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on Corporate Finance |
| By: | Gabriele Beccari (University of Rome Tor Vergata. Dipartimento di Economia e Finanza); Francesco Marchionne (Indiana University, Kelley School of Business); Beniamino Pisicoli (University of Rome Tor Vergata. Dipartimento di Economia e Finanza) |
| Abstract: | This paper uses the Italian 2012 reform that introduced minibonds, a financial instrument specifically designed for SMEs, to check whether more accessible market-based finance promotes investment in intangibles. We apply a propensity score matching to address selection bias, run diff-in-diff estimates over 1,454 different samples to test our hypotheses, and use a meta-analysis to summarize the results. We find that minibond-issuing firms increase investments in intangible assets, a component difficult to finance via bank credit, more than other firms and investments in tangibles. Two mechanisms are at work: minibond issuances increase financial resources available to the firm (financial effect) and, above all, signal an improvement in business practices (reputational effect). These effects are more intense for smaller, more opaque, and bank-dependent firms. Our results are not affected by model dependence or endogeneity issues and are robust to different specifications. |
| Keywords: | intangibles; corporate bonds; bank dependence; minibonds; market-based finance; SMEs; investment |
| JEL: | G10 G23 G32 O30 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:174&r= |
| By: | Ralph De Haas; Ralf Martin; Mirabelle Muuls; Helena Schweiger |
| Abstract: | We use data on 10,852 firms across 22 emerging markets to analyse how credit constraints and deficient firm management inhibit corporate investment in green technologies. For identification, we exploit quasi-exogenous variation in local credit conditions. Our results indicate that both credit constraints and green managerial constraints slow down firm investment in more energy efficient and less polluting technologies. Complementary analysis of data from the European Pollutant Release and Transfer Register (E-PRTR) reveals the pollution impact of these constraints. We show that in areas where more firms are credit constrained and weakly managed, industrial facilities systematically emit more CO2 and other gases. This is corroborated by the finding that in areas where banks needed to deleverage more after the Global Financial Crisis, industrial facilities subsequently reduced their carbon emissions considerably less. On aggregate this kept CO2 emissions 5.6% above the level they would have been in the absence of credit constraints. |
| Keywords: | credit constraints, green management, CO2 emissions, energy efficiency |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1837&r= |
| By: | Lyonnet, Victor (Ohio State University); Stern, Lea H. (University of Washington) |
| Abstract: | We use machine learning to study how venture capitalists (VCs) make investment decisions. Using a large administrative data set on French entrepreneurs that contains VC-backed as well as non-VC-backed firms, we use algorithmic predictions of new ventures’ performance to identify the most promising ventures. We find that VCs invest in some firms that perform predictably poorly and pass on others that perform predictably well. Consistent with models of stereotypical thinking, we show that VCs select entrepreneurs whose characteristics are representative of the most successful entrepreneurs (i.e., characteristics that occur more frequently among the best performing entrepreneurs relative to the other ones). Although VCs rely on accurate stereotypes, they make prediction errors as they exaggerate some representative features of success in their selection of entrepreneurs (e.g., male, highly educated, Paris-based, and high-tech entrepreneurs). Overall, algorithmic decision aids show promise to broaden the scope of VCs’ investments and founder diversity. |
| JEL: | D8 D83 G11 G24 G41 M13 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2022-02&r= |
| By: | Brett Barkley; Mark E. Schweitzer |
| Abstract: | We apply data from the Federal Reserve’s Small Business Credit Survey from 2016 to 2020 to estimate disparities in access to small business financing through loan denials and discouragement. We find that substantial credit disparities continue to exist despite the growth of fintech lenders, which prior research shows have expanded the set of small businesses receiving credit. Because the pandemic period brought many direct changes to the business and lending environment, we separately analyze the change to lending in 2020. PPP loans represented an unprecedented support for small businesses, support that was not dependent on the creditworthiness of businesses, but minority-owned businesses are estimated to have received a smaller fraction of the funds they applied for from the program. |
| Keywords: | small business lending; minority credit access; fintech; COVID-19 |
| JEL: | G21 L5 R3 |
| Date: | 2022–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:94290&r= |
| By: | Bai, Hang (University of Connecticut); Li, Erica X. N. (Cheung Kong Graduate School of Business); Xue, Chen (University of Cincinnati); Zhang, Lu (Ohio State University - Fisher College of Business; National Bureau of Economic Research) |
| Abstract: | Integrating national accounting with financial accounting, we provide firm-specific estimates of current-cost capital stocks for the entire Compustat universe, as well as an array of estimates of investment flows, economic depreciation rates, and capital and investment price deflators. The firm-level current-cost investment rate distribution is heavily right-skewed, with a small fraction of negative investment rates, 5.51%, but a huge fraction of positive investment rates, 91.64%. Despite a tiny fraction of inactive investment rates, 2.85%, firm-level investment also seems lumpy, featuring a fraction of 32.66% for positive spikes (investment rates higher than 20%). For a typical firm, 39% of total investment is completed within 20% of the sample years. |
| JEL: | D22 D25 E22 E44 G12 G31 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2022-03&r= |
| By: | Yojiro Ito (Economist, Institute for Monetary and Economic Studies (currently, Personnel and Corporate Affairs Department), Bank of Japan (E-mail: youjirou.itou@boj.or.jp)); Daisuke Miyakawa (Associate Professor, Hitotsubashi University Business School (E-mail: dmiyakawa@hub.hit-u.ac.jp)) |
| Abstract: | Studies on firm performance have found that exiting firms in Japan persistently show better performance than surviving firms, and this persistence adversely affects aggregate productivity. We use the panel data of business enterprises along with unique information on their exit modes (i.e., default, voluntary closure, and merger) to show that a large part of such a "negative exit effect" is attributed to the firms exiting through mergers. Further, we confirm that the causal effect of those mergers results in positive growth in the productivity of merging firms. Given that the size of such a positive causal effect overwhelms the negative exit effect, resource reallocation through mergers positively contributes to the aggregate growth in productivity for Japanese firms. |
| Keywords: | Productivity dynamics, Exit effects, Mergers |
| JEL: | D24 G33 G34 O47 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:22-e-07&r= |
| By: | Kim, Jinhwan (Stanford U); Valentine, Kristen (U of Georgia) |
| Abstract: | We examine the spillover effect of public firm innovation disclosures on the patent trading market. Relative to equity markets, the patent market is decentralized and rife with information frictions, yet it serves as an important mechanism through which innovations reallocate to the most productive users. Using data on patent transactions, we find that going from the 25th percentile to the 75th percentile in innovation-relevant public firm disclosures – proxied by the number of innovation-relevant sentences in 10-K filings – is linked to a 13.0% to 14.9% increase in future patent sales by other parties that likely consume these disclosures. These results are consistent with financial statement disclosures generating positive information externalities useful for trading patents. The positive link between innovation-relevant firm disclosures is stronger where information asymmetry is likely greatest (transactions between public and private firms) and where information uncertainty likely prevails (transactions between private firms) relative to transactions less likely to suffer from information frictions (transactions between public firms). We corroborate that the positive link between public firm disclosures and other parties’ patent sales is likely due to the resolution of information frictions through several cross-sectional tests, the use of proprietary patent broker data, and the plausibly exogenous implementation of Edgar by public firms. Our results speak to an important, but previously underexplored, externality of financial statement disclosures – their contribution to a well-functioning patent market. |
| JEL: | D23 M40 M41 O30 O31 O32 O34 O39 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:4013&r= |
| By: | Papoutsi, Melina; Darmouni, Olivier |
| Abstract: | Using large panel data of public and private firms, this paper dissects the growth of bond financing in the Euro Area through the lens of the cross-section of issuers. In recent years, the composition of bond issuers has shifted, with the entry of many smaller and riskier issuers. New issuers invest and grow, instead of simply repaying bank loans. Moreover, holdings of ‘buy-and-hold’ bond investors are large in aggregate but small for weaker issuers. Nevertheless, the bond investors’ sell-off after March 2020 was largely directed at bonds of larger, safer issuers. This micro-evidence can shed light on the implications of corporate bonds market development for smaller firms and financial stability. JEL Classification: G21, G32, E44 |
| Keywords: | bond investors, Corporate bond market, debt structure, disintermediation, ECB, financial fragility, monetary policy, quantitative easing |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20222663&r= |