nep-cfn New Economics Papers
on Corporate Finance
Issue of 2021‒11‒01
ten papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Risky Financial Collateral, Firm Heterogeneity, and the Impact of Eligibility Requirements By Kaldorf, Matthias; Wicknig, Florian
  2. Investors' perception of business group membership during an economic crisis : Evidence from the COVID-19 pandemic By Ducret, Romain
  3. Collateral in bank lending during the financial crises:a borrower and a lender story. By Massimiliano Affinito; Fabiana Sabatini; Massimiliano Stacchini
  4. The IRB approach and bank lending to firms By Raffaele Gallo
  5. AgriLOVE: agriculture, land-use and technical change in an evolutionary, agent-based model. By Jonathan Taglialatela; Andrea Mina
  6. Tax Incentives to Appear Small: Evidence from Thai Firms and Corporate Groups By Chanont Banternghansa; Athiphat Muthitacharoen; Archawa Paweenawat; Krislert Samphantharak
  7. Section 199 and Agribusiness Investment Decisions By Secor, William; Boland, Michael A.
  8. The Financial Fragility of For-profit Hospitals: Evidence from the COVID-19 Pandemic By Ge Bai; Daniel Jiménez; Phillip Phan; Luis E. Quintero; Alessandro Rebucci; Xian Sun
  9. Measuring Systemic Financial Stress and its Impact on the Macroeconomy By Kremer, Manfred; Chavleishvili, Sulkhan
  10. Leverage, Liquidity and Agricultural Cooperative Profitability By Miranda, Mario J.; Chen, Meng-Fen

  1. By: Kaldorf, Matthias; Wicknig, Florian
    JEL: E23 E44 G11 G32
    Date: 2021
  2. By: Ducret, Romain (Faculty of Economics and Social Sciences)
    Abstract: This paper examines how investors perceive business group membership in Korea during the COVID-19 pandemic. Stock price performance analysis reveals evidence of a time-varying and heterogeneous value of affiliation: investors discount business group affiliation during a market collapse, but are willing to pay a premium for affiliation during market recovery. Overall, this pattern is more pronounced for financially weak affiliates and large business groups. The results further show that business group membership alleviates investors' concerns regarding financial flexibility, highlighting the role of internal capital markets as a substitute for external finance.
    Keywords: Business groups; financial crisis; COVID-19; internal capital market; Korea
    JEL: G01 G14 G38 L20
    Date: 2021–10–22
  3. By: Massimiliano Affinito (Bank of Italy); Fabiana Sabatini (Bank of Italy); Massimiliano Stacchini (Bank of Italy)
    Abstract: We analyse whether and to what extent both firm and bank soundness are associated with the use of collateral in bank lending, and whether these relationships changed during the global financial crisis and the euro-area sovereign debt crisis. By using a large dataset of 2 million observations at bank and firm level covering the years 2007-13, we find that the degree of collateralization is higher for firms that are financially stressed and have low capitalization and that it increases further for these borrowers during downturns. In addition, we find that collateral policies are tighter at sounder banks, that is, at banks that are more capitalized and have a lower burden of bad loans. This result is consistent with the existence of a negative link between bank soundness and risk-taking in bank lending.
    Keywords: bank-lending channel, collateral, financial crises.
    JEL: G01 G21 E5 E51
    Date: 2021–10
  4. By: Raffaele Gallo (Bank of Italy, Directorate General for Economics, Statistics and Research.)
    Abstract: This paper examines the impact of the regulatory approach adopted to calculate capital requirements on banks’ lending policies. Since the capital absorption of loans to high-risk borrowers is greater under the internal ratings-based (IRB) method than under the standardized approach (SA), IRB banks may raise interest rates and reduce credit to riskier borrowers following their regulatory regime shift. The analysis examines banks’ lending policies around each of the shifts that occurred between 2007 and 2017. First, in a context of declining rates and credit growth, banks adopting the IRB approach decreased interest rates (credit) less (more) for riskier than for safer borrowers when compared with SA intermediaries. Second, an existing credit relationship with a high-risk borrower is more likely to end after the shift. Third, the results at the firm level suggest that high-risk borrowers partly compensated the reduction in bank credit by obtaining funds from SA institutions, but that they were not able to offset the rise in their average cost of credit because of the significant costs involved in switching lenders.
    Keywords: credit risk regulation, interest rates, bank credit, internal rating model.
    JEL: G20 G21 G28 G32
    Date: 2021–10
  5. By: Jonathan Taglialatela; Andrea Mina
    Abstract: The paper focuses on the capital structure of firms in their early years of operation. Through the lens of Pecking Order Theory, we study how the pursuit of innovation influences the reliance of firms on different types of internal and external finance. Panel analyses of data on 7,394 German start-ups show that innovation activities are relevant predictors of the start-ups' revealed preferences for finance, and that the nature of these effects on the type and order of financing sources depends on the degree of information asymmetries specific to research and development activities, human capital endowments, and the market introduction of new products and processes.
    Keywords: Innovation; information asymmetries; start-up; pecking order; entrepreneurial finance.
    Date: 2021–10–23
  6. By: Chanont Banternghansa; Athiphat Muthitacharoen; Archawa Paweenawat; Krislert Samphantharak
    Abstract: This paper studies the effects of SME tax incentives on firm behaviors. We use firm-level panel data of all registered firms in Thailand to analyze the effects of a large reduction in corporate income tax rates for SMEs in 2011. First, we find that firms responded strongly to the SME tax incentive as indicated by a sharp bunching of firms just below the threshold after the incentive was introduced. The responses were concentrated among firms with positive EBIT, implying a financial motive for firms to remain small. Second, the bunching was prominent for stand-alone firms, where we observe slower revenue growth for those below the threshold. Third, we do not observe bunching for corporate-group firms, but we find evidence of tax-motivated profit shifting among them instead, especially among firms in small groups with weak corporate governance. Our analysis suggests that transfer pricing was likely a primary channel. Finally, despite the unintended consequences, we find that the incentive significantly raised the probability of firm's survival and encouraged new firm registration, as the policy intended.
    Keywords: Bunching; Tax Incentives; Business Group; Corporate Tax; Size-dependent Policy; Tax Evasion
    JEL: F23 H25 H26 K34 M42
    Date: 2021–02
  7. By: Secor, William; Boland, Michael A.
    Keywords: Agricultural Finance, Marketing, Agribusiness
    Date: 2021–08
  8. By: Ge Bai; Daniel Jiménez; Phillip Phan; Luis E. Quintero; Alessandro Rebucci; Xian Sun
    Abstract: We estimate the likelihood of financial distress of U.S. hospitals in 2020 due to the COVID-19 pandemic using AHA Annual Survey data for 2011-2019 and smartphone mobility data for 2020. We find that while the average likelihood of distress across all hospitals is 28.53 % in 2020, slightly increasing from 2019, for-profit hospitals are much more likely to be distressed. Their average likelihood of financial distress is 39.13 %---a 6.93 percentage point increase from 2019. For-profit hospitals are the main providers of specialty health care services, such as psychiatric and acute long-term care, so their increased likelihood of distress poses a risk to service provision in these specialty areas, and particularly in rural communities. Our prediction model based on mobility data performs very well in sample against actual data and can potentially help policymakers and hospital administrators to monitor financial distress in real-time when case mixes change, or other large shocks materialize.
    JEL: G3 H51 I1 R51 Z21
    Date: 2021–10
  9. By: Kremer, Manfred; Chavleishvili, Sulkhan
    JEL: C14 C31 C43 C53 E44 G01
    Date: 2021
  10. By: Miranda, Mario J.; Chen, Meng-Fen
    Keywords: Agricultural Finance, Agribusiness, Marketing
    Date: 2021–08

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