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on Corporate Finance |
| By: | Giebel, Marek; Kraft, Kornelius |
| Abstract: | We analyze the impact of subsidies on R&D expenditures in the financial crisis and beyond. The financial crisis has led to considerable turmoil in financing and, as a result, to restrictions of firms' access to external financing. Utilizing this fact, we identify and analyze financing constraints in two ways. First, firm financing constraints are determined via their credit rating and second, restrictions from the supply side are identified via the firm's main banks capital reserves. The results of our empirical test imply that R&D investments of non-subsidized firms decrease during the crisis. This effect is particularly pronounced for firms that are affected by financing constraints on the firm or bank side. Finally, our results imply that subsidies can at least partially compensate for these negative effects. |
| Keywords: | R&D investment,financing constraints,financial crisis,R&D subsidies |
| JEL: | G01 G21 G24 G30 O16 O30 O31 O32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21097&r= |
| By: | Bellucci, Andrea (Universita Degli Studi Dell'insubria); Fatica, Serena (European Commission); Georgakaki, Aliki (European Commission); Gucciardi, Gianluca (Unicredit Bank); Letout, Simon (European Commission); Pasimeni, Francesco (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: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:jrs:wpaper:202111&r= |
| By: | Jose-Maria Serena; Marina-Eliza Spaliara; Serafeim Tsoukas |
| Abstract: | Using a cross-country firm-bank dataset, we examine how an unexpected increase in bank capital requirements by the European Banking Authority (EBA) affects firms' financial choices. Our results first suggest that the regulatory shock implies a reduction in the supply of bank credit, with US firms affected the most. Yet, following the capital exercise, US firms are able to tap into the public bond markets and secure credit lines from nonbank financial institutions. This has implications for their capital structure and their real outcomes. These results suggest that diversified domestic loan markets, in which banks and nonbank financial institutions lend to corporations, can help overcome reductions in cross-border bank funding. |
| Keywords: | International bank credit, nonbank lenders, external financing |
| JEL: | G32 E22 F32 D22 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2022_04&r= |
| By: | Srivastava, Jagriti; Gopalakrishnan, Balagopal |
| Abstract: | Using a cross-country quarterly firm-level dataset, we empirically examine the impact of the COVID-19 pandemic on the trade credit channel of firms. In contrast to the impact on trade credit documented during earlier crisis episodes, we find that firms with poor credit quality obtain lower amounts of trade credit from their supplier firms during the quarters following the COVID-19 outbreak. The findings suggest that less creditworthy firms are credit rationed by their suppliers during a product market crisis, in contrast to the credit substitution documented between formal financial institutions and suppliers during a credit market crisis. Furthermore, we document that firms with better growth prospects and firms with better stakeholder relationships are able to obtain trade credit in the post-pandemic period, despite their poor creditworthiness. Our empirical analysis supports the view that supplier financing is conditional on the product market conditions and is not always a generous substitute for bank credit. |
| Keywords: | Trade credit; COVID-19; Financial constraints; Credit default; ESG |
| JEL: | G30 G32 G33 M14 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111433&r= |
| By: | Léon, Florian; Weill, Laurent |
| Abstract: | To analyze whether the occurrence of elections affects access to credit for firms, we perform an investigation using firm-level data covering 44 developed and developing countries. The results show that elections impair access to credit. Specifically, firms are more credit-constrained in election years and pre-election years as elections exacerbate political uncertainty. While lower credit demand is a tangible negative effect of elections, their occurrece per se does not seem to affect credit supply. We further establish that the design of political and financial systems affects how elections influence access to credit. |
| JEL: | G21 D72 O16 |
| Date: | 2022–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2022_003&r= |
| By: | Christopher F Baum (Boston College; DIW Berlin); Arash Kordestani (Södertörn University); Dorothea Schäfer (DIW Berlin; Jönköping International Business School); Andreas Stephan (Linnaeus University; DIW Berlin) |
| 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 sustainable public procurement is examined. |
| Keywords: | public procurement, green investment, public authorities, European Union |
| JEL: | H42 H44 C54 |
| Date: | 2022–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:1049&r= |
| By: | Krämer-Eis, Helmut; Botsari, Antonia; Lang, Frank; Mandys, Filip |
| Abstract: | This working paper presents the results of the 2020 EIF Private Equity Mid-Market Survey, an anonymised online survey of the private equity (PE) mid-market general partner/management companies. Complementing the 2018 EIF Venture Capital Survey paper (2018/51), which examined the venture capital fund managers' perception of the EIF's value added, this paper analyses the sentiment of the PE mid-market fund managers towards the EIF, its products and processes, and value added. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202177&r= |
| By: | Csaba Burger (Magyar Nemzeti Bank (Central Bank of Hungary)) |
| Abstract: | The transition from the state ownership to market mechanisms in Hungary fundamentally altered the geography of domestic micro, small, and medium enterprises (SMEs). This study investigates the spatial and temporal evolution of owner numbers, using data on all Hungarian SMEs between 1991 and 2019 and across 175 regional districts. Then it explores the relationship between the number of owners and the probability of credit default by joining data from the Credit Registry (KHR) for the period between 2007 and 2019. The number of owners at an average SME sank from four in 1991 to two in 2019, with consistently higher averages in less populated regions. Meanwhile, SMEs with one owner only have up to twice as high credit default probability as SMEs with more owners over all geographies in all years. Therefore, regionally varying ownership structures mean regionally differing ownership and management practices and hence risk levels. These could be mitigated with targeted regional policy measures. |
| Keywords: | financial geography, ownership structures, credit risk, SMEs |
| JEL: | G21 G3 R3 R11 R1 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:opaper:2022/144&r= |
| By: | Carlo Altomonte; Peter Bauer; Alberto Maria Gilardi; Chiara Soriolo |
| Abstract: | We take the global financial crisis (GFC), as an example of major crises, to study the trends of intangible investment, the link between industrial performance and intangible assets, and the differences of financing of intangible versus tangible assets during crises. We find an upward trend in investment intensities (investment-to-value added) for several kinds of intangible assets in almost all advanced EU countries, and in almost all sectors based on industry-level data. This trend started well before the GFC and the crisis had little impact on it, in contrast to tangible investment intensities, which declined a lot. Then we explore the potential role that intangible assets may play in weathering the negative effects of major crises using industry-level data. One of the main results about industrial performance is that pre-crisis R&D investment is robustly associated with economic resilience during the GFC, and higher productivity growth in the aftermath. Finally, we investigate how a financial turmoil may affect the financing of different assets. We combine insights from a macro (industry-level) and a micro (firm-level) approach to shed light on the importance of financial shocks in intangible investment. We find differences from tangible investment, mainly that tangibles are more sensitive to demand shocks, while intangible investment is more vulnerable to financial shocks. For the latter, our main explanation is that tight credit conditions create a trade-off between tangible and intangible investment financing. |
| Keywords: | productivity, financial crisis, resilience, intangible assets |
| JEL: | G01 D22 D24 G31 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp22173&r= |
| By: | Martin Indergand (Swiss National Bank - Financial Stability); Eric Jondeau (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute; Swiss Finance Institute); Andreas Fuster (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)) |
| Abstract: | We propose a methodology for measuring the market-implied capital of banks by subtracting from the market value of equity (market capitalization) a credit-spread-based correction for the value of shareholders' default option. We show that without such a correction, the estimated impact of a severe market downturn is systematically distorted, underestimating the risk of banks with low market capitalization. We argue that this adjusted measure of capital is the relevant market-implied capital measure for policymakers. We propose an econometric model for the combined simulation of equity prices and CDS spreads, which allows us to introduce this correction in the SRISK framework for measuring systemic risk. |
| Keywords: | Banking, Capital, Stress Test, Systemic Risk, Multifactor Model |
| JEL: | C32 G01 G21 G28 G32 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2211&r= |
| By: | Neamtu, Ioana (Bank of England); Vo, Quynh-Anh (Bank of England) |
| Abstract: | This paper examines how the level (ie group or business unit level) at which regulatory requirements are applied affects banks’ asset risk. We develop a theoretical model and calibrate it to UK banks. Our main finding is that the impact differs depending on which regulatory constraint is binding at the group consolidated level. If that is the leverage ratio requirement, then the allocation of regulatory constraints to business units either maintains or decreases the riskiness of banks’ investment portfolios. However, if the risk-weighted requirement is the binding constraint at the group level, applying regulatory requirements at the business unit level can lead to banks selecting riskier asset portfolios as optimal. We also find that the impact on banks’ asset risk differs across bank business models. |
| Keywords: | Leverage ratio requirement; risk-weighted capital requirements; capital allocation |
| JEL: | G21 G28 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0956&r= |
| By: | Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | This study aims to investigate the effects of mergers and acquisitions (M&As) by Chinese multinational firm in the EU28 on the subsequent innovation performance of acquiring firms with different technological intensities and types of corporate ownership The study does so by applying the Zero-Inflated Negative Binomial estimation to analyze novel longitudinal firm-level data covering the period from 2010 to 2018. The empirical evidence suggests that Chinese acquiring firms are generally able to enhance their innovation performance after merging or acquiring firms from the EU28 countries. Furthermore, this study reveals that medium low- and low-tech firms significantly improved their innovation performance after undertaking M&As, but the same effect cannot be identified for firms in the high- and medium high-tech groups. Finally, strong evidence confirms the significant increase in innovation output of private-owned enterprises in the post-acquisition era compared with state-owned or -controlled enterprises. |
| Keywords: | mergers and acquisitions, M&A, innovation performance, emerging market multinationals (EMNEs), learning, China, EU |
| JEL: | O1 O3 F23 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei310&r= |
| By: | Lorenzo Ricci; Giovanni Soggia; Lorenzo Trimarchi |
| Abstract: | This paper investigates the impact of idiosyncratic shocks in bank lending standards on firm credit in Italy, using survey data from the Regional Bank Lending Survey to identify bank supply conditions. From 2009 to 2019, we document that a one-standard-deviation tightening in lending standards reduces firm credit growth by 0.21 percentage points and explains 4.3% of the total variation. This effect is driven mainly by liquidity provisionsto firms for credit lines. Examining the extensive margin of the bank-firm relationship, we find that a negative shock significantly impacts the probability of accepting new loan applications and the likelihood of the bank-firm relationship breaking up. We also show firms cannot smooth individual bank shocks by borrowing more from other lenders. Changes to lending standards have sizable and persistent effects on aggregatecredit and production, especially at times of high economic uncertainty. |
| Keywords: | Credit Growth, Bank Lending Standards, Credit Lines |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/338083&r= |
| By: | Marco Caliendo (University of Potsdam, IZA, DIW, IAB); Deborah A. Cobb-Clark (University of Sydney, IZA, ARC Centre of Excellence for Children and Families over the Life Course Centre); Harald Pfeifer (Federal Institute for Vocational Education and Training (BIBB) Bonn, ROA at Maastricht University); Arne Uhlendorff (CREST, CNRS, IPParis, IAB, IZA, DIW); Caroline Wehner (BIBB, IZA, ROA at Maastricht University, UNU-MERIT) |
| Abstract: | We provide the first estimates of the impact of managers’ risk preferences on their training allocation decisions. Our conceptual framework links managers’ risk preferences to firms’ training decisions through the bonuses they expect to receive. Risk-averse managers are expected to select workers with low turnover risk and invest in specific rather than general training. Empirical evidence supporting these predictions is provided using a novel vignette study embedded in a nationally representative survey of firm managers. Risk-tolerant and risk-averse decision makers have significantly different training preferences. Risk aversion results in increased sensitivity to turnover risk. Managers who are risk-averse offer significantly less general training and, in some cases, are more reluctant to train workers with a history of job mobility. All managers, irrespective of their risk preferences, are sensitive to the investment risk associated with training, avoiding training that is more costly or targets those with less occupational expertise or nearing retirement. This suggests the risks of training are primarily due to the risk that trained workers will leave the firm (turnover risk) rather than the risk that the benefits of training do not outweigh the costs (investment risk). |
| Keywords: | Manager Decisions, Employee Training, Risk Attitudes, Human Capital Investments |
| JEL: | J24 D22 D91 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:44&r= |