nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒02‒07
eight papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Venture Capital Financing and Green Patenting By Andrea Bellucci; Serena Fatica; Aliki Georgakaki; Gianluca Gucciardi; Simon Letout; Francesco Pasimeni
  2. Foreign institutional investors and the great productivity slowdown By Schain, Jan Philip
  3. Acquisition experience and director remuneration By Addis Gedefaw Birhanu; Philipp Geiler; Luc Renneboog; Yang Zhao
  4. Firms in (Green) Public Procurement: Financial Strength Indicators’ Impact on Contract Awards and Its Repercussion on Financial Strength By Christopher F. Baum; Arash Kordestani; Dorothea Schäfer; Andreas Stephan
  5. Board Gender Diversity and Firm Risk By Zyed Achour
  6. The Impact of Audit Committee Effectiveness on Corporate Performance – Evidence from Saudi Arabia By Sultan Altass
  7. Does a Change in an Accounting Standard Affect the Risk-Pricing of a Firm? By Itay Kedmi
  8. Information versus Investment By Stephen J. Terry; Toni M. Whited; Anastasia A. Zakolyukina

  1. By: Andrea Bellucci (University of Insubria); Serena Fatica; Aliki Georgakaki; Gianluca Gucciardi (UniCredit Bank); Simon Letout; Francesco Pasimeni (IRENA – International Renewable Energy Agency)
    Abstract: This paper explores the role of green innovation in attracting venture capital (VC) financing. We use a unique dataset that matches information on VC transactions, companies' balance sheet variables and data on patented innovation at the firm level over the period 2008-2017. Taking advance of a novel granular definition of green innovative activities that tracks patents at the firm level, we show that green innovators are more likely to receive VC funding than firms without green patents. Likewise, a larger share of green vs. non-green patents in a firm's portfolio increases the probability of receiving VC finance. Robustness checks and extensions tackling several dimensions of heterogeneity corroborate the view that green patenting is an important driver of VC funding.
    Keywords: Venture capital, Green ventures, Patents, Green technology
    JEL: G24 M13 M21 O35 Q55
    Date: 2022–01
  2. By: Schain, Jan Philip
    Abstract: This article analyzes the impact of institutional investors on firm productivity duringthe financial crisis 2008/09 across European manufacturing industries. Using propen-sity score matching combined with a difference in differences estimator I find a positivesignificant effect of 2% of foreign institutional ownership. Employing a variety of prox-ies for financial constraints, the article shows that the effect is driven by industries,countries, and firms that are more financially constrained indicating that foreign insti-tutional ownership prevents the known productivity slowdown during the financial crisisby alleviating financial constraints.
    Keywords: Institutional Investors,Financial Crisis,Productivity,Financial Constraints
    JEL: F61 G23 G32 G01 L25 D22 D24
    Date: 2022
  3. By: Addis Gedefaw Birhanu (emlyon business school); Philipp Geiler; Luc Renneboog; Yang Zhao
    Abstract: We investigate whether acquisition experience of executive and non-executive directors is priced in their remuneration contracts. Acquisition experience generates a contractual premium, and the relative size of this premium is higher for non-executive directors than for executives. Only a director's track record related to past successful acquisitions is priced. Acquisition experience of a director is not remunerated if this type of experience is already abundantly present in the firm through the firm's past acquisition record (substitution effect). We verify the results by examining potential endogeneity concerns, by analyzing a broad set of measures of acquisition experience (such as industry-specific, broad or international experience, experience on a target's board), and by ruling out alternative explanations (such as a director's general skills level or reputation, the CEO's power and delegation attitude, and the firm's corporate governance quality).
    Keywords: Directors,M&A,Takeovers,Mergers,remuneration contracting,Compensation,Experience,Human capital,skills
    Date: 2021–11–01
  4. By: Christopher F. Baum; Arash Kordestani; Dorothea Schäfer; Andreas Stephan
    Abstract: We examine whether the financial strength of companies, in particular, small and medium-sized enterprises (SMEs) is causally linked to the award of a public procurement contract (PP), especially in the environmentally friendly “green” area (GPP). For this purpose, we build a combined procurement company data set from the Tenders Electronic Daily (TED) and the SME database AMADEUS, which includes ten European countries. First, we apply probit models to investigate whether the probability of winning the public tender depends on the company's financial strength. We then use the Flexpanel DiD approach to investigate the question of whether the award has an impact on the future financial strength of the successful company. On the one hand, we find that a lower equity ratio and a higher short-term debt ratio increase the probability of being successful in a public tender. On the other hand, the success means that the companies can continue to work after the award with a lower equity ratio than comparable companies without an award, regardless of whether the company was successful in a traditional or a “green” public tender. We conclude from this that the success in a PP is a substitute for one's own financial strength and thus facilitates access to external financing. The estimation results differ depending on whether public procurement in general or the sub-group of “green” public procurement is examined.
    Keywords: Sustainable Finance, Public Procurement, Green Public Procurement, Small and Medium-sized Companies, Innovation, Financial constraints
    JEL: G30 Q56 Q01 O16
    Date: 2021
  5. By: Zyed Achour (INTES - Institut national du travail et des études sociales - Université de Carthage - University of Carthage)
    Abstract: In this chapter, we address the following question: Does board gender diversity affect global risk? Drawing on agency theory, upper echelon theory, and human capital theory, we hypothesize that gender diversity on the board of directors will decrease the volatility of firm risk. Applying fixed effect estimation on a panel data of listed French companies (SBF120) for the years 2011–2018, the results show a negative link between the percentage of female directors on the board and the standard deviation of monthly stock return as firm risk proxy suggesting that the inclusion of more women on corporate boards could improve financial stability. Our findings contribute to the literature by providing empirical evidence from France occupying the first place at the European level with the most female presence on the boards of directors.1
    Keywords: board gender diversity,board of directors,corporate governance,firm risk,SBF 120
    Date: 2021–11–15
  6. By: Sultan Altass (King Abdulaziz University, Rabigh Campus, Saudi Arabia)
    Abstract: The main aim of this study is to investigate the relationship between the effectiveness of audit committee (AC) of transportation firms listed on TASI and firm performance (FP) for the period 2010-2019. Employing Pooled OLS multiple regression analysis, the results indicate that the AC independence is negatively associated with FP. Therefore, the results contradict previous research which found that such relationship is significantly positive. Moreover, the results of two Pooled OLS regression analysis models reveal that frequent annual AC meetings do not have statistical association with FP. The findings of this study are relevant to investors and policy makers in Saudi Arabia regarding the reliability of AC in today’s competitive markets.
    Keywords: Corporate governance, Audit committee, Firm performance, Return on Equity, Earnings per share
    Date: 2021–10
  7. By: Itay Kedmi (Bank of Israel)
    Abstract: In 2016, a new accounting standard for Leases (IFRS 16) was issued, which substantially changes the accounting treatment of operating leases. As a result, financial ratios of firms might change dramatically, especially the leverage ratio. Using the difference-in-differences approach, this paper examines the impact of the disclosure regarding this standard, and its implementation, on the risk-pricing of firms, as measured by the yield spreads of their bonds. The results indicate that the yield spreads of the treated firms rise in the first disclosure date, compared to the control group. Thereafter, in the implementation date, there is no impact. The results are stronger in firms that are expected to violate financial covenants following the new standard
    Date: 2021–08
  8. By: Stephen J. Terry; Toni M. Whited; Anastasia A. Zakolyukina
    Abstract: We quantify the real implications of trade-offs between firm information disclosure and long-term investment efficiency. We estimate a dynamic equilibrium model in which firm managers confront realistic incentives to misreport earnings and distort their real investment choices. The model implies a socially optimal level of disclosure regulation that exceeds the estimated value. Counterfactual analysis reveals that eliminating earnings misreporting completely through disclosure regulation incentivizes managers to distort real investment. Lower earnings informativeness raises the cost of capital, which results in a 5.7% drop in average firm value, but more modest effects on social welfare and aggregate growth.
    JEL: G14 O4
    Date: 2022–01

This nep-cfn issue is ©2022 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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