|
on Corporate Finance |
| By: | Brett Barkley; Mark E. Schweitzer |
| Abstract: | Online lending through fintech firms is a rapidly expanding segment of the financial market that is receiving much attention from investors and increasing scrutiny from regulators. Research is only beginning to assess how fintech firms’ entry is altering the choices and outcomes of small businesses that borrow from them. The Federal Reserve Small Business Credit Survey is a unique data source on the experiences of business owners with new and more traditional sources of credit. We find that the businesses using online lenders are not representative of small and medium-size enterprise in the US. Businesses borrowing online are younger, smaller, and less profitable. Through reaching borrowers less likely to be served by traditional lenders fintech lenders have substantially expanded the small business finance market. We apply treatment effects estimators to flexibly control for composition differences in the borrowers. After controlling for compositional differences between online and bank borrower, we find that loan application amounts are generally smaller with fintech lenders; businesses that receive fintech loans expect more revenue and employment growth than those receiving a bank loan; and businesses that borrow from banks are more satisfied than businesses that borrow online, which are still more satisfied than businesses who were denied credit. These results highlight issues that the financial industry and regulators should examine as fintech lending to small businesses continues to expand. |
| Keywords: | Small business lending; online alternative lenders; fintech; firm growth |
| JEL: | G21 G23 G28 C31 |
| Date: | 2020–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:87704&r=all |
| By: | Ramesh Jangili (Indira Gandhi Institute of Development Research) |
| Abstract: | The legal systems in emerging economies are weak and hence unsuccessful in completely eliminating market abuse, which could benefit some segment of firms to earn higher profits. This further leads to market imperfections and eventually to higher concentration. The problem persists even after strengthening market discipline and improving overall competition in emerging markets. Large and group firms in these markets could gain differential advantage and destroy value. We analyse the profitability of firms in an emerging economy, India; and find that large and group firms are more profitable than small and standalone firms. Further, we explicitly use cost efficiency of firms to understand the impact of market power on profitability and find that large firms in concentrated industries generate more profits. We also find that higher profitability of large firms is due to market power. |
| Keywords: | Profitability, Size, Group affiliation, Cost efficiency, Market power |
| JEL: | L22 L25 D22 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2020-003&r=all |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | The study examines the role of governance in modulating the effect of capital flight on industrialisation in Africa. The empirical evidence is based on Generalised Method of Moments and governance is bundled by principal component analysis, namely: (i) political governance from political stability and “voice and accountability†; (ii) economic governance from government effectiveness and regulation quality; and (iii) institutional governance from corruption-control and the rule of law. First, governance increases industrialisation whereas capital flight has the opposite effect; and second, governance does not significantly mitigate the negative effect of capital flight on industrialisation. Policy implications are discussed. |
| Keywords: | Econometric modelling; Capital flight; Governance; Industrialisation; Africa |
| JEL: | C50 F34 G38 O14 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:19/077&r=all |
| By: | Cardozo, Pamela; Morales-Acevedo, Paola; Murcia, Andrés; Pacheco, Beatriz |
| Abstract: | During the last decade Colombian international financial conglomerates (IFC) expanded abroad, significantly increasing their geographical complexity. This paper analyzes the effect of this change in geographical complexity on the risk level of individual Colombian banks. We use monthly bank-level data on financial indicators and complexity measures for the period 2007- 2018. We use the Z-score as a measure of bank risk and the number of countries in which a Colombian IFC has foreign banks subsidiaries as a measure of geographical complexity. Our results suggest that complexity is associated with higher levels of individual bank risk, as a result of an expansion to countries with large GDP co-movements and lower regulatory qualities. In addition, we find that banks with access to international funding respond differently to monetary policy changes. In particular, during periods of domestic monetary policy tightening (loosening), individual banks of complex IFCs present higher (lower) levels of risk, suggesting that the monetary policy risk taking channel is affected by the level of geographical complexity. |
| Keywords: | Bank risk; Geographical complexity; Monetary policy |
| JEL: | E52 F65 G21 G28 G32 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:rie:riecdt:37&r=all |
| By: | Neira, Julian; Singhania, Rish |
| Abstract: | How does corporate taxation affect the life cycle of firms? A change in profit-tax rates affects the life cycle of firms through wages and through firm selection. We quantify these effects by looking at the average size of young and mature US firms 30 years after the Reagan Tax Cuts. We disentangle the wage and the selection effects using a model of firm dynamics. We find that the wage effect of profit tax cuts is about six times stronger than the selection effect. A change in population growth affects average firm size by changing the composition of surviving firms. We find that the effect of declining population growth on average firm size is three times stronger for mature firms than for young firms. |
| Keywords: | Incidence; Corporate Taxation; Firm Lifecycle; Calibration |
| JEL: | E13 H22 H25 H32 L16 L26 |
| Date: | 2020–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99359&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon) |
| Abstract: | The purpose of this study is to investigate whether enhancing financial access influences productivity in Sub-Saharan Africa. The research focuses on 25 countries in the region with data for the period 1980-2014. The adopted empirical strategy is the Generalised Method of Moments. The credit channel of financial access is considered and proxied by private domestic credit while four main total factor productivity (TFP) dynamics are adopted for the study, namely: TFP, real TFP, welfare TFP and real welfare TFP. It is apparent from the findings that enhancing financial access positively affects welfare TFP whereas the effect is not significant on TFP, real TFP and welfare TFP. Policy implications are discussed. The study complements the extant literature by engaging hitherto unemployed dynamics of TFP in Sub-Saharan Africa. |
| Keywords: | Economic Output; Financial Development; Sub-Saharan Africa |
| JEL: | E23 F21 F30 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:19/052&r=all |
| By: | Brunello, Giorgio (University of Padova); Gereben, Áron (European Investment Bank); Weiss, Christoph T. (European Investment Bank); Wruuck, Patricia (European Investment Bank) |
| Abstract: | Using a representative sample of European firms, we study whether and to what extent financing constraints affect employers' decision to invest in employee training. We combine survey data on investment activities with administrative data on financial statements to develop an index of financing constraints. We estimate that a 10 percent increase in this index reduces investment in training as a share of fixed assets by 2.9 to 4.5 percent and investment in training per employee by 1.8 to 2.5 percent. We document that lower investment in training reduces productivity, and show that firms facing tighter financing constraints cut back the investment in training and tangible assets less than the investment in R&D and software and data. |
| Keywords: | training, financing constraints, Europe |
| JEL: | J24 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13067&r=all |