nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒04‒18
fifteen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Capital controls, corporate debt and real effects By Andrea Fabiani; Martha López Piñeros; José-Luis Peydró; Paul E. Soto
  2. Does gender diversity in the workplace mitigate climate change? By Altunbas, Yener; Gambacorta, Leonardo; Reghezza, Alessio; Velliscig, Giulio
  3. Bank Information and Firm Growth. Microeconomic Evidence from the US Credit Market By Degryse, Hans; Kokas, Sotirios; Minetti, Raoul; Peruzzi, Valentina
  4. Financial Frictions and International Trade: A Review By David Kohn; Fernando Leibovici; Michal Szkup
  5. Impact of COVID-19 Packages on MSME Financing in India By Muduli, Silu
  6. Financial Literacy and Cash Holdings in Turkey By Mustafa Recep Bilici; Saygin Cevik
  7. The (heterogenous) economic effects of private equity buyouts By Davis, Steven J.; Haltiwanger, John C.; Handley, Kyle; Lerner, Joshua; Lipsius, Ben; Miranda, Javier
  8. Employee Health and Firm Performance By Rettl, Daniel A.; Schandlbauer, Alexander; Trandafir, Mircea
  9. Financial Constraints and Markups By HOSONO Kaoru; TAKIZAWA Miho; YAMANOUCHI Kenta
  10. Effects of the Quality of Science and Innovation on Venture Finance: Evidence from University Spinoffs in Japan By FUKUGAWA Nobuya
  11. Political and Socioeconomic Factors That Determine the Financial Outcome of Successful Green Innovation By Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
  12. Can Social Media Inform Corporate Decisions? Evidence from Merger Withdrawals By Cookson, J. Anthony; Niessner, Marina; Schiller, Christoph M.
  13. The low-carbon transition, climate commitments and firm credit risk By Carbone, Sante; Giuzio, Margherita; Kapadia, Sujit; Krämer, Johannes Sebastian; Nyholm, Ken; Vozian, Katia
  14. For a European Approach to R&D Tax Incentive(s) : study of the European Law Institute By Georges Cavalier; Rémi Barnéoud; Mehdy Ben Brahim; Pablo Guédon; Lukasz Stankiewicz
  15. The importance of capital in closing the entrepreneurial gender gap: a longitudinal study of lottery wins By Fleche, Sarah; Lepinteur, Anthony; Powdthavee, Nattavudh

  1. By: Andrea Fabiani; Martha López Piñeros; José-Luis Peydró; Paul E. Soto
    Abstract: Non-US firms have massively borrowed dollars (foreign currency, FX), which may lead to booms and crises. We show the real effects of capital controls, including prudential benefits, through a firm-debt mechanism. Our identification exploits the introduction of a tax on FX-debt inflows in Colombia before the global financial crisis (GFC), and administrative, proprietary datasets, including loan-level credit register data and firm-level information on FX-debt inflows and imports/exports. Our results show that capital controls substantially reduce FX-debt inflows, particularly for firms with larger ex-ante FX-debt exposure. Moreover, firms with weaker local banking relationships cannot substitute FX-debt with domestic-debt and experience a reduction in total debt and imports upon implementation of the policy. However, our results suggest that, by preemptively reducing pre-crisis firm-level debt, capital controls boost exports during the subsequent GFC, especially among financially-constrained firms.
    Keywords: Capital controls; corporate FX-debt; real effects; macroprudential; capital inflows
    JEL: F3 F38 F4 F6 G01 G15 G21 G28
    Date: 2021–09
  2. By: Altunbas, Yener; Gambacorta, Leonardo; Reghezza, Alessio; Velliscig, Giulio
    Abstract: We match firm-corporate governance characteristics with firm-level carbon dioxide (CO2) emissions over the period 2009-2019 to study the relationship between gender diversity in the workplace and firm carbon emissions. We find that a 1 percentage point increase in the percentage of female managers within the firm leads to a 0.5% decrease in CO2 emissions. We document that this effect is statically significant, also when controlling for institutional differences caused by more patriarchal and hierarchical cultures and religions. At the same time, we show that gender diversity at the managerial level has stronger mitigating effects on climate change if females are also well-represented outside the organization, e.g. in political institutions and civil society organizations. Finally, we find that, after the Paris Agreement, firms with greater gender diversity reduced their CO2 emissions by about 5% more than firms with more male managers. JEL Classification: G12, G23, G30, D62, Q54
    Keywords: carbon emissions, female managers, global warming, green economics, Paris agreement
    Date: 2022–02
  3. By: Degryse, Hans (KU Leuven & CEPR); Kokas, Sotirios (University of Essex); Minetti, Raoul (Michigan State University, Department of Economics); Peruzzi, Valentina (Sapienza University of Rome)
    Abstract: We investigate the impact that banks’ information on borrowing firms has on firm-level growth using matched bank-firm data from the U.S. credit market. Exploiting the structure of lending syndicates to construct proxies for bank information, we find consistent evidence that banks’ information spurs firms’ tangible and intangible investments, as well as promoting better growth outcomes. We find limited evidence of banks’ exploitation of informational monopolies that could deter firms’ investment, even when banks hold significant credit market power. Banks’ information does not appear to bias firm growth towards capital-intensive investments, but rather fosters employment growth.
    Keywords: Firm Growth; Banks; Information; Syndicates
    JEL: G21 L25
    Date: 2022–04–11
  4. By: David Kohn (Pontificia Universidad Católica de Chile); Fernando Leibovici (Federal Reserve Bank of St. Louis); Michal Szkup (University of British Columbia)
    Abstract: This paper reviews recent studies on the impact of financial frictions on international trade. We first present evidence on the relation between measures of access to external finance and export decisions. We then present an analytical framework to analyze the impact of financial frictions on firms’ export decisions. Finally, we review recent applications of this framework to investigate the impact of financial frictions on international trade dynamics across firms, industries, and in the aggregate. We discuss related empirical, theoretical, and quantitative studies throughout.
    Keywords: financial frictions, international trade, export decisions, trade distortions, firm dynamics
    Date: 2022–02
  5. By: Muduli, Silu
    Abstract: The small, micro, and medium enterprise (MSME) sector in India was severely affected during the COVID-19 pandemic. The Government of India and the Reserve Bank of India brought numerous policy measures to revive and provide external liquidity support to borrowers in the MSMEs sector. Credit growth picked up in the MSME sector following the introduction of the Emergency Credit Line Guarantee Scheme (ECLGS) scheme in May 2020, particularly of a loan of size less than 10 lakh. Initially, it benefited borrowers already having a relationship with the bank, later the benefit passed to new borrowers. On the usage of funds, nearly 45 per cent of these loans were used for clearing dues of vendors and 29 per cent to restart the business. On the performance of ECLGS loans, 88 per cent of loans are standard assets and 1.96 per cent are non-performing assets as of March 31, 2021.
    Keywords: COVID-19,MSMEs Relief packages,MSME financing
    JEL: G28 G32 H12
    Date: 2022
  6. By: Mustafa Recep Bilici; Saygin Cevik
    Abstract: This paper examines the effect of financial literacy level on cash holdings in Turkey. Utilizing the Methods of Payment Survey, which includes both financial literacy and cash-related data, we first investigate the fundamentals of financial literacy in Turkey. Based on the performance on financial literacy questions, we categorize respondents into three groups. Subsequently, we analyze how cash holding behavior differs among financial literacy groups. Our results reveal that financially literate respondents tend to hold less cash on hand and store more cash elsewhere. Moreover, card ownership increases through financial literacy and the change in payment behavior of financially literate respondents is more significant during Covid-19 pandemic. The results imply that promoting financial literacy may result in less cash usage at points of sale accompanied by the currency in circulation growth, due to the overwhelming effect of increased non-transactional demand following a positive change in financial literacy level.
    Keywords: Financial literacy, Money demand, Cash demand
    JEL: C50 E41 G53
    Date: 2022
  7. By: Davis, Steven J.; Haltiwanger, John C.; Handley, Kyle; Lerner, Joshua; Lipsius, Ben; Miranda, Javier
    Abstract: The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms - on average, and relative to control firms - but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
    Keywords: administrative data,business cycle,credit conditions,employment,private equity,productivity
    JEL: D24 G24 G32 G34 J23 J63 L25
    Date: 2022
  8. By: Rettl, Daniel A. (University of Georgia); Schandlbauer, Alexander (University of Southern Denmark); Trandafir, Mircea (University of Southern Denmark)
    Abstract: When workers are in bad health, their productivity declines. We investigate whether the health of employees affects firm performance, taking advantage of the severity of the seasonal influenza seasons as a source of exogenous variation. We find that firms whose employees are particularly affected by influenza experience reductions in their return on assets and in net income. These results are not driven by firm-specific characteristics, as we find the same relationship between influenza severity and firm performance within firms, at the establishment level. We also document substantial heterogeneity in the effects, with small firms and labor-intensive firms driving our findings. This suggests that labor is an important driver of firm performance and that capital-intensive and larger firms are better able to shift resources in response to temporary shocks to their workforce. Back-of-the-envelope calculations suggest that smaller firms may be better off subsidizing vaccination programs for their employees.
    Keywords: seasonal influenza, health shock, firm performance
    JEL: L25 I12 G30 J31
    Date: 2022–03
    Abstract: We analyze the effects of financial constraints on markups. Using a firm-level dataset from Japan, we first find that financially constrained firms decreased markups and this effect was heightened during the Global Financial Crisis. Second, we find that financially constrained firms decreased inventories and tangible capital investment. These results are consistent with the liquidity management hypothesis that posits that financially constrained firms lower prices to shed inventories, but not with the customer market hypothesis that predicts that constrained firms raise prices to invest less in the customer base and decrease their market shares. Third, although the extent to which the dispersion in markups due to financial constraints results in aggregate TFP losses through inefficient resource allocation is economically small, the magnitude almost doubled during the Global Financial Crisis. Our results indicate that financial constraints matter for product market competition as well as investment.
    Date: 2022–02
  10. By: FUKUGAWA Nobuya
    Abstract: University spinoffs build on strong science, which allows them to create radical innovation. Radical innovation entails uncertainty in entrepreneurial outcomes, necessitating the participation of individuals and organizations that bridge the gap between science and the market. Recognizing that the commercial success of university spinoffs hinges on the entrepreneurial ecosystems they are embedded in, this study establishes unbalanced panel data (2015-2020) to examine the relationships among the key factors in university spinoff ecosystems: scientific productivity of academic researchers associated with university spinoffs, radicalness of the innovation created by the university spinoff, and entrepreneurial intermediaries who bridge the gap between science and the market. Estimation results reveal that h5-index positively affects venture capital funding. The quality of innovation does not affect the probability of university spinoffs receiving venture financing, negating the scout function of entrepreneurial intermediaries. Venture capital financing positively affects sales growth of university spinoffs, corroborating the coach function of entrepreneurial intermediaries.
    Date: 2022–02
  11. By: Riehl, Kevin; Kiesel, Florian; Schiereck, Dirk
    Abstract: Green innovation and technology diffusion must be financially and commercially attractive to convince corporate decision makers. This paper focuses on the factors that determine the financial outcome of successful green innovation activities conducted by large, listed companies. We employ a cross-industry dataset including more than 97,954 reports on corporate environmentalism from 286 international listed companies. Our results indicate that economic, political, cultural, firm-specific, investor-related, and governance factors significantly determine the financial performance of green innovation, measured by abnormal returns. Moreover, we can show that factors that reduce the competition in green innovation markets benefit the financial success of firms operating via them. Finally, we find an opposing influence for several factors that benefit earlier stages of innovation (e.g., research output) while harming the later stages (e.g., market introduction and financial performance). These findings imply that a spatial separation strategy for different stages of innovation supports corporate environmentalism activities. Moreover, physical property rights, the governments’ willingness to support green technologies, and economic framework conditions such as oil price, GDP, or public R&D budget need to be balanced by policymakers to address and stimulate green innovation.
    Date: 2022
  12. By: Cookson, J. Anthony; Niessner, Marina; Schiller, Christoph M.
    Abstract: This paper examines the role of social media in informing corporate decision-making by studying the decision of firm management to withdraw an announced merger. A standard deviation decline in abnormal social media sentiment following a merger announcement predicts a 0.73 percentage point increase in the likelihood of merger withdrawal (18.9% of the baseline rate). The informativeness of social media for merger withdrawals is not explained by abnormal price reactions or news sentiment, and in fact, it is stronger when these other signals disagree. Consistent with learning from external information, we find that the social media signal is most informative for complex mergers in which analyst conference calls take a negative tone, driven by the Q&A portion of the call. Overall, these findings imply that social media is not a sideshow, but an important aspect of firm information environment.
    Date: 2022–03–16
  13. By: Carbone, Sante (Financial Stability Department, Central Bank of Sweden); Giuzio, Margherita (European Central Bank); Kapadia, Sujit (European Central Bank); Krämer, Johannes Sebastian (European Central Bank); Nyholm, Ken (European Central Bank); Vozian, Katia (European Central Bank, Helsinki Graduate School of Economics, Hanken School of Economics, Leibniz Institute for Financial Research SAFE)
    Abstract: This paper explores how the need to transition to a low-carbon economy influences credit risk. It develops a novel dataset covering firms’ greenhouse gas emissions over time alongside information on strategies for managing transition risk, includ ing climate disclosure practices and forward-looking emission reduction targets. It assesses how such metrics influence firms’ credit ratings and their market-implied distance-to-default. High emissions tend to be associated with higher credit risk. But disclosing emissions and setting emission reduction targets are associated with lower credit risk, with the effect somewhat stronger for more ambitious climate commitments. After the Paris agreement, firms most exposed to transition risk also saw their ratings deteriorate relative to otherwise comparable firms, with the effect larger for European than US firms, probably reflecting differential climate policy expectations. These results have policy implications for corporate disclosures and strategies around climate change, and the treatment of climate-related transition risk in the financial sector.
    Keywords: climate change; transition risk; disclosure; net zero; green finance; credit risk
    JEL: C58 E58 G11 G32 Q51 Q56
    Date: 2022–01–01
  14. By: Georges Cavalier (CERFF - Centre d'études et de recherches financières et fiscales - Equipe de droit public de Lyon - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon); Rémi Barnéoud; Mehdy Ben Brahim; Pablo Guédon (UJML - Université Jean Moulin - Lyon 3 - Université de Lyon); Lukasz Stankiewicz (CERFF - Centre d'études et de recherches financières et fiscales - Equipe de droit public de Lyon - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon)
    Abstract: The fall off in economic activity following the financial crisis of 2008 has highlighted the need to encour-age new areas of economic activity. As the European Union deals with the financial and health conse-quences of the COVID-19 pandemic, this continues to be the case. Innovation is a possible generator of economic activity, one which many believe is underutilised in Europe. It is widely agreed that techno-logical advances are important contributors to long-term growth, but research and development (R&D) of new technologies is risky. That is precisely why EU member states incentivise R&D through their tax systems by supporting companies that invest in new technology. Boosting R&D is one of the main objectives of the European Union. A majority of studies conclude that tax incentives stimulate investment in R&D and are an important component in encouraging research-ori-ented economic activity. However, the R&D incentives currently in place in the European Union are not always adequate and in any case piecemeal.
    Keywords: economic activity,tax incentive,Research and Development,Activité économique,Incitation fiscale,Recherche & d
    Date: 2021
  15. By: Fleche, Sarah; Lepinteur, Anthony; Powdthavee, Nattavudh
    Abstract: Can capital constraints explain why there are more male than female entrepreneurs in most societies? We study this issue by exploiting longitudinal data on lottery winners. Comparing between large to small winners, we find that an increase in lottery win in period t-1 significantly increases the likelihood of becoming self-employed in period t. This windfall effect is statistically the same in magnitude for men and women; a one percent increase in exogenous income increases the probability of female selfemployment by 0.6 percentage points, which is approximately 10% of the gender entrepreneurial gap. These results suggest that we can causally reduce the gender entrepreneurial gap by improving women’s access to capital that might not be as readily available to the aspiring female entrepreneurs as it is to male entrepreneurs.
    Keywords: gender inequality; self-employment; lottery wins; BHPS
    JEL: J16 J21 J24
    Date: 2021–04–19

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