nep-cfn New Economics Papers
on Corporate Finance
Issue of 2020‒02‒10
thirteen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Private debt renegotiation and financial institutions' network By Christophe GODLEWSKI; Bulat SANDITOV
  2. Firming up the capital base of the Austrian business sector - Consolidating Austria’s business sector strengths and its social role in the face of new challenges By Dennis Dlugosch; Rauf Gönenç; Eun Jung Kim; Aleksandra Paciorek
  3. Implied Volatility Changes and Corporate Bond Returns By Jie Cao; Amit Goyal; Xiao Xiao; Xintong Zhan
  4. Option Trading and Stock Price Informativeness By Jie Cao; Amit Goyal; Sai Ke; Xintong Zhan
  5. Winners and losers from Sovereign debt inflows: evidence from the stock market By Fernando Broner; Alberto Martin; Lorenzo Pandolfi; Tomas Williams
  6. Structural and cyclical determinants of access to finance: Evidence from Egypt By Betz, Frank; Ravasan, Farshad R.; Weiss, Christoph T.
  7. Bank stocks inform higher growth – A System GMM analysis of ten emerging markets in Asia By Mittal, Amit; Garg, Ajay Kumar
  8. Debt, Innovation, and Growth By Thomas Geelen; Jakub Hajda; Erwan Morellec
  9. Determinants of investment in tangible and intangible fixed assets By Miguel García-Posada; Álvaro Menéndez; Maristela Mulino
  10. Productivity and finance: the intangible assets channel - a firm level analysis By Lilas Demmou; Guido Franco; Irina Stefanescu
  11. How Does Information Affect Liquidity in Over-the-Counter Markets? By Michael Junho Lee; Antoine Martin
  12. Productivity growth determinants of differently developed countries: comparative capital input results By Toma Lankauskiene
  13. Financial disclosure environment and the cash policy of private firms By Marcelo Ortiz

  1. By: Christophe GODLEWSKI (LaRGE Research Center, Université de Strasbourg); Bulat SANDITOV (Université Paris-Saclay, Univ Evry, IMT-BS, LITEM)
    Abstract: We study the influence of financial institutions’ network on private debt renegotiation outside of distress. Lenders with a network-central position have access to superior private information, are more experienced and trustworthy and have a greater reputational capital. Using a large sample of more than 10.000 loans issued in 25 European countries we find that network-central lenders have a significant influence on the renegotiation process. Such lenders increase the likelihood of renegotiation, the number of renegotiation rounds, and the number of amendments to the loan agreement. Our findings survive multiple robustness checks and confirm that access to superior information, greater experience, reputation, and trust encourages private debt renegotiation.
    Keywords: financial contracts, bank loan, renegotiation, syndicated lending, social network analysis, lender network, lender centrality.
    JEL: G21 G24 G32 G34
    Date: 2020
  2. By: Dennis Dlugosch; Rauf Gönenç; Eun Jung Kim; Aleksandra Paciorek
    Abstract: While small- and medium sized firms in Austria are generally more productive, export more, and engage more in higher technology activities than in comparable countries, they need to adapt better to the knowledge economy to maintain their relative performance levels. The capital structure of Austrian SMEs are biased towards debt-financing and stronger equity, growth and venture capital markets would provide them with further resources for their long-term knowledge based investments. Skills shortages, in particular in advanced digital technologies, should be overcome. As around one third of all SMEs are up for ownership transmissions, ensuring successful business transfers will be crucial for maintaining the broad-based entrepreneurial dynamism. Meeting these challenges would also help to lift constraints on upscaling that many SMEs face and would provide the fruitful soil for future innovative activities.This Working Paper relates to the 2019 OECD Economic Survey of Austria ( nomic-snapshot/)
    Keywords: allowance for corporate equity, capital structure of SMEs, debt-financing, ownership transmissions, skill shortages
    JEL: E22 G30 G32 G38 G21 J11 J21
    Date: 2020–02–03
  3. By: Jie Cao (The Chinese University of Hong Kong (CUHK) - CUHK Business School); Amit Goyal (University of Lausanne; Swiss Finance Institute); Xiao Xiao (Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)); Xintong Zhan (The Chinese University of Hong Kong (CUHK) - CUHK Business School)
    Abstract: Option implied volatility change has significant cross-sectional predictive power for the underlying firms’ bond returns. Corporate bonds with large increases in implied volatilities over the past month underperform those with large decreases in implied volatilities by approximately 0.6% per month. The results are robust to various bond characteristics and volatility related variables, as well as to stock and bond factor models. Our results are consistent with the notion that informed traders with new information about default risk prefer to trade in the option market, and that the corporate bond market is slow in incorporating that information.
    Keywords: Corporate bonds, implied volatility changes, default risk, information diffusion
    JEL: G10 G12 G14
    Date: 2019–06
  4. By: Jie Cao (The Chinese University of Hong Kong (CUHK) - CUHK Business School); Amit Goyal (University of Lausanne; Swiss Finance Institute); Sai Ke (University of Houston - C.T. Bauer College of Business); Xintong Zhan (The Chinese University of Hong Kong (CUHK) - CUHK Business School)
    Abstract: We examine the impact of single-name option trading on stock price informativeness. By documenting a robust relation and establishing causality, we confirm that option trading causes the stock price to incorporate more firm-specific information. Our findings are through the channels of investors’ acquiring more information and through managers’ voluntary release. The findings are driven by firms with higher information asymmetry and firms with more efficiently priced options.
    Keywords: option trading, price informativeness, stock synchronicity, information acquisition and production
    JEL: G02 G12 G13 G14
    Date: 2019–06
  5. By: Fernando Broner; Alberto Martin; Lorenzo Pandolfi; Tomas Williams
    Abstract: This paper analyzes the effects on firms of sovereign debt inflows in emerging countries. To deal with the endogeneity between capital inflows and economic activity, we focus on capital inflows driven by countries’ inclusions into well-known local currency sovereign debt market indexes. These events convey little information about the future economic prospects of countries but induce large capital flows from institutional investors tracking the indexes. We show that inclusion-driven flows significantly reduce government bond yields and appreciate the domestic currency. In turn, these flows have heterogenous impact on firms’ stock market returns. Government related firms, financial firms and firms with larger financial constraints experience positive abnormal returns following the announcement of these events. Instead, companies operating in export-intensive sectors have negative abnormal returns. Our findings shed novel light on the channels through which capital inflows to sovereign debt markets affect firms in the economy.
    Keywords: Sovereign debt; capital inflows; exchange rate; government bond yields; external financial dependence
    JEL: F31 F32 F36 G15 G23
    Date: 2019–12
  6. By: Betz, Frank; Ravasan, Farshad R.; Weiss, Christoph T.
    Abstract: Using panel data on Egyptian firms to explore cyclical and structural determinants of access to finance, we find that firms with more educated and more experienced managers are more likely to open a checking account, often a prerequisite for obtaining credit. Firms that started operating in the informal sector before registering are less likely to engage with the banking system. Exploiting data on the location of firms and bank branches, we also show that firms located in areas with a greater presence of banks that invest more in government debt are more likely to be credit constrained due to crowding out of the private sector.
    Keywords: financial constraints,crowding out,managerial skills
    JEL: G21 O15 O17
    Date: 2019
  7. By: Mittal, Amit; Garg, Ajay Kumar
    Abstract: The paper aims to recover the critical role of banks in defining the relationship between Financial Development and growth. We hypothesize that Banks can positively motivate templatized GDP growth. A System GMM estimation of GDP growth in a sample of high growth emerging markets from Asia investigates if bank stocks contain information beyond the monetary and banking aggregates.
    Keywords: Banks, Economic Growth, Asia, Emerging Markets, GMM system
    JEL: C23 F02 F63 F65 G01 G14 G21 G28 G3 G30
    Date: 2018–12–31
  8. By: Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (University of Lausanne; Swiss Finance Institute); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)
    Abstract: Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence..
    Keywords: debt, innovation, industry dynamics, growth
    JEL: G32 O30
    Date: 2019–07
  9. By: Miguel García-Posada (Banco de España); Álvaro Menéndez (Banco de España); Maristela Mulino (Banco de España)
    Abstract: We investigate which firm characteristics are associated with investment in tangible and intangible fixed assets, paying special attention to the case of R&D, and which funding sources are used for each type of investment. Regarding firm characteristics, we find that younger and more profitable firms tend to invest more in all asset types. In the case of size, larger firms invest more in R&D and intangibles but less in tangible fixed assets. In addition, there is a concave relationship between leverage and investment. Regarding funding sources, we find that cash flow is the most important source of funding for intangibles and R&D, whereas financial debt is the most important funding source for tangible fixed assets. Stock issues are used to fund R&D and, especially, tangible fixed assets. Firms use cash holdings to smooth investment in R&D.
    Keywords: investment, tangible fixed assets, R&D, intangibles
    JEL: G31 G32 O32
    Date: 2020–02
  10. By: Lilas Demmou; Guido Franco; Irina Stefanescu
    Abstract: Using a cross-country firm level panel dataset from 1995 to 2015, this paper revisits the finance–productivity nexus by looking at the role of intangible assets. It argues that due to their specific characteristics, such as valuation uncertainty and lower pledgeability, financing the purchase of intangible assets is more difficult than that of tangible assets. As a result, financial frictions are expected to be more binding for productivity growth in sectors where intangibles have become a pivotal component in firms production function. The analysis relies on a panel fixed effects econometric approach, several indices to capture financial frictions at the firm level and a new measure of intangible intensity at the industry level. We provide evidence that financial frictions act as a drag on productivity growth and especially so with respect to firms operating in intangible intensive sectors. These findings, which are robust to alternative specifications, shed light on the role of financial factors in explaining the productivity slowdown in OECD countries and provide support for using intangible intensity as a new dimension to proxy the relative exposure of industries to financing frictions.
    Keywords: financial constraints, intangible assets, productivity
    JEL: D22 D24 G31 O33
    Date: 2020–02–03
  11. By: Michael Junho Lee; Antoine Martin
    Abstract: A large volume of financial transactions occur in decentralized markets that commonly depend on a network of dealers. Dealers face two impediments to providing liquidity in these markets. First, dealers may face informed traders. Second, they may face costs associated with maintaining large balance sheets, either due to inventory or liquidity costs. In a recent paper, we study a model of over-the-counter (OTC) markets in which liquidity is endogenously determined by dealers who must contend with both asymmetric information and liquidity costs. This post provides an intuitive explanation of our model and the dynamics of interdealer liquidity.
    Keywords: Liquidity; information; inter-dealer
    JEL: G1 G14
    Date: 2020–01–13
  12. By: Toma Lankauskiene (Vilnius Gediminas Technical University)
    Abstract: The article aims to apply the growth accounting methodology to the Baltic countries in order to obtain detailed productivity growth determinants in the aggregated market economy with a particular focus to capital input. To this end, a new database following the KLEMS methodology for tangible and intangible capital indicators is constructed. The paper analyses determinants’ genesis and growth tendencies in the context of more developed countries and uncovers the productivity gains associated with different types of capital assets. First, an overview of the economies during the period researched is presented. Second, a methodology is developed to derive new intangibles and EU KLEMS data for the Baltic countries. Third, statistical data are constructed for all economies and the growth accounting method is applied in order to obtain comparable results. Finally, economic analysis is conducted to detect certain aspects of the growth determinants for differently developed and structured economies.
    Keywords: productivity growth; KLEMS methodology; growth accounting; tangible capital; intangible capital; national accounts
    JEL: O47 E22
    Date: 2020–01
  13. By: Marcelo Ortiz
    Abstract: This paper proposes that private firms facing stronger financial constraints benefit from greater transparency in the financial disclosure environment since it facilitates the estimation of future liquidity needs. I test this idea using a sample of private firms from 12 European countries with similar disclosure regulations for public and private firms. Consistently, I find that private firms hold less cash when they operate in industries with a higher fraction of peers disclosing extended financial reports. Further, I find that the decrease in cash holding is more pronounced in industries with higher cash-deficit risk and for younger firms. These findings are mainly explained by the disclosures of other private peers, which provide a means for learning from firms with similar liquidity constraints.
    Keywords: Disclosure regulation, cash policy, private firms.
    JEL: M41 M48 G32
    Date: 2020–01

This nep-cfn issue is ©2020 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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