nep-cfn New Economics Papers
on Corporate Finance
Issue of 2021‒04‒12
five papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Global syndicated lending during the COVID-19 pandemic By Hasan, Iftekhar; Politsidis, Panagiotis N.; Sharma, Zenu
  2. Turnaround Prediction Model with Content Dimension on Financial Distressed Firms By Dr. Giriati
  3. Filling Big Shoes: CEO and COO Succession Planning in Family Businesses By Patrizia Fanasch; Bernd Frick
  4. Financial regulation and bank supervision during a pandemic By Ozili, Peterson Kitakogelu
  5. Exchange Rate Fluctuations and Firm Leverage By Ṣebnem Kalemli-Özcan; Ilhyock Shim; Xiaoxi Liu

  1. By: Hasan, Iftekhar; Politsidis, Panagiotis N.; Sharma, Zenu
    Abstract: This paper examines the pricing of global syndicated loans during the COVID-19 pandemic. We find that loan spreads rise by over 11 basis points in response to a one standard deviation increase in the lender’s exposure to COVID-19 and over 5 basis points for an equivalent increase in the borrower’s exposure. This implies excess interest of about USD 5.16 million and USD 2.37 million respectively for a loan of average size and duration. The aggravating effect of the pandemic is exacerbated with the level of government restrictions to tackle the virus’s spread, with firms’ financial constraints and reliance on debt financing, whereas it is mitigated for relationship borrowers, borrowers listed in multiple exchanges or headquartered in countries that can attract institutional investors.
    Keywords: Syndicated loans, Cost of credit, COVID-19, Pandemic
    JEL: G01 G21 G29 G3
    Date: 2021–03
  2. By: Dr. Giriati (Management Study Program, Faculty of Economics and Business, Universitas Tanjungpura, 78124, Pontianak, West Kalimantan, Indonesia Author-2-Name: Author-2-Workplace-Name: Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - This article aims to examine the influence of content dimensions of Organization Change Theory, such as CEO Expertise, Free Assets, Debt to Equity Ratio and Growth of Sales, on a company's turnaround ability when it is experiencing financial distress. The companies examined are listed on the Indonesian Stock Exchange (IDX). Methodology – The population used in this study is companies from sectors excluding the finance sector that were listed on the Indonesian Stock Exchange between 2013 and 2018. The sample size was determined using purposive sampling method. From the 109 companies that experienced financial distress, 57 have successfully turned their business around. The research data was collected from the ICMD (Indonesian Capital Market Directory), which was then analysed using multi regression technique analysis, using SPSS software to examine the determinants of company turnaround ability. Findings – The results indicate that CEO Expertise, Debt to Equity Ratio and Growth of Sales have a negative relationship on a company's turnaround ability. Meanwhile, Free Assets has a positive and significant relationship on a company's turnaround ability. Novelty – Previous studies have been conducted in many western countries, giving rise to researchers' doubts about the generalizability of research based on previous research findings when applied in developing countries such as Indonesia, particularly due to differences in regulations, conditions of distress, culture, financial systems and strategies used in overcoming distress. Type of Paper - Empirical
    Keywords: Financial Distress; Turnaround Model; CEO Expertise; Free Assets; Debt to Equity Ratio; Growth of Sales
    JEL: B26 G15 P34
    Date: 2021–03–31
  3. By: Patrizia Fanasch (University of Paderborn); Bernd Frick (University of Paderborn)
    Abstract: The succession of chief executive officer (CEO) and chief operating officer (COO) is inevitable in the life cycle of a company and especially in family businesses. However, the majority of family businesses fail to survive across multiple generations. Although the relevance of effective succession planning to secure a competitive advantage is undisputed, no attempts have yet been made to assess the impact of family-internal changes on firm performance in general and firm reputation in particular with respect to the positions of CEO and COO. In an attempt to close these gaps, this study uses event study methodology to analyze the impact of multiple managerial changes in a sample of 1,397 German wineries in the period 1994 to 2017. The results indicate that family-internal CEO and COO changes have a significantly positive impact on firm reputation. Relay succession turns out to be a particularly well-suited instrument to increase reputation.
    Keywords: Family firms; Succession planning; Reputation; Wine industry
    JEL: M12 L22 L66 L14 J24
    Date: 2021–04
  4. By: Ozili, Peterson Kitakogelu
    Abstract: Pandemics lead to a sudden decline in the level of economic activities. Lending institutions reduce credit supply to businesses due to fears of rising bad debts during a pandemic. This paper highlights some approach to financial regulation and bank supervision during a pandemic such as the SARS and COVID-19 pandemic. The approach suggested in this paper are intended to be applicable to all types of pandemic since their effect on banks and financial institutions are relatively the same.
    Keywords: Pandemic, COVID-19, coronavirus, SARS, bank regulation, financial institution, banks, bank supervision, financial regulation.
    JEL: G21 G23 G24 G28 I18
    Date: 2021
  5. By: Ṣebnem Kalemli-Özcan; Ilhyock Shim; Xiaoxi Liu
    Abstract: We quantify the effect of exchange rate fluctuations on firm leverage. When home currency appreciates, firms who hold foreign currency debt and local currency assets observe higher net worth as appreciation lowers the value of their foreign currency debt. These firms can borrow more as a result and increase their leverage. When home currency depreciates, the reverse happens as firms have to de-lever with a negative shock to their balance sheets. Using firm-level data for leverage from 10 emerging market economies during the period from 2002 to 2015, we show that firms operating in countries whose non-financial sectors hold more of the debt in foreign currency, increase (decrease) their leverage relatively more after home currency appreciations (depreciations). Combining the leverage data with firm-level FX debt data for 4 emerging market countries, we further show that our results hold at the most granular level. Our quantitative results are asymmetric: the effects of depreciations, that are generally associated with sudden stops, are quantitatively larger than those of appreciations, which take place at a slower pace over time during capital inflow episodes. As our exercise compares depreciations and appreciations of similar size, these results are suggestive of financial frictions being more binding during depreciations than a possible relaxation of such frictions during appreciations.
    JEL: F3
    Date: 2021–03

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