nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒05‒30
five papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Causal Effects of the Fed's Large-Scale Asset Purchases on Firms' Capital Structure By Andrea Nocera; M. Hashem Pesaran
  2. The position of the EU in the semiconductor value chain: evidence on trade, foreign acquisitions, and ownership By Ciani, Andrea; Nardo, Michela
  3. Climate change and credit risk: the effect of carbon taxes on Italian banks’ business loan default rates By Maria Alessia Aiello; Cristina Angelico
  4. The evolution of owner-entrepreneurs’ taxation: five tax regimes over a 160-year period By Elert, Niklas; Johansson, Dan; Stenkula, Mikael; Wykman, Niklas
  5. Debt-Financed Collateral and Stability Risks in the DeFi Ecosystem By Michael Darlin; Leandros Tassiulas

  1. By: Andrea Nocera; M. Hashem Pesaran
    Abstract: This paper investigates the short- and long-term impacts of the Federal Reserve’s large-scale asset purchases (LSAPs) on the capital structure of U.S. non-financial firms. To isolate the effects of LSAPs from the impact of concurrent macroeconomic conditions, we exploit cross-industry variations in the ability of firms therein to raise external funds without exhausting their debt capacity. We show that firms’ responses to LSAPs strongly depend on the financing decisions of other peers in the same industry. The higher the proportion of firms without high debt burdens in an industry, the stronger the response of firms within the industry to the Fed’s asset purchases. Overall, our results show that LSAPs facilitated firms’ access to debt financing and that the impacts of LSAPs on firms’ capital structure are likely to be long-lasting.
    Keywords: capital structure, identification, interactive effects, leverage, quantitative easing, unconventional monetary policy
    JEL: C32 E44 E52 E58
    Date: 2022
  2. By: Ciani, Andrea (European Commission); Nardo, Michela (European Commission)
    Abstract: We map companies belonging to the semiconductor value chain at the world level and investigate the turnover of the companies by jurisdiction of their ultimate owner. Total turnover for the top-10 companies, with respect to revenue, among the manufacturers of semiconductors amounts to 266 Billion EUR for year 2020. The same group of companies accounts for 87% of market capitalization of this industry in 2021. Our coverage is uneven across jurisdictions. We have a richer coverage for Europe than for the US and China, given the interest in analysing the European landscape. Data on turnover by segment shows that EU-owned companies represent a relevant share of the input suppliers for the production of semiconductors (evidence confirmed by De Jong, 2020, as well as by Kleinhans and Baisakova, 2020). Indeed EU companies are among the largest suppliers of chemicals and gases in this supply chain, accounting for 34% of world turnover in 2020. US companies are leaders in the production of equipment used for the production of semiconductors with 31% of the turnover, closely followed by European ones with 27%. The picture changes when looking at the turnover of EU-owned chip producers (foundries) and chip designers (fabless companies), which is negligible. Taiwanese firms share with South Korean manufacturers the leadership in the foundry segment.
    Keywords: Semiconductors, Europe, Companies, Ownership
    JEL: F23 F10 L63 G32
    Date: 2022–04
  3. By: Maria Alessia Aiello (Bank of Italy); Cristina Angelico (Bank of Italy)
    Abstract: Climate change poses severe systemic risks to the financial sector through multiple transmission channels. In this paper, we estimate the potential impact of different carbon taxes (€50, €100, €200 and €800 per ton of CO2) on the Italian banks’ default rates at the sector level in the short term using a counterfactual analysis. We build on the micro-founded climate stress test approach proposed by Faiella et al. (2021), which estimates the energy demand of Italian firms using granular data and simulates the effects of the alternative taxes on the share of financially vulnerable agents (and their debt). Credit risks stemming from introducing a carbon tax – during periods of low default rates – are modest on banks: on average, in a one-year horizon, the default rates of firms increase but remain below their historical averages. The effect is heterogeneous across different sectors and rises with the tax value; however, even assuming a tax of €800 per ton of CO2, the default rates are lower than the historical peaks.
    Keywords: climate change, carbon tax, climate stress test, banks’ credit risk
    JEL: Q43 Q48 Q58 G21
    Date: 2022–04
  4. By: Elert, Niklas (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Stenkula, Mikael (Research Institute of Industrial Economics (IFN)); Wykman, Niklas (Örebro University School of Business)
    Abstract: The institutional literature suggests that long-term tax incentives are crucial for entrepreneurs, but studies on this topic are hampered by theoretical and empirical problems related to how to define and measure entrepreneurial income. We resolve these problems by drawing on a theoretical definition of the entrepreneur as an owner, which enables us to identify entrepreneurship empirically by means of investments made by active owners of closely held firms. Using detailed Swedish tax data, we analyze the tax incentives for such owner-entrepreneur investments from 1862 to 2018, thereby highlighting the evolution of a general institutional phenomenon through a long-run, in-depth, country-specific analysis. We calculate the annual marginal effective tax rate (METR) on capital income for investments, distinguishing between average- and top-income entrepreneurs, and between three sources of finance. We identify five tax regimes that indicate substantial differences in institutional quality over time according to the magnitude of the METR and METR differences between average- and top-income entrepreneurs and across sources of finance. Increased taxation of owner-entrepreneurs helps explain the absence of new large entrepreneurial firms in Sweden after World War II, while improved incentives can be associated with Sweden’s recent entrepreneurial renaissance.
    Keywords: high-impact entrepreneurship; institutional quality; arginal effective tax rates; tax regimes; tax reforms
    JEL: H21 H31 H32 L25 L26 N44
    Date: 2022–05–12
  5. By: Michael Darlin; Leandros Tassiulas
    Abstract: The rise of Decentralized Finance ("DeFi") on the Ethereum blockchain has enabled the creation of lending platforms, which serve as marketplaces to lend and borrow digital currencies. We first categorize the activity of lending platforms within a standard regulatory framework. We then employ a novel grouping and classification algorithm to calculate the percentage of fund flows into DeFi lending platforms that can be attributed to debt created elsewhere in the system ("debt-financed collateral"). Based on our results, we conclude that the wide-spread use of stablecoins as debt-financed collateral increases financial stability risks in the DeFi ecosystem.
    Date: 2022–04

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.