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on Corporate Finance |
| By: | Charles Boissel (HEC Paris); Adrien Matray (Princeton University and CEPR) |
| Abstract: | This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008–2018 and a quasi-experimental setting, we find that firms swiftly cut dividend payments and used this tax-induced increase in liquidity to invest more. Heterogeneity analyses show that firms with high demand and returns on capital responded most while no group of firms cut their investment. Our results reject models in which higher dividend taxes increase the cost of capital and show that the tax-induced increase in liquidity relaxes credit constraints, which can reduce capital misallocation. |
| Keywords: | Financing Policy; Business Taxes; Capital and Ownership Structure |
| JEL: | G11 G32 H25 O16 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2021-39&r= |
| By: | Christian Kubitza (University of Bonn) |
| Abstract: | This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small subset of firms for identification, I show that these increases in bond demand raise bond prices and lower firms' funding costs. In response, firms issue more bonds, especially when their bond underwriters are well connected with investors. Firms use the proceeds to raise investment rather than equity payouts. The results emphasize the significant impact of investor demand on firms' financing and investment activities. |
| Keywords: | Corporate Finance, Corporate Bonds, Insurance, Real Effects |
| JEL: | G12 G22 G24 G32 G34 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:144&r= |
| By: | David Schoenherr (Princeton University); Jan Starmans (Stockholm School of Economics) |
| Abstract: | We examine how creditor protection affects firms with different levels of owners’ and man- agers’ personal costs of bankruptcy. Theoretically, we show that firms with high personal costs of bankruptcy borrow and invest more under a more debtor-friendly management stay system, whereas firms with low personal costs of bankruptcy borrow and invest more under a more creditor-friendly receivership system. Intuitively, stronger creditor protection relaxes financial constraints but reduces credit demand. Which effect dominates depends on owners’ and managers’ personal costs of bankruptcy. Empirically, we find support for these predictions using a Korean bankruptcy reform, which replaced receivership with management stay. |
| Keywords: | Bankruptcy, personal costs of bankruptcy, investment, law and economics |
| JEL: | G31 G32 G33 G38 K22 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-43&r= |
| By: | Li, Xiang |
| Abstract: | This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a large firm-level dataset for four European countries, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Moreover, the impacts are stronger for innovation-intensive firms. We use firms' flexibility in changing debt maturity and the deviation to leverage target to gauge the causal relationship, and identify the reduced investment and steepened term structure as the transmission mechanisms. |
| Keywords: | capital structure,corporate investment,debt maturity,economic policy uncertainty |
| JEL: | D81 G32 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:52022&r= |
| By: | Eszter Balogh; Adám Banai; Tirupam Goel; Péter Lang; Martin Stancsics; Előd Takáts; Álmos Telegdy |
| Abstract: | We assess the effects of non-repayable subsidies on financially constrained and unconstrained Hungarian SMEs. Using rejected subsidy applicants as control group and bank queries to the credit-registry to identify firms that applied for but did not receive a loan, we show that subsidies generate a sizeable incremental impact on asset growth of constrained firms relative to unconstrained businesses. This effect, however, is transitory and does not translate into higher sales, profitability or productivity. Financing, therefore, may not be the primary hurdle for these SMEs, and credit constraints may reflect other shortcomings, such as lack of good management or viable projects. |
| Keywords: | SMEs, subsidies, credit constraints, emerging market economies, difference-in-differences, credit registry micro-data |
| JEL: | G38 G21 E58 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:984&r= |
| By: | Ferreira, Miguel A.; Eça, Afonso; Prado, Melissa Porras; Rizzo, A. Emanuele |
| Abstract: | We show that FinTech lending affects credit markets and real economic activity using a unique data set of a Peer-to-Business platform for which we have the universe of loan applications. We find that FinTech serves high quality and creditworthy small businesses who already have access to bank credit. Firms use FinTech to obtain long-term unsecured loans and reduce their exposure to banks with less liquid assets, stable funds, and capital. We find that access to FinTech spurs firm growth, employment and investment relative to firms that get their loan application rejected. In addition, firms with access to FinTech increase leverage and substitute long-term bank debt with FinTech debt. Our findings suggest that FinTech allows firms to preserve financial flexibility, reduce their bank dependence and exposure to banking shocks. JEL Classification: G21, G23, O33 |
| Keywords: | bank relationships, debt structure, FinTech, firm growth, small business lending |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222639&r= |
| By: | Alessandro Barbera; Áron Gereben; Marcin Wolski |
| Abstract: | We estimate heterogeneous treatment effects of the EIB fnancial support on European firms between 2008 and 2015. The relevant control groups are created with propensity score matching and the effects are estimated in a difference-in-differences framework, controlling for firm-level and country-sector-year fixed effects. We find that the positive effects of EIB-supported lending on job creation and investments were larger for smaller and younger firms. Moreover, we find evidence that longer maturities and more advantageous loan pricing are associated with larger employment and investment effects, while no larger impact is observed for larger loan volumes. Overall, the results suggest that benefits of the EIB support are rather observed on an intensive, rather than on an extensive, margin. |
| Keywords: | SMEs, EIB, intermediated loans, impact assessment, conditional treatment effects, difference-in- differences. |
| JEL: | G38 G21 G23 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1006&r= |
| By: | Julian di Giovanni; Manuel García-Santana; Priit Jeenas; Enrique Moral-Benito; Josep Pijoan-Mas |
| Abstract: | We provide a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. We start by using a newly created panel dataset of administrative data that merges Spanish credit register loan data, quasicensus firm-level data, and public procurement projects to study firm selection into procurement and the effects of procurement on credit growth and firm growth. We show evidence consistent with the hypotheses that there is selection of large firms into procurement, that procurement contracts provide useful collateral for firms -more so than sales to the private sector- and that procurement contracts facilitate firm growth beyond the contract duration. We next build a model of firm dynamics with both asset-based and earnings-based borrowing constraints and a government that buys goods and services from private sector firms. We use the calibrated model to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. We find that granting procurement contracts to small firms, either by directly targeting them or by slicing large contracts into smaller ones, helps these firms grow and overcome financial constraints in the long run. However, we also find that reducing the average size of contracts -or making it less likely for large firms to access them- removes saving incentives for large firms, whose negative effects on capital accumulation can overcome the expansionary consequences for small firms and hence generate a drop in aggregate output. |
| Keywords: | Government procurement, financial frictions, capital accumulation, aggregate productivity |
| JEL: | E22 E23 E62 G32 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1821&r= |
| By: | Barbiero, Francesca; Schepens, Glenn; Sigaux, Jean-David |
| Abstract: | We show that the liquidation value of collateral depends on who is pledging it. We employ transaction-level data on overnight repurchase agreements (repo) and loan-level credit registry data on corporate loans. We find that borrowers on the repo market pay a 2.6 basis points rate premium when their default risk is positively correlated with the risk of the collateral that they pledge. The premium in corporate loan markets amounts to 25 basis points. Our results imply that liquidation value contains a component at the borrower-collateral level, and that lenders monitor and price-in the interdependency between borrower and collateral risk. JEL Classification: G21, G12, D53, D47, E43 |
| Keywords: | collateral, corporate loans, LGD, money markets, wrong-way risk |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222645&r= |
| By: | E. Mark Curtis; Daniel G. Garrett; Eric Ohrn; Kevin A. Roberts; Juan Carlos Suarez Serrato |
| Abstract: | We study how bonus depreciation, a policy designed to lower the cost of capital, impacted investment and labor demand in the US manufacturing sector. Difference-in-differences estimates using restricted-use US Census Data on manufacturing establishments show that this policy increased both investment and employment, but did not lead to wage or productivity gains. Using a structural model, we show that the primary effect of the policy was to increase the use of all inputs by lowering overall costs of production. The policy further stimulated production employment due to the complementarity of production labor and capital. Supporting this conclusion, we nd that investment is greater in plants with lower labor costs. Our results show that recent policies that incentivize capital investment do not lead manufacturing plants to replace workers with machines. |
| Keywords: | capital-labor substitution, bonus depreciation, corporate taxation |
| JEL: | D22 H25 H32 J23 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:22-04&r= |
| By: | Kazemian, Soheil; Djajadikerta, Hadrian Geri; Said, Jamaliah; Roni, Saiyidi Mat; Trireksani, Terri; Alam, Md. Mahmudul (Universiti Utara Malaysia) |
| Abstract: | Market orientation has been known as an efficient managerial tool to assist in sustaining the performance of organisations. Market orientation has three dimensions, namely customer orientation, competitor orientation and inter-function coordination. This paper evaluates how corporate governance influences the three dimensions of market orientation within Iran's upscale hotels. The impacts of the three dimensions of market orientation on the hotels' social and financial performance are also examined to determine if market orientation mediates the relationships between corporate governance and performance. Partial least squares structural equation modelling (PLS-SEM) is used to analyse the survey data collected from the executives of four- and five-star hotels in Mashhad, Iran. Results show that corporate governance positively influences the three dimensions of market orientation, while overall market orientation influences financial and social performance. Specifically, customer orientation and inter-function coordination significantly reinforce such mediation, whereas the influence of competitor orientation is limited to financial performance. |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:ajmvn&r= |