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on Corporate Finance |
| By: | Rao, Vivek (Asian Development Bank) |
| Abstract: | A recent Asian Development Bank publication estimates the large infrastructure financing requirement in Asia for the period 2016–2030, which establishes the strong need to encourage private sector participation to meet investment requirements. This paper analyzes a critical aspect of expanding private finance to infrastructure by examining the role of bank lending to public–private partnership (PPP) projects through the project finance modality. The key empirical results suggest that project financing by banks to infrastructure PPP projects is still in its infancy in several Asian markets, and banks are guided more by macroeconomic factors and by the strength of their balance sheets. The key policy implications to unlock bank finance for infrastructure PPP projects lie in reducing macroeconomic risk factors and having well-capitalized banks. The latter assumes significance, given the higher capital requirements that banks are expected to fulfill, following the adoption of Basel III capital standards. |
| Keywords: | project finance; bank lending; infrastructure; public–private partnership |
| JEL: | G21 G32 H41 H54 |
| Date: | 2018–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0554&r=all |
| By: | Hyun, Suk (Korea Capital Market Institute); Park, Donghyun (Asian Development Bank); Tian, Shu (Asian Development Bank) |
| Abstract: | In this study, we attempt to understand the role of greater access to finance, i.e., stocks, bonds, and bank loans, in public–private partnership (PPP) investment in developing countries. Most developing countries still depend heavily on fiscal financing for infrastructure projects. Our empirical results reconfirm the fact that banks remain the major source of finance for infrastructure projects. The domestic bond market should be further developed to have depth and liquidity enough to provide longterm funding for private sector investors. Interestingly, we find a negative impact of bond market development on PPP investment. A possible interpretation is that financing through government bonds, which dominates bond markets in developing countries, discourages private sector participation by reducing financing access to the corporate bond market. Our evidence underlines the importance of a well-functioning corporate bond market in developing countries, which can offer long-term financing to private sector participation in infrastructure investments. |
| Keywords: | bond market development; government bond; public–private partnership |
| JEL: | E20 G10 H00 |
| Date: | 2018–08–07 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0552&r=all |
| By: | Nizam, Ahmed Mehedi |
| Abstract: | Basel framework for bank's capital adequacy has been criticized for its over reliance on external credit rating agencies. Moreover, implementation of Minimum Capital Requirement (MCR) under Basel-III is often linked to a decrease in economic growth as it requires banks to maintain a higher capital base which raises their cost of fund. In addition to these, here, we criticize the Basel accord for the capital requirement under this framework is not inspired by the essence of the basic accounting equation. Moreover, under Basel framework, capital requirement and liquidity parameters are discussed separately. Here, we argue that the capital requirement should arise as a by-product of the day to day liquidity management and hence both the requirements can be brought together under one umbrella which enables us to view the overall position of a bank from a more holistic point of view. Here, we attain all the above issues and provide a comprehensive framework regarding bank's capital adequacy and liquidity requirements which is claimed to settle all the aforementioned issues and reduces all the extensive paper works needed for the implementation of the Basel accord. |
| Keywords: | Basel; Capital Adequacy; Minimum Capital Requirement; MCR; Liquidity Ratio; LCR; NSFR; Liquidity Coverage Ratio; Net Stable Funding Ratio; Banking; Basic Accounting Equation |
| JEL: | E58 G0 G01 G20 G21 G28 |
| Date: | 2019–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92330&r=all |
| By: | Yanagisako, Sylvia |
| Abstract: | Evidence from around the globe shows that family firms are enduring, resilient forms of profit-seeking and not an archaic, transient form that will inevitably disappear. Social science research has tended to characterize the family values of these firms as producing "efficiency distortions" that adversely affect their financial performance. The author suggests an alternative heuristic approach of treating family firms as kinship enterprises that endure beyond the life of the firm. This approach enables us to understand how the timing of decisions about capital accumulation, expansion and diversification, as well as managerial organization, are shaped by kinship sentiments and intergenerational commitments without setting up an opposition between economic and kinship goals. |
| Keywords: | family firms,kinship,Italian firms,Italian-Chinese joint enterprises |
| JEL: | A13 D22 D91 L21 Z13 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201912&r=all |
| By: | Farboodi, Maryam; Mihet, Roxana; Philippon, Thomas; Veldkamp, Laura |
| Abstract: | We study a model where firms accumulate data as a valuable intangible asset. Data accumulation affects firms' dynamics. It increases the skewness of the firm size distribution as large firms generate more data and invest more in active experimentation. On the other hand, small data-savvy firms can overtake more traditional incumbents, provided they can finance their initial money-losing growth. Our model can be used to estimate the market and social value of data. |
| Keywords: | Big Data; firm size |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13489&r=all |
| By: | Hickfang, Michael; Holder, Ulrike |
| Abstract: | This paper investigates whether and how founder-CEOs' risk incentives (VEGA) are related to firm innovation. We exploit a change in the accounting treatment of stock-based compensation under FAS 123R in 2005 to show a relationship between founders' risk-taking incentive and innovation. Using a sample of 226 firm-year observations between 2002 and 2008, we first show that stock options are incentives that encourage founder-CEOs to engage in risk-taking behaviour and that these were significantly reduced as a result of FAS 123R. Secondly, we find that innovation activities of the observed firms are significantly declining due to the reduction of the option compensation and the associated reduction in VEGA of founder-CEOs. Finally, our difference-in-differences approach provides strong evidence that there is a relationship between CEOs risk-taking and innovation output. Our results imply that even in founder-led firms it is important to incentivise founders' risk-taking behaviour in order that firms continue to innovate and remain competitive. |
| JEL: | G30 G32 G38 D80 O31 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:umiodp:122018&r=all |
| By: | Khanal, Aditya; Tegegne, Fisseha; Li, Lan; Goetz, Stephen; Han, Yicheol; Tubene, Stephen; Wetherill, Andy |
| Keywords: | Agricultural Finance, Community/Rural/Urban Development, Farm Management |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea19:284295&r=all |
| By: | Andersson, Per-Åke (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Sida is exploiting loan guarantee schemes to leverage finance from the private sector in partner countries. This paper is a literature review of the rationale for and experiences of this type of schemes, focusing on Small and Medium Enterprises. Since, credit rationing and moral hazard problems certainly occur in partner countries, loan guarantee schemes could become an important instrument for Sida. Loan guarantee schemes are popular in many countries and the overall experience seems to be positive. Unfortunately, impact evaluations are uncommon. The schemes have positive effects on short-run financial outcome of companies and, in the long run, economic outcomes are more often positive than negative. |
| Keywords: | Loan guarantee schemes; SMEs; development cooperation |
| JEL: | F35 G21 G23 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0752&r=all |
| By: | Najam, Najam Ul Sabeeh; Mehmood, Arshad Mehmood |
| Abstract: | Do natural disasters and terrorism affect the financial markets of Pakistan? We aimed to answer this question by studying a large dataset of stock returns of financial markets of Pakistan with respect to natural disasters and terrorist activities. The dataset consists of a total of 289 terrorist events and 45 natural disasters; taken from the Global Terrorism Database (GTD) and Emergency Database (EM-DAT), covering events from the year 2003 to 2017. The event study methodology used to analyze daily, weekly and monthly stock returns of concerned sectors. Calculated the Abnormal returns with the help of market adjusted return model. The findings show that terrorist events have a statistically significant negative impact on the banking sector returns as well as insurance sector returns. Furthermore, the impact on the Pakistan Stock Market is insignificant. The impact of natural disasters on stock markets was not significant however when studied separately the floods have a negative significant impact on bank returns while insignificant for insurance and stock market returns. On the other hand, earthquakes are negatively affecting the stock market but no impact has been reported significant neither for insurance nor for banks returns. |
| Keywords: | Terrorism, Natural Disasters, Stock Market, Financial Sectors, Event Study Methodology, Market Adjusted Returns Model |
| JEL: | G21 O16 |
| Date: | 2019–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:92278&r=all |
| By: | Park, Donghyun (Asian Development Bank); Shin, Kwanho (Korea University); Tian, Shu (Asian Development Bank) |
| Abstract: | The rapid accumulation of private debt is widely viewed as a major risk to financial and economic stability. This paper systematically and comprehensively assesses the effect of private debt buildup on economic growth. In the spirit of Mian, Sufi, and Verner (2017) that separately examine the effects of two types of private debt, i.e., household debt and corporate debt, on growth in developed economies, this study specifically provides new evidence on the growth–private debt nexus in both advanced and emerging market economies (EMEs). Moreover, we construct financial peaks in terms of the speed of debt accumulation rather than crisis dates and find that in both advanced and EMEs, corporate debt buildups cause more financial peaks than household debt buildups. Further, corporate debt-induced financial recessions inflict a bigger damage on output than household debt-induced financial recessions in EMEs. Overall, our evidence suggests that policy makers would do well to closely monitor not only household debt but also corporate debt. |
| Keywords: | : business cycle; corporate debt; crisis; debt; economic growth; household debt; output; private debt |
| JEL: | E32 E44 G01 |
| Date: | 2018–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0567&r=all |
| By: | Omobitan, Omobolaji; Khanal, Aditya; Honey, Ummey |
| Keywords: | Agricultural Finance, Farm Management, Production Economics |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea19:284282&r=all |
| By: | Matti Keloharju; Juhani T. Linnainmaa; Peter Nyberg |
| Abstract: | Long-term expected returns appear to vary little, if at all, in the cross section of stocks. We devise a bootstrapping procedure that injects small amounts of variation into expected returns and show that even negligible differences in expected returns, if they existed, would be easy to detect. Markers of such differences, however, are absent from actual stock returns. Our estimates are consistent with production-based asset pricing models such as Berk, Green, and Naik (1999) and Gomes, Kogan, and Zhang (2003) in which firms' risks change over time. We show that long-term reversals in stock returns are the consequence of the rapid convergence in expected returns. Our results imply stock market anomalies have only a limited effect on firm valuations. |
| JEL: | G12 G31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25579&r=all |