nep-cfn New Economics Papers
on Corporate Finance
Issue of 2021‒02‒15
four papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Information security breaches and financial market reaction: the French case By Mendiela, Pauline
  2. Liquidity, Pledgeability, and the Nature of Lending By Douglas W. Diamond; Yunzhi Hu; Raghuram G. Rajan
  3. Profit Taxation and Bank Risk Taking By Michael Kogler
  4. Board Diversity and Shareholder Voting By Gow, Ian D.; Larcker, David F.; Watts, Edward M.

  1. By: Mendiela, Pauline
    Abstract: This study examines the impact of information security breaches on the stock returns on French companies. Using the event study methodology, we provide insights on the effect of cyberattack announcements on the market value of French companies from 2009 to 2019. We show that following cyberattack announcements, stock returns significantly decrease. We find that financial companies are more negatively impacted than other industries. Our results lead conclude that cybersecurity is now fully integrated into risk management and the overall strategy of companies. Cyber resilience appears to be the essential element to face current threats and reassure investors.
    Keywords: Cybersecurity; Market reaction; Stock returns; Event Study
    JEL: A10 G1 G10 G15
    Date: 2021–01–12
  2. By: Douglas W. Diamond; Yunzhi Hu; Raghuram G. Rajan
    Abstract: We develop a theory of how corporate lending and financial intermediation change based on the fundamentals of the firm and its environment. We focus on the interaction between the prospective net worth or liquidity of an industry and the firm’s internal governance or pledgeability. Variations in prospective liquidity can induce changes in the nature, covenants, and quantity of loans that are made, the identity of the lender, and the extent to which the lender is leveraged. We offer predictions on how these might vary over the financial cycle.
    JEL: G2 G21 G23 G3 G32 G33
    Date: 2021–01
  3. By: Michael Kogler
    Abstract: How can tax policy improve financial stability? Recent studies suggest large stability gains from eliminating the debt bias in corporate taxation. It is well known that this reform reduces bank leverage. This paper analyzes a novel, complementary channel: risk taking. We model banks’ portfolio choice under moral hazard and emphasize the ‘incentive function’ of equity. We find that (i) an allowance for corporate equity (ACE) and a lower tax rate discourage risk taking and offer stability and welfare gains, (ii) a revenue-neutral ACE unambiguously improves financial stability, and (iii) capital regulation and deposit insurance influence the risk-taking effects of taxation.
    Keywords: corporate taxation, tax reform, banking, risk taking, financial stability
    JEL: G21 G28 H25
    Date: 2021
  4. By: Gow, Ian D. (U of Melbourne and Melbourne Centre for Corporate Governance and Regulation); Larcker, David F. (Stanford U and Rock Center for Corporate Governance); Watts, Edward M. (Yale U)
    Abstract: The lack of board diversity is one of the most controversial topics in corporate board governance. We investigate one important influence on diversity by studying whether shareholders value diversity on corporate boards in director elections. Using a broad sample of director elections from 2003 through 2018, we provide robust evidence that shareholders value diversity. However, the magnitude of these effects is heavily dependent on the type of diversity. Our findings suggest that while both the race or ethnicity and gender of candidates are important factors in the shareholder voting process, shareholders have historically been more likely to support gender diverse candidates than racially or ethnically diverse candidates. We also provide evidence that shareholders place significantly more value on boards' overall diversity rather than the diversity of individual candidates. Finally, the magnitude of the additional voting support for diverse candidates and boards has grown significantly over time, and there is considerable heterogeneity in voting behavior across shareholders along several important dimensions (e.g., the Big Three asset managers).
    JEL: G23 G30 G34 M14
    Date: 2020–11

This nep-cfn issue is ©2021 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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