three related but distinct dimensions: capital ownership, firm’s management and corporate control. The marginal effect of each of these three dimensions is specified as a unique regression parameter in a conditional mean model for the proportion of medium- plus long-term debt to total debt. This general strategy calls for an appropriate modelling and estimation approach, taking due account of the response variable’s inherent fractional definition and consequential nonlinear functional form of its conditional expectation, given covariates. Such an approach, combining a probit model for the equation of interest with a control function estimation method, is applied to a panel data set on Portuguese family businesses. Estimation results confirm the uniqueness of the impact of each of the three considered dimensions of families’ corporate involvement on the debt structure of firms. |
| Keywords: | Family firms; Management and control considerations; Debt maturity structure; Panel fractional data. |
| JEL: | G3 C23 C25 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:papers:2018-11&r=cfn |
| By: | Friewald, Nils; Nagler, Florian |
| Abstract: | We empirically study whether systematic over-the-counter (OTC) market frictions affect the large unexplained common factor in yield spread changes. Using transactions data on U.S. corporate bonds, we show that measures of marketwide inventory, search, and bargaining frictions reduce the unexplained common component by 19 percentage points. Systematic OTC frictions substantially improve the explanatory power of yield spread changes and account for one-third of their total explained variation. Inventory frictions are equally important in explaining the dynamics of yield spread changes as search and bargaining frictions combined. Our findings support the implications of leading theories of intermediation frictions in OTC markets. |
| Keywords: | Corporate bond market; dealer market; intermediation frictions; Over-the-counter market; yield spread changes |
| JEL: | G10 G12 G20 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13345&r=cfn |
| By: | Bryan Hardy |
| Abstract: | Emerging market firms frequently borrow in foreign currency (FX), but their assets are often denominated in domestic currency. This behavior leads to an FX mismatch on firms balance sheets, which can harm their net worth in the event of a depreciation. I use a large, unanticipated, and exogenous depreciation episode and a unique dataset to identify the real and financial effects of firm balance sheet shocks. I construct a new dataset of all listed non-financial firms, matched to their banks, in Mexico over 2008q1-2015q2. This dataset combines firm-level balance sheets and real outcomes, currency composition of both assets and liabilities, and firms' loan-level borrowing from banks in peso and FX. This data allows me to control for shocks to firms' credit supply to identify the balance sheet shock and examine its real consequences. I find that non-exporting firms that have a larger FX mismatch experience greater negative balance sheet effects following the depreciation. Among these, smaller firms see a decrease in loan growth, resulting in stagnant employment growth and decreased growth in physical capital relative to firms with smaller FX mismatch. Larger firms with a large FX mismatch also have lower growth in FX loans following the shock, but are able to increase borrowing in peso loans, resulting in relatively higher growth in employment and physical capital. My results imply that firms are subject to net worth based borrowing constraints, and that these constraints are more binding on smaller firms and for loans in FX. |
| Keywords: | balance sheet shocks, credit rationing, currency risk, foreign currency, corporate finance, bank lending, investment |
| JEL: | E44 F31 F41 F44 G31 G32 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:758&r=cfn |
| By: | Pham, Tho; Talavera, Oleksandr; Tsapin, Andriy |
| Abstract: | This paper exploits the geopolitical conflict in Eastern Ukraine as a negative shock to banking sector and examines the shock transmission. We find that banks with more loans in the conflict areas during the pre-conflict period face a higher level of bad loans in other markets after the shock. This effect is stronger in the regional markets which are closer to the conflict zone. We also find evidence for the “flight to headquarters” effect in post-conflict lending. Specifically, while more affected banks tend to cut their credit supply, the larger contraction is observed in regional markets located farther from headquarters. |
| JEL: | G01 G21 |
| Date: | 2018–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2018_021&r=cfn |
| By: | Ding, Lei (Federal Reserve Bank of Philadelphia); Lee, Hyojung (Harvard University); Bostic, Raphael W. (fedreal reserve bank of Atlanta) |
| Abstract: | This study provides new evidence on the effectiveness of the Community Reinvestment Act (CRA) on small business lending by focusing on a sample of neighborhoods with changed CRA eligibility status across the country because of an exogenous policy shock in 2013. The results of difference-in-differences analysis provide consistent evidence that the CRA promotes small business lending, especially in terms of number of loan originations, in lower-income neighborhoods. The generally positive effects of the CRA are sensitive to the types of CRA treatment. Losing CRA eligibility status has a relatively larger effect on small business lending activities, while the effects of newly gaining CRA eligibility are less pronounced. The results are fairly robust when alternative sample periods and control groups are used. |
| Keywords: | Small Business; Credit; Community Reinvestment Act |
| JEL: | G21 G28 G32 |
| Date: | 2018–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:18-27&r=cfn |
| By: | Finger, R.; Hirsch, S.; Lanter, D. |
| Abstract: | This article investigates the drivers and the persistence of firm profits in EU food retailing thereby generating insights for the derivation of managerial strategies as well as antitrust policies in this highly dynamic sector. Using a dynamic panel model, a sample of 13,256 food retailers from five EU countries France, Poland, Spain, Sweden, and the UK is analyzed over the period 2006 to 2014. Our findings indicate that profits in food retailing are more persistent than in other retail sectors presumably caused by high bargaining power towards processors and entry barriers that lead to less pronounced competition. The results also show that profits are influenced by firm- and industry-specific characteristics. While industry concentration and firm size positively influence profitability, firm age and financial risk tend to have a negative impact. Acknowledgement : |
| Keywords: | Agribusiness |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:277105&r=cfn |
| By: | Ronald B. Davies; Neill Killeen |
| Abstract: | Tax arbitrage is often cited as a potential motive for the substantial growth and complexity of market based finance. Tax treaties are an important feature of the international tax system and can be used to reduce the tax burden on cross-border capital flows. Using an EU firm-level dataset and a number of alternative tax treaty measures, this paper investigates the importance of tax treaties on the investment decisions of a large sample of non-bank financial institutions. The novel dataset includes conduits such as special purpose entities which are often used to channel cross-border investments. Our results show that tax treaties influence the extensive margin of non-bank financial FDI with conduit related investments particularly sensitive to international taxation. |
| Keywords: | Tax treaties; Market-based finance; Shadow banking system; Conditional logit model; Mixed logit model; Nested logit model |
| JEL: | F23 G23 G32 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:ucn:wpaper:201818&r=cfn |
| By: | Popov, Alexander; Wolski, Marcin; Barbiero, Francesca |
| Abstract: | Using a pan-European dataset of 8.5 million firms, we find that firms with high debt overhang invest relatively more than otherwise similar firms if they are operating in sectors facing good global growth opportunities. At the same time, the positive impact of a marginal increase in debt on investment efficiency disappears if firm debt is already excessive, if it is dominated by short maturities, and during systemic banking crises. Our results are consistent with theories of the disciplining role of debt, as well as with models highlighting the negative link between agency problems at firms and banks and investment efficiency. JEL Classification: E22, E44, G21, H63 |
| Keywords: | banking crises, debt overhang, investment efficiency |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20182213&r=cfn |