nep-cfn New Economics Papers
on Corporate Finance
Issue of 2021‒07‒26
twelve papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Financing Structure, Micro and Small Enterprises’ Performance, and Woman Entrepreneurship in Indonesia By Zeinab Elbeltagy; Zenathan Hasannudin
  2. Board director reputation capital and financial performance of listed firms in Nigeria By Peter Ehizokhale Okpamen; Sunday Oseiweh Ogbeide
  3. Dividend Policy and the COVID-19 Crisis By Mazur, Mieszko; Dang, Man; Vo, Thuy Anh Thi
  4. Un-used Bank Capital Buffers and Credit Supply Shocks at SMEs during the Pandemic By Jose M. Berrospide; Arun Gupta; Matthew P. Seay
  5. A data-driven explainable case-based reasoning approach for financial risk detection By Li, Wei; Paraschiv, Florentina; Sermpinis, Georgios
  6. Rents and Intangible Capital: A Q+ Framework By Nicolas Crouzet; Janice C. Eberly
  7. Financial Network Games By Panagiotis Kanellopoulos; Maria Kyropoulou; Hao Zhou
  8. Director appointments, boardroom networks, and firm environmental performance By Mingyuan Chen; Dakshina De Silva; Aurelie Slechten
  9. "Stabilizer" or "catalyst"? How does green technology innovation affect the risk of stock price crash: an analysis based on the quantity and quality of patents By Ge-zhi Wu; Daming You
  10. Effect of Supply Chain Integration on Business Performance and Competitiveness of Philippine SMEs By Borazon, Elaine Q.; Supangco, Vivien T.
  11. Playlisting Favorites: Measuring Platform Bias in the Music Industry By Luis Aguiar; Joel Waldfogel; Sarah B. Waldfogel
  12. Bail-in and Bank Funding Costs By Vittoria Cerasi; Paola Galfrascoli

  1. By: Zeinab Elbeltagy (Intern, Macroeconomic and Financing for Development Division, UNESCAP); Zenathan Hasannudin (Macroeconomic Policy and Financing for Development Division, UNESCAP)
    Abstract: Access to finance has been found crucial in influencing firms’ real activities and economic performance.This paper investigates the relationship between the financing structure and firm performance by explor-ing a unique panel dataset of 59,968 Micro and Small Enterprises (MSEs) operating in the manufacturingsector in Indonesia over the 2010-2015 period. We collected a rich set of information about source ofloans to assess the firm performance using yearly total factor productivity (TFP) and labor productivityof each firm. We then examined whether more financing options available to women entrepreneurshipimproves firm performance. Our results show that financial factors are highly decisive to firms’ TFPand labor productivity. The MSEs which have access to external formal financing directly improvesproductivity at the firm level. Moreover, the study finds a significant underperformance of firms ownedby women entrepreneurs compared to those owned by men entrepreneurs. Nevertheless, we found thatwomen entrepreneurs who have access to formal financing improve their firm’s performance. The effectsof finance on productivity are also linked to the firm’s ownership, education, size and age. Our resultsare robust as demonstrated through the use of different approaches. These results provide support forpolicymakers to alleviate credit constraints to enhance productivity of micro and small enterprises andespecially woman entrepreneurship in Indonesia.
    Keywords: Total factor productivity, inclusive financing, woman entrepreneurship
    JEL: G21 J16 L25 L26 N65
    Date: 2020–09
  2. By: Peter Ehizokhale Okpamen (Elizade University); Sunday Oseiweh Ogbeide (Ambrose Alli University)
    Abstract: This study examined the impact of board director reputation capital on financial performance of listed firms in Nigeria. The population of the study consists of all the listed non-financial firms in Nigeria. A sample of fifty (50) firms was selected and data were collected over the period 2007 to 2018. Descriptive statistics and system general method of moment estimation methods were used to undertake the data analysis. Findings reveal that board director reputational capital exerted a positive and significant impact on financial performance of the firms. Board size and firm size were negative on firm financial performance in the reference period. The study concludes that board reputational capital is a significant driver of corporate financial performance in Nigeria irrespective of the size of the board. Based on the empirical findings, it is recommended that there is need for regulators to design a framework to efficiently and effectively monitor the reputation of executive board directors and managers in firms. This will assist to check mate agency costs, demonstration of opportunistic behavior capable of destroying the firm value, There is need for firms to encourage adequate interlocking members who have diverse professional training, high social net worth and experience (experience hypothesis) to positively influence effective management and financial performance of listed firms in Nigeria.
    Keywords: board reputational capital,board size,firm size,financial performance,Nigeria
    Date: 2020–12–30
  3. By: Mazur, Mieszko; Dang, Man; Vo, Thuy Anh Thi
    Abstract: This paper examines dividend payment behavior of the S&P1500 firms during the COVID-19 crisis characterized by the stock market crash and a V-shaped stock price recovery propelled by technology stocks. We find that the great majority of firms either maintain or increase the level of dividend payment during the crisis period. Yet, the relationship between the dividend payout and bottom-line earnings available to common shareholders is significantly negative. This relationship holds even for dividend-increasing firms whose earnings streams should be relatively higher (or increasing) compared to other firms in the sample. We also find that forecast earnings of up to one year in the future are negatively associated with the current dividend level implying that the existing payout policies are unsustainable. Interestingly, we document similar patterns for stock repurchases.
    Keywords: Dividend Policy; Dividend Yield; Share Repurchases; COVID-19
    JEL: G3
    Date: 2020–10
  4. By: Jose M. Berrospide; Arun Gupta; Matthew P. Seay
    Abstract: Did banks curb lending to creditworthy small and mid-sized enterprises (SME) during the COVID-19 pandemic? Sitting on top of minimum capital requirements, regulatory capital buffers introduced after the 2008 global financial crisis (GFC) are costly regions of “rainy day†equity capital designed to absorb losses and provide lending capacity in a downturn. Using a novel set of confidential loan level data that includes private SME firms, we show that “buffer-constrained†banks (those entering the pandemic with capital ratios close to this regulatory buffer region) reduced loan commitments to SME firms by an average of 1.4 percent more (quarterly) and were 4 percent more likely to end pre-existing lending relationships during the pandemic as compared to “buffer-unconstrained†banks (those entering the pandemic with capital ratios far from the regulatory capital buffer region). We further find heterogenous effects across firms, as buffer-constrained banks disproportionately curtailed credit to three types of borrowers: (1) private, bank-dependent SME firms, (2) firms whose lending relationships were relatively young, and (3) firms whose pre-pandemic credit lines contractually matured at the start of the pandemic (and thus were up for renegotiation). While the post-2008 period saw the rise of banking system capital to historically high levels, these capital buffers went effectively unused during the pandemic. To the best of our knowledge, our study is the first to: (1) empirically test the usability of these Basel III regulatory buffers in a downturn, and (2) contribute a bank capital-based transmission channel to the literature studying the effects of the pandemic on SME firms.
    Keywords: Financial institutions; Capital regulation; Procyclicality; COVID-19
    JEL: G20 G21 G28
    Date: 2021–07–15
  5. By: Li, Wei; Paraschiv, Florentina; Sermpinis, Georgios
    Abstract: The rapid development of artificial intelligence methods contributes to their wide applications for forecasting various financial risks in recent years. This study introduces a novel explainable case-based reasoning (CBR) approach without a requirement of rich expertise in financial risk. Compared with other black-box algorithms, the explainable CBR system allows a natural economic interpretation of results. Indeed, the empirical results emphasize the interpretability of the CBR system in predicting financial risk, which is essential for both financial companies and their customers. In addition, results show that the proposed automatic design CBR system has a good prediction performance compared to other artificial intelligence methods, overcoming the main drawback of a standard CBR system of highly depending on prior domain knowledge about the corresponding field.
    Keywords: Case-based reasoning,Financial risk detection,Multiple-criteria decision-making,Feature scoring,Particle swarm optimization,Parallel computing
    JEL: C51 C52 C53 C61 C63 D81 G21 G32
    Date: 2021
  6. By: Nicolas Crouzet; Janice C. Eberly
    Abstract: In recent years, US investment has been lackluster, despite rising valuations. Key explanations include growing rents and growing intangibles. We propose and estimate a framework to quantify their roles. The gap between valuations — reflected in average Q — and investment — reflected in marginal q — can be decomposed into three terms: the value of installed intangibles; rents generated by physical capital; and an interaction term, measuring rents generated by intangibles. The intangible-related terms contribute significantly to the gap, particularly in fast-growing sectors. Our findings suggest care in a pure-rents interpretation, given the rising role of intangibles.
    JEL: D25 D4 E22 G31
    Date: 2021–07
  7. By: Panagiotis Kanellopoulos; Maria Kyropoulou; Hao Zhou
    Abstract: We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in the network indicates that a payment of a firm to one of its lenders might result to some incoming payment. So, if a firm cannot fully repay its debt, then the exact (partial) payments it makes to each of its creditors can affect the cash inflow back to itself. We naturally assume that the firms are interested in their financial well-being (utility) which is aligned with the amount of incoming payments they receive from the network. This defines a game among the firms, that can be seen as utility-maximizing agents who can strategize over their payments. We are the first to study financial network games that arise under a natural set of payment strategies called priority-proportional payments. We investigate the existence and (in)efficiency of equilibrium strategies, under different assumptions on how the firms' utility is defined, on the types of debt contracts allowed between the firms, and on the presence of other financial features that commonly arise in practice. Surprisingly, even if all firms' strategies are fixed, the existence of a unique payment profile is not guaranteed. So, we also investigate the existence and computation of valid payment profiles for fixed payment strategies.
    Date: 2021–07
  8. By: Mingyuan Chen; Dakshina De Silva; Aurelie Slechten
    Abstract: Using BoardEx (2000{2017), we create a dynamic network connecting firms and board directors for the United States. We use the Environmental Protection Agency's Toxic Release Inventory to measure environmental performance at the director and rm-level. We examine how a candidate's environmental performance and networks affect director appointments. This allows us to endogenize the effect of directors' environmental experience when studying the impact on firms' chemical releases. We show that firms are likely to appoint influential directors with good environmental records and similar characteristics. Further, boards with good environmental performance and with diverse environmental backgrounds improve firms' environmental performance.
    Keywords: Network Formation, Firm Organization, Toxic Release, Board of directors
    JEL: D85 L21 Q5
    Date: 2021
  9. By: Ge-zhi Wu; Daming You
    Abstract: In order to explore the relationship between corporate green technological innovation and the risk of stock price crash, First, we analyzed the data of listed companies in China from 2008 to 2018, and constructed indicators for the quantity and quality of corporate green technology innovation. The study found that the quantity of green technology innovation is not related to the risk of stock price crash, while the quality of green technology innovation is negatively related to the risk of stock price crash. Secondly, we further studied the impact of corporate ownership on the relationship between the quality of green technological innovation and the risk of stock price crash, and found that in non-state-owned enterprises, the quality of green technological innovation is negatively correlated with the risk of stock price collapse, while in state-owned enterprises, the quality of green technological innovation is positively correlated with the risk of stock price collapse. Furthermore, we studied the mediating effect of the number of negative news reports in the media of listed companies on the relationship between the quality of corporate green technology innovation and the stock price crash.Finally, we conducted a DID regression by using the impact of exogenous policy shocks on the quality of green technology innovation, and the main results passed the robustness test.
    Date: 2021–06
  10. By: Borazon, Elaine Q.; Supangco, Vivien T.
    Abstract: This study aims to determine the relationship of supply chain integration with the performance and competitiveness of small and medium enterprises (SMEs) in the Philippines. A survey of 384 companies was conducted to measure the customer integration, supplier integration, and internal integration of SMEs. Structural equation modelling was used to test the hypotheses. The results show that the internal integration of SMEs strongly influences their business performance or growth and competitiveness. Customer integration directly and indirectly (through internal integration) influences the business performance and competitiveness of SMEs. Accordingly, the effect of supplier integration on business performance (growth) and competitiveness of companies is fully mediated by internal integration.
    Keywords: small and medium enterprises, supply chain integration, Customer integration, SME competitiveness
    Date: 2020
  11. By: Luis Aguiar; Joel Waldfogel; Sarah B. Waldfogel
    Abstract: Platforms are growing increasingly powerful, raising questions about whether their power might be exercised with bias. While bias is inherently difficult to measure, we identify a context within the music industry that is amenable to bias testing. Our approach requires ex ante platform assessments of commercial promise - such as the rank order in which products are presented - along with information on eventual product success. A platform is biased against a product type if the type attains greater success, conditional on ex ante assessment. Theoretical considerations and voiced industry concerns suggest the possibility of platform biases in favor of major record labels, and industry participants also point to bias against women. Using data on Spotify curators' rank of songs on New Music Friday playlists in 2017, we find that Spotify's New Music Friday rankings favor independent-label music, along with some evidence of bias in favor of music by women. Despite challenges that independent-label artists and women face in the music industry, Spotify's New Music curation appears to favor them.
    JEL: K21 L12 L82
    Date: 2021–07
  12. By: Vittoria Cerasi; Paola Galfrascoli
    Abstract: We empirically evaluate the impact of the new resolution policy, the so-called Bank Recovery and Resolution Directive (BRRD) enacted in 2016, on the cost of funding for EU banks. We first measure the change in the spreads of credit default swaps on subordinated and senior bonds issued by EU banks around the period when the policy became effective and provide evidence of a greater increase in the risk premia of more junior bail-in-able bonds than for senior bonds. We then investigate the reasons for the different intensities by which this policy has affected the banks in our sample. We uncover specific characteristics of banks and macroeconomic factors to explain this heterogeneity. Banks with more problematic loans, that are less capitalized, and that are headquartered in countries with a higher risk premium on sovereign debt have experienced a greater rise in the cost of their funds; conversely, larger banks with a greater proportion of domestic over total subsidiaries were less affected. Moreover, we show that the low-interest-rate environment has increased the riskiness of all the banks in our sample. Overall, our paper provides evidence that market discipline has been reinforced by the adoption of the BRRD.
    Keywords: Bank resolution; Credit Default Swaps; Market discipline.
    JEL: G28 G21 G14
    Date: 2021–07

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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