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on Corporate Finance |
| By: | Majida Jrad; Yamina Tadjeddine |
| Abstract: | This paper examines the factors that affect the collateralizing of a loan specifically for SMEs in Lebanon that is a country with a small open emerging-market economy. Collateral should guarantee the bank loan but in practice it is adjusted according to other socio-economic criteria of companies. This is particularly true for SME's and even more so for emerging countries. We propose in this article to illustrate the signals mobilized by banks when providing collateralized loans. Data on these variables have been derived from the Lebanese Central Band and the World Bank. It contains observations for two samples – 532 firms for 2020 and 561 firms for 2014. Three sets of factors influence the level of collateral required: those related to firm characteristics (relevant variables: age, size, auditing financial statements, developing the qualification of workforce, export orientation, the sector of manufacturing, located in capital city, female manager, export orientation), to loan characteristics (no relevant variable), and to credit market specifics (interest rate). Regression estimates suggest the age and size of a firm contributed to more collateral required in 2019. Smaller collateral is required by firms with bigger size, auditing financial statements, developing the qualification of workforce, export orientation, belonging to the sector of manufacturing, located in capital city in 2013. Female manager, export orientation, and location in capital city contribute to smaller collateral required in 2019. Loan value does not seem to tighten collateral requirements. In opposite perspective, the increases in the interest rate entail stricter collateralizing the loans. |
| Keywords: | Financing, SMEs, collateral, credit risk, regression analysis, Lebanon. |
| JEL: | G32 O16 O53 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2020-46&r=all |
| By: | Marchioni, Andrea; Magni, Carlo Alberto; Baschieri, Davide |
| Abstract: | In this work we illustrate a simple logical framework serving the purpose of measuring value creation in a real-life solar photovoltaic project, funded with a lease contract, a loan contract and internal financing (i.e., withdrawal from liquid assets). We use the projected accounting data to compute the value created. We assess the project from both an investment perspective (operating assets and liquid assets) and a financing perspective (debt and equity). Furthermore, focusing on value creation for equity-holders, we calculate the expected contribution on shareholders wealth increase of operating and financing activity. In particular, we highlight the role of the distribution policy in financial modeling, by underlining the strict logical connections between estimated data and financial decisions. |
| Keywords: | photovoltaic solar energy, project evaluation, net present value, distribution policy |
| JEL: | C60 C63 C67 G00 G30 G31 G32 G35 M41 O13 |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104012&r=all |
| By: | Muhammad, Akbar; Shahzad, Hussain; Tanveer, Ahmad; Shoib, Hassan |
| Abstract: | The purpose of this research is to analyze the association between corporate governance and firm performance. Specifically, it examines the impact of CEO duality on board characteristics and its relationship with firm performance through dynamic penal estimation. Findings of this research are based on a sample of 230 listed non-financial firms over the period 2004-2014. We document that the corporate governance plays a pivotal role in determining the financial performance of firms operating in Pakistan. Consistent with past studies, findings of this research also show some statistical variations among the sampled firms (large and small size). The CEO duality compromises the efficiency of board independence. Further, the non-linear relationship of managerial ownership with performance is also depicted through the results of this study. |
| Date: | 2020–11–19 |
| URL: | http://d.repec.org/n?u=RePEc:akf:cafewp:6&r=all |
| By: | Francesco Aiello (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Paola Cardamone (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Lidia Mannarino (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria); Valeria Pupo (Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF, Università della Calabria) |
| Abstract: | Using a large sample of Italian small–medium-sized firms, this note analyses the effects of formal inter-firm cooperation on the performance of family firms (FFs). The study is based on the network contract (“Contratto di rete”) implemented in Italy in 2009. The results show that networks have a positive effect on FFs, while no conclusive evidence is found for non-family firms. Additionally, the advantages for southern FFs and for small firms are considerable. |
| Keywords: | family firms, formal business networks, performance |
| JEL: | G34 L24 L25 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:202007&r=all |
| By: | Jérôme Creel (Observatoire français des conjonctures économiques); Paul Hubert (Observatoire français des conjonctures économiques); Fabien Labondance (Observatoire français des conjonctures économiques) |
| Abstract: | Drawing on European Union data, this paper investigates the hypothesis that private credit and banking sector fragility may affect economic growth. We capture banking sector fragility both with the ratio of bank capital to assets and non-performing loans. We assess the effect of these three variables on the growth rate of GDP per capita, using the Solow growth model as a guiding framework. We observe that credit has no effect on economic performance in the EU when banking fragilities are high. However, the potential fragility of the banking sector measured by the non-performing loans decreases GDP per capita. |
| Keywords: | Private credit; Capital to assets ratio; Non-performing loans |
| JEL: | G10 G21 O40 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2qqgdhhldi83pq6n0hl9nrguki&r=all |
| By: | José-Luis Peydró; Andrea Polo; Enrico Sette |
| Abstract: | We show that risk mitigating incentives dominate risk shifting incentives in fragile banks. Risk shifting could be particularly severe in banking since it is the most opaque industry and banks are one of the most leveraged corporations with very low skin in the game. To analyze this question, we exploit security trading by banks during financial crises, as banks can easily and quickly change their risk exposure within their security portfolio. However, in contrast with the risk shifting hypothesis, we find that less capitalized banks take relatively less risk after financial market stress shocks. We show this using the supervisory ISIN-bank-month level dataset from Italy with all securities for each bank. Our results are over and above capital regulation as we show lower reach-for-yield effects by less capitalized banks within government bonds (with zero risk weights) or within securities with the same rating and maturity in the same month (which determines regulatory capital). Effects are robust to controlling for the covariance with the existence portfolio, and less capitalized banks, if anything, reduce concentration risk. Further, effects are stronger when uncertainty is higher, despite that risk shifting motives may be then higher. Moreover, three separate tests - based on different accounting portfolios (trading book versus held to maturity), the distribution of capital and franchise value - suggest that bank own incentives, instead of supervision, are the main drivers. Results are confirmed if we consider other sources of balance sheet fragility and different measures of risk-taking. Finally, evidence from the recent COVID-19 shock corroborates findings from the Global Financial Crisis and the Euro Area Sovereign Crisis. |
| Keywords: | risk shifting, financial crises, securities, bank capital, interbank funding, concentration risk, uncertainty, risk weights, available for sale, held to maturity, trading book, COVID-19 |
| JEL: | G01 G21 G28 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1753&r=all |
| By: | Andres Rodriguez-Pose; Roberto Ganau; Kristina Maslauskaite; Monica Brezzi; |
| Abstract: | This paper examines the relationship between credit constraints − proxied by the investment-to-cash flow sensitivity – and firm-level economic performance − defined in terms of labor productivity – during the period 2009-2016, using a sample of 22,380 manufacturing firms from 11 European countries. It also assesses how regional institutional quality affects productivity at the level of the firm both directly and indirectly. The empirical results highlight that credit rationing is rife and represents a serious barrier for improvements in firm-level productivity and that this effect is far greater for micro and small than for larger firms. Moreover, high-quality regional institutions foster productivity and help mitigate the negative credit constraints-labor productivity relationship that limits the economic performance of European firms. Dealing with the European productivity conundrum thus requires greater attention to existing credit constraints for micro and small firms, although in many areas of Europe access to credit will become more effective if institutional quality is improved. |
| Keywords: | Credit Constraints; Labor Productivity; Manufacturing Firms; Regional Institutions; Cross-Country Analysis; Europe |
| JEL: | C23 D24 G32 H41 R12 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2053&r=all |
| By: | Diego A. Comin; Javier Quintana Gonzalez; Tom G. Schmitz; Antonella Trigari |
| Abstract: | Standard methods for estimating total factor productivity (TFP) growth assume that economic profits are zero and adjustment costs are negligible. Moreover, following the seminal contribution of Basu, Fernald and Kimball (2006), they use changes in hours per worker as a proxy for unobserved changes in capacity utilization. In this paper, we propose a new estimation method that accounts for non-zero profits, structurally estimates adjustment costs, and relies on a utilization proxy from firm surveys. We then compute industry-level and aggregate TFP growth rates for the United States and five European countries, for the period 1995-2016. In the United States, our results suggest that the recent slowdown of TFP growth was more gradual than previously thought. In Europe, we find that TFP was essentially flat during the Great Recession, while standard methods suggest a substantial decrease. These differences are driven by profits in the United States, and by profits and our new utilization proxy in Europe. |
| JEL: | E01 E30 O30 O40 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28008&r=all |
| By: | Boyan Jovanovic; Sai Ma; Peter L. Rousseau |
| Abstract: | We study private equity in a dynamic general equilibrium model and ask two questions: (i) Why does the investment of venture funds respond more strongly to the business cycle than that of buyout funds? (ii) Why are venture funds returns higher than those of buyout? On (i), venture brings in new capital whereas buyout largely reorganizes existing capital; this can explain the stronger co-movement of venture with aggregate Tobin's Q. Regarding (ii), venture returns co-move more strongly with aggregate consumption and therefore pay a higher premium. Our model embodies this logic and fits the data on investment and returns well. At the estimated parameters, the two PE sectors together contribute between 14 and 21 percent of observed growth, relative to the extreme case where private equity is absent. |
| JEL: | E44 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28030&r=all |