nep-cfn New Economics Papers
on Corporate Finance
Issue of 2020‒05‒25
six papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Management Innovations in Family Firms after Succession: Evidence from Japanese SMEs By Hirofumi Uchida; Kazuo Yamada; Alberto Zazzaro
  2. Financing Firms in Hibernation during the COVID-19 Pandemic By Tatiana Didier; Federico Huneeus; Mauricio Larrain; Sergio L. Schmukler
  3. Quantitative Easing, investment, and safe assets: The corporate-bond lending channel By Giambona, Erasmo; Matta, Rafael; Peydró, José-Luis; Wang, Ye
  4. International Equity and Debt Flows: Composition, Crisis, and Controls By Chang Ma; Shang-Jin Wei
  5. Are non-sticky costs endemic in the Arabian Gulf Region? Evidence from publicly listed companies By Fernando Zanella; Peter Oyelere
  6. Meta-analyzing the relative performance of venture capital-backed firms By Lohwasser, Todor S.

  1. By: Hirofumi Uchida (Graduate School of Business Administration Kobe University); Kazuo Yamada (Faculty of Economics and Graduate School of Economics Nagasaki University); Alberto Zazzaro (Universita' degli Studi di Napoli Federico II)
    Abstract: In this paper, we examine whether family firms are more or less likely to foster management innovation, expanded incumbent business activities, or make advance to new business fields after CEO succession than non-family firms. Using data of 1,149 SMEs (small- and medium-sized enterprises) obtained from a corporate survey in Japan, we find that the new CEOs of family firms are not systematically less or more innovative than their counterparts in non-family firms. However, we also find that this zero effect of family ownership on innovation likelihood is the result of a negative impact of professional successors and a positive impact of heir successors. Finally, we show that access to intangible family assets increases the innovativeness of heir successors and decreases that of professional successors.
    Keywords: Innovation, Family Firm, Family Ownership, Succession
    JEL: L21 J12 Z13 G32 G21
    Date: 2020–05
  2. By: Tatiana Didier (World Bank Group); Federico Huneeus (Yale University and Central Bank of Chile); Mauricio Larrain (Financial Market Commission & PUC Chile); Sergio L. Schmukler (World Bank)
    Abstract: The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms' relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from "hibernating," using the minimum bare cash necessary to withstand the pandemic, while using credit to remain alive until the crisis subdues. Fourth, the existing legal and regulatory infrastructure is ill-equipped to deal with an exogenous systemic shock such as this pandemic. Financial sector policies can help increase the provision of credit, while posing difficult choices and trade-offs.
    Keywords: Cash crush, coronavirus, credit risk, nancial policies, rm relationships
    JEL: G21 G28 G32 G33 G38 I18
    Date: 2020–05
  3. By: Giambona, Erasmo; Matta, Rafael; Peydró, José-Luis; Wang, Ye
    Abstract: We show that Quantitative Easing (QE) stimulates investment via a corporate-bond lending channel. Fed's large-scale asset purchases of MBS and treasuries through QE creates a vacuum of safe assets, prompting safer firms to invest more by issuing relatively "safe" bonds. Using micro-data around QE, we find that QE increases firm-level investment by 7.4 percentage points for firms with bond market access. This growth is financed with senior bonds. We find no evidence of higher shareholders' payouts associated to QE. The robust findings are consistent with a model in which reducing the supply of government debt lowers "safe" corporate bond yields, stimulating investment.
    Keywords: Quantitative Easing,Corporate-bond lending channel,Investment,Safe assets,Financing
    JEL: E5 G01 G31 G32 G38
    Date: 2020
  4. By: Chang Ma; Shang-Jin Wei
    Abstract: We propose a theory of endogenous composition of capital flows that highlights two asymmetries between international equity and debt financing. In our model, poor institutional quality leads to an inefficiently low share of equity financing as well as an inefficiently high volume of total inflows. The required optimal capital controls naturally become looser as a country's institutional quality improves. Our story differs in important ways from an alternative narrative focusing on collateral constraint.
    JEL: F3
    Date: 2020–05
  5. By: Fernando Zanella (United Arab Emirates University); Peter Oyelere (United Arab Emirates University)
    Abstract: We investigate the endemism of non-sticky costs in resources-rich emerging economies of Arabian Gulf Co-operation Council (GCC) countries. Evidence already exists for non-sticky costs amongst publicly-listed companies in the United Arab Emirates (UAE). This study extends the investigation of the phenomenon to four other member countries of the GCC ? Saudi Arabia, Qatar, Kuwait, and Bahrain. We measured the degree of adjustment between operating revenues and costs for publicly listed companies in all GCC countries. We did not find evidence of sticky costs in four of the five countries suggesting that the endemic absence or curtailment of the main benefits of western-style employment protection legislation (EPL) available in other national jurisdictions is a possible explanation for why variable costs, such as labor costs, adjust easier to changes in sales thus eliminating the main cause of cost stickiness. This result, which may be generalizable to other similar emerging economies, raises some practical questions that may need to be addressed by relevant authorities in the respective countries of the region.
    Keywords: Sticky costs, Employment Protection Legislation, GCC countries, Expatriates
    JEL: M20 M41
    Date: 2020–02
  6. By: Lohwasser, Todor S.
    Abstract: In this study, we perform a meta-analysis on existing research covering the relationship between a venture capitalist's involvement (VCI) and the performance (P) of funded firms. As research on this topic has been inconclusive, we aim to determine whether providers of venture capital (VC) only possess superior scouting capabilities or whether they can also provide additional value beyond the simple endowment of financial resources. Furthermore, we determine whether the nature of the institutions in the funded firms' home countries, in terms of institutional quality and financial market efficiency, is a critical factor in the VCI - P relationship. We argue that a venture capitalist's decision to actively engage in its portfolio firms and provide value beyond capital depends on the quality of formal institutions and the likelihood of achieving a successful exit. We test our arguments using a meta-analytical approach on a dataset of 984 effect sizes in 15 individual countries. Our results show that venture capitalists have advantages stemming from superior selection and guidance capabilities. In addition, our results confirm that higher quality of formal institutions and the efficiency of the financial market in the startups' home countries strengthen the VCI - P relationship. In essence, we help corroborate arguments from the resource-based view, which suggest that the success of a VCI depends on institutional factors.
    JEL: G2 G24 L25 M13 O43
    Date: 2020

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