nep-cfn New Economics Papers
on Corporate Finance
Issue of 2019‒05‒20
fourteen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Does Credit Reporting Lead to a Decline in Relationship Lending? Evidence from Information Sharing Technology By Sutherland, Andrew
  2. Institutional Investor Attention and Firm Disclosure By Abramova, Inna; Core, John; Sutherland, Andrew
  3. Tobin's Q of Honda Motor Company, Limited and its Determinants from 2013 to 2017 By Khoo, Shi Shean
  4. Corporate Governance Index And Its Determinants In Samsung Company By Lim, Guan Ta
  5. The European venture capital landscape: an EIF perspective. Volume V: The economic impact of VC investments supported by the EIF By Pavlova, Elitsa; Signore, Simone
  6. The Governance of Risk Management: The Importance of Directors’ Independence and Financial Knowledge By Dionne, Georges; Maalaoui Chun, Olfa; Triki, Thouraya
  7. Corporate Governance and Its Determinants: A Study on Wells Fargo Scandal By Mohd Nor Zamry, Nur Syafinaz
  8. Tobin’s Q and Its Determinants: A Study of Market Valuation in MISC Berhad By Syazwani, Anis
  9. The influence of capital structure on financial performance of microfinance institutions By Razvan-Gabriel Hapau
  10. Entrepreneurial Incentives and the Role of Initial Coin Offerings By Rod Garratt; Maarten van Oordt
  11. Banks as Patient Lenders: Evidence from a Tax Reform By Carletti, Elena; De Marco, Filippo; Ioannidou, Vasso; Sette, Enrico
  12. Study on the correlation between the development of the capital market and the economic growth by groups of countries By Ioana-Maria Dobjanschi
  13. Productivity growth and finance: The role of intangible assets - a sector level analysis By Lilas Demmou; Irina Stefanescu; Axelle Arquie
  14. Learning about Competitors: Evidence from SME Lending By Darmouni, Olivier; Sutherland, Andrew

  1. By: Sutherland, Andrew
    Abstract: I examine how credit reporting affects where firms access credit and how lenders contract with them. I use within firm-time and lender-time tests that exploit lenders joining a credit bureau and sharing information in a staggered pattern. I find information sharing reduces relationship-switching costs, particularly for firms that are young, small, or have had no defaults. After sharing, lenders transition away from relationship contracting, in two ways: contract maturities in new relationships are shorter, and lenders are less willing to provide financing to their delinquent borrowers. My results highlight the mixed effects of transparency-improving financial technologies on credit availability.
    Keywords: Debt contracts; information sharing; information asymmetries; hard and soft information; credit bureaus; relationship lending; transactional lending; information economics; entrepreneurial finance; credit reports; credit scores, FinTech
    JEL: D82 D83 G21 G23 G30 G32 M41
    Date: 2018
  2. By: Abramova, Inna; Core, John; Sutherland, Andrew
    Abstract: We study how short-term changes in institutional owner attention affect managers’ short-term disclosure choices. Holding institutional ownership constant and controlling for industry-quarter effects, we find that managers respond to attention by increasing the number of forecasts and 8-K filings. Rather than alter the decision of whether to forecast or to provide more informative disclosures, attention causes minor disclosure adjustments. Although attention explains significant variation in the quantity of disclosure, we find little change in abnormal volume and volatility, the bid-ask spread, or depth. Overall, our evidence suggests that management responds to temporary institutional investor attention by making disclosures that have little effect on information quality or liquidity.
    Keywords: disclosure, management forecasts, 8-K filings, information quality, liquidity, institutional ownership, passive investors, corporate governance, monitoring
    JEL: G1 G12 G14 G23 G32 G34
    Date: 2019–04–11
  3. By: Khoo, Shi Shean
    Abstract: A firm’s market capitalization can be influenced by internal or external factors. This may be caused by and linked to corporate governance failures and the changes of macroeconomic factors. This paper attempted to investigate the internal determinants (corporate governance index, return on assets, return on equity, Altman Z) and external determinants (gross domestic product, unemployment rates and exchange rate) of Tobin’s Q and how they influence Tobin’s Q of Honda Motor Company, Limited from 2013 to 2017. The importance of corporate governance will also be delivered indirectly in this study. Ordinary Least Square analysis (OLS) was used to study the significance of independent variables towards Tobin’s Q. The findings showed that Altman Z (internal determinant) was positively significant to the Tobin’s Q ratio and influenced Tobin’s Q the most. This study also suggested the firm to focus on its corporate governance principle, which is transparency to avoid bankruptcy.
    Keywords: Tobin’s Q, market capitalization, Altman Z, corporate governance
    JEL: B22 G3 G34 O1 O16
    Date: 2019–05–12
  4. By: Lim, Guan Ta
    Abstract: The aim of this study is to examine the relationship between Corporate Governance Index and with its dependents. This Samsung Company had been chosen as the focus of our studies. Five years of data were collected from Samsung’s annual reports and websites from the year 2014 until the year 2018. The data collected is used to calculate the descriptive analysis which will be shown in the reports. Based on our studies, the dependent variables were the Corporate Governance Index. And for the independent variables, We had chosen Return on Asset (ROA), Return On Equity (ROE), Tobin’s Q, and Altman Z as the Internal factors and for the data like GDP per capita, Unemployment rate, and Exchange rate had been chosen as the external factors. The Stepwise method is used to claiming the results for the Correlations, regression results and etc to observe the most significant with the corporate governance index. Only the unemployment rate shows the most influence on the Corporate Governance Index.
    Keywords: Corporate Governance, Corporate Governance Index, ROA, ROE Unemployment Rate, GDP per capita
    JEL: B21 B22 E24 G3 G33 G34 O16
    Date: 2019–05–05
  5. By: Pavlova, Elitsa; Signore, Simone
    Abstract: This paper examines the impact of venture capital (VC) investments supported by the EIF on the financial growth and performance of young and innovative firms. Using a novel dataset covering European start-ups supported by VC in the years 2007 to 2014, we generate a counterfactual group of non-VCbacked firms through a combination of exact and propensity score matching. To offset the relatively limited set of observables allowed by our data, we estimate treatment propensity using a series of innovative measures based on machine learning, network theory, and satellite imagery analysis. Our results document the positive effects of EIF-supported VC investments on start-up performance, as measured through various financial indicators (e.g. assets, revenue, employment). We find that VC financing enables start-ups to prioritise long-term growth, trading off short- to medium-term profitability if necessary. Overall, our work provides meaningful evidence towards the positive effects of EIF-supported VC investment on the financial growth of young and innovative businesses in Europe.
    Keywords: EIF,venture capital,public intervention,real effects,start-ups,machine learning,geospatial analysis,network theory
    JEL: G24 L25 M13 O38
    Date: 2019
  6. By: Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Maalaoui Chun, Olfa (HEC Montreal, Canada Research Chair in Risk Management); Triki, Thouraya (HEC Montreal, Canada Research Chair in Risk Management)
    Abstract: This paper tests the effects of the independence and financial knowledge of directors on risk management and firm value in the gold mining industry. Our original hand-collected database on directors’ financial education, accounting background, and financial experience allows us to test the effect of each dimension of financial knowledge on risk management activities. We show that directors’ financial knowledge increases firm value through the risk management channel. This effect is strengthened by the independence of the directors on the board and on the audit committee. Extending the dimension of education, we show that, following unexpected shocks to gold prices, educated hedgers are more effective than average hedgers in the industry. As a policy implication, our results suggest adding the experience and education dimensions to the 2002 Sarbanes–Oxley Act and New York Stock Exchange requirements for financial literacy.
    Keywords: Risk management governance; financial knowledge; financial and accounting education of director; financial experience of director; independence of director; policy implications.
    JEL: D83 G18 G30 G32 G34 G38
    Date: 2018–01–04
  7. By: Mohd Nor Zamry, Nur Syafinaz
    Abstract: Despite having the perfect board, Wells Fargo was hit with a scandal in 2016 as a result from its cross-selling tactics and intense pressure to its employee to achieve impossible targets. Due to its decentralized management, fake accounts were created without customer knowledge, sometimes forging their signatures. This study aims to investigate the impact of corporate governance index in relation to bankruptcy, firm value, company performance and macroeconomics. Multiple regression analysis is applied on the sample of five years of Wells Fargo data from the year 2014 to 2018. The findings shows that corporate governance index has been influenced and affected by internal factors specifically by return on asset (ROA). Moreover, there is a moderate significant relationship between corporate governance index and unemployment rate. The analysis further explained that ROA negatively influence CGI which supports the results from Wells Fargo decentralized management that led to the crisis of the firm.
    Keywords: corporate governance index, return on asset (ROA), Wells Fargo Scandal
    JEL: G3 G34 L1 L2
    Date: 2019–05–05
  8. By: Syazwani, Anis
    Abstract: The study examines the impact of Tobin’s Q or market valuation determinants on firm corporate governance of MISC Berhad. Tobin’s Q of the firm represents the ratio of market capitalization plus long-term debt to total assets. This study employs time series regression analysis from 2012 to 2016. The findings show that only internal factors giving significant impact to the market valuation of the firm when it has been tested solely in Model 1 and combined for both internal and external factors in Model 3. Meanwhile, there is no significant result when the external factors were tested solely in Model 2. The multiple linear regression analysis shows that the Altman Z score is the most significant and positively influenced the market valuation of MISC Berhad.
    Keywords: Tobin’s Q, Market Valuation, Internal Factors, External Factors
    JEL: E3 E31 G32 G33
    Date: 2019–05–07
  9. By: Razvan-Gabriel Hapau (Academy of Economic Studies, Bucharest)
    Abstract: This paper aims to investigate the influence of capital structure on the financial performance of microfinance institutions (MFIs) using a sample of 89 institutions from 35 countries using the data provided by the MIX Market platform for the year 2015.In order to do that, the paper focus on two main objectives: the first one is to evaluate the financial performance of microfinance institutions using a synthetic measure-composite index based on principal component analysis using several financial indicators and the second one is to assess the impact of capital structure on the MFIsfinancial performance composite index using regression techniques, taking into account three proxies for capital structure(capital to asset ratio, debt to equity ratio, deposits to total assets) and controlling for a variety of MFI-specific variables.Theempirical results pointed out two important factors for the financial performance of MFIs: profit margin and yield on gross loan portfolio. Based on the results of the composite index, Mexico, Azerbaijan, Bolivia, Nepal, Romania, Moldova, Egypt, Armenia and Bolivia are considered to be poles of microfinance performance. In Romania, the best performances were recorded by Express Finance, while at the opposite side there are OMRO and Pro-Credit, which performed poorly.Analysing the influence of capital structure on the financial performance of MFIs, a significant and positive impact have been highlighted by the capital to asset ratio, while for the other two proxies any influence has been refuted. Therefore, a higher ratio of capital to total assets is positively associated with a higher MFIs financial performance.
    Keywords: microfinance institutions, capital structure, financial performance, principal component analysis, regression analysis
    JEL: G21 G32 G10 G15 C38 C40
    Date: 2018–05
  10. By: Rod Garratt; Maarten van Oordt
    Abstract: Initial coin offerings (ICOs) are a new mode of financing start-ups that saw an explosion in popularity in 2017 but declined in popularity in the second half of 2018 as regulatory pressure, instances of fraud and reports of poor performance began to undermine their reputation. We examine whether ICOs are a passing fad or a worthwhile form of financing with beneficial economic properties. We do so by examining how financing a start-up through an ICO changes the incentives of an entrepreneur relative to debt and venture capital financing. Depending on market characteristics, an ICO can result in a better or worse alignment of the interests of the entrepreneur and the investors compared with conventional modes of financing. Notably, an ICO can be the only form of financing that induces optimal effort and hence maximizes the net present value of the start-up, and there are projects that should not take place at all unless they can be financed through an ICO.
    Keywords: Asset Pricing; Exchange rates
    JEL: G32
    Date: 2019–05
  11. By: Carletti, Elena; De Marco, Filippo; Ioannidou, Vasso; Sette, Enrico
    Abstract: We study how a greater reliance on deposits affects bank lending policies. For identification, we exploit a tax reform in Italy that induced households to substitute bank bonds with deposits. We show that the reform led to larger increases (decreases) in term deposits (bonds) in areas where households held more bonds before the reform. We then find that banks with larger increases in deposits did not change their overall credit supply, but increased credit-lines and the maturity of term-loans. These results are consistent with key theories on the role of deposits as a discipline device and of banks as liquidity providers.
    Keywords: banks; deposits; government guarantee; Maturity; risk-taking
    JEL: G01 G21 G28
    Date: 2019–05
  12. By: Ioana-Maria Dobjanschi (Acamedy of Economics Studies, Bucharest)
    Abstract: The correlation between financial market development and economic growth was and is still an intensively studied theme from the theoretical and empirical point of view. Because of this fact, the main goal of this article is to theoretically and empirically discover the relationship between thefinancial markets and economic growth using panel regression, OLS method. The database used is composed from some variables for 30 countries during the period 2006-2016 and the frequency of the data is annual.
    Keywords: economic growth, financial markets development, capital market, banking market, panel regression
    JEL: C33 E51
    Date: 2018–11
  13. By: Lilas Demmou; Irina Stefanescu; Axelle Arquie
    Abstract: Investment in intangible assets has become an increasingly important driver of productivity growth in OECD countries. Facing stronger informational asymmetries and harder to value collateral, intangible investment is subject to more severe financial constraints and relies more on internal rather than external capital. To test the hypothesis that the availability of finance, and financial development in particular, is more important for productivity growth in sectors that are intensive in intangible assets, an empirical analysis is carried over a panel of 32 countries and 30 industries, from 1990 to 2014. Overall, results confirm that the impact of financial development on labour productivity is not uniform across sectors. It varies based on country-specific institutional settings and sector-specific characteristics such as the intangible asset intensity, financial structure and external financial dependence. Policies and institutional settings may relax financial constraints by: i) altering the overall composition of finance; ii) encouraging competition and iii) strengthening the legal environment in which businesses operate.
    Keywords: Financial Development, Intangible assets, Productivity Growth
    JEL: G10 G21
    Date: 2019–05–17
  14. By: Darmouni, Olivier; Sutherland, Andrew
    Abstract: This paper provides evidence of strategic complementarities in lenders’ contract terms in SME financing. To isolate this strategic effect from lenders’ joint reaction to unobserved common shocks to fundamentals, we exploit the staggered entry of lenders into an information sharing platform. Upon joining, lenders adjust their terms toward what others are offering. This effect is mediated by market power and seems to be driven by incentives to match rivals in order to preserve market share as opposed to learning about fundamentals. We also find evidence that this strategic behavior increased delinquencies during the recent crisis.
    Keywords: competition, strategic complementarities, information sharing, credit bureau, corporate loans, SME
    JEL: D22 D43 D82 D83 G00 G21 G24 G30
    Date: 2018

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