nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒07‒18
eight papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Dividend Taxes and the Allocation of Capital By Charles Boissel; Adrien Matray
  2. Determinants of Campaign Success: Empirical evidence from equity crowdfunding in Japan By KURIHARA Koki; HONJO Yuji
  3. The Secular Decline in Private Firm Leverage By Christine L. Dobridge; Erik P. Gilje; Andrew Whitten
  4. Gender Gap in Business Angel financing By Andrea Bellucci; Gianluca Gucciardi; Rossella Locatelli; Cristiana Schena
  5. Financing Infrastructure in the Shadow of Expropriation By Viral V. Acharya; Cecilia Parlatore; Suresh Sundaresan
  6. Export Decision and Credit Constraints under Institution Obstacles By Phan, Trang Hoai; Stachuletz, Rainer; Nguyen, Hai Thi Hong
  7. Exploring Corporate Crisis Communication after COVID-19: The Role of Enterprise Risk Management in (Re)Building Trust By Chiara Mio; Marco Fasan; Carlo Marcon; Silvia Panfilo
  8. Corporate Debt and Stock Returns: Evidence from U.S. Firms During the 2020 Oil Crash By Rabah Arezki; Caleb Cho; Ha Nguyen; Kate Nguyen; Anh Pham

  1. By: Charles Boissel; Adrien Matray
    Abstract: This paper investigates the 2013 three-fold increase in the French dividend tax rate. Using administrative data covering the universe of firms from 2008-2017 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.
    JEL: G32 H2 H25 H32 O16
    Date: 2022–06
  2. By: KURIHARA Koki; HONJO Yuji
    Abstract: This study investigates campaign success in equity crowdfunding, using campaigns listed on a leading Japanese equity crowdfunding platform. We examine how success depends on campaign- and firm-specific characteristics, including the campaign target amount. We provide evidence that campaigns launched by venture capital-backed firms are more likely to succeed than others. We also find that patenting has a positive effect on campaign success, as well as on the campaign target amount. Moreover, campaigns that have already provided services or products have a lower probability of success, although not always, and tend to set a lower target amount. Furthermore, campaigns launched by firms eligible for the Angel Tax System, introduced in Japan as a tax incentive for investment in young and small firms, have a higher tendency to succeed in equity crowdfunding.
    Date: 2022–06
  3. By: Christine L. Dobridge; Erik P. Gilje; Andrew Whitten
    Abstract: Using firm-level administrative tax data on the 43% of business liabilities in the United States tied to privately held firms, we document dramatic reductions in leverage since the Great Recession. Leverage for the average private firm fell fifteen percent between 2004 and 2018. In contrast, leverage among public firms rose during this period. The decline in leverage among private firms is inconsistent with theories that suggest firm leverage tracks pro-cyclical credit market conditions. Younger and smaller private firms see especially large declines in leverage, and we find that reduced leverage among private firms is correlated with lower investment. Our findings have important implications for theories on how firm leverage and investment relate to economic fluctuations.
    JEL: G3 G30 G31 G32
    Date: 2022–05
  4. By: Andrea Bellucci (Universita' degli Studi dell'Insubria and Mo.Fi.R.); Gianluca Gucciardi (UniCredit and Universita' degli Studi di Milano); Rossella Locatelli (Universita' degli Studi dell'Insubria); Cristiana Schena (Universita' degli Studi dell'Insubria)
    Abstract: We study the relevance of the gender of contracting parties involved in equity early-stage financing using transaction-level data on Business Angel (BA) investments around the world between 2018 and 2020. In particular, we analyze whether the gender of BA investor has an impact on the size of the financial transaction and whether female-owned businesses are disadvantaged with respect to male-owned businesses. Then, we offer insights into possible channels and underlying mechanisms that could drive BAs' behaviors. According to our findings, female-owned businesses receive less equity financing than their male counterparts. This effect is independent from the information available to BAs on the target and persists even when unobservable individual factors are taken into consideration. This disadvantage seems to be linked to male Business Angels' taste prejudice, independently from the information available to the investor.
    Keywords: Gender-based discrimination, Female-owned enterprises, Access to finance, start-up; SME financing, Business Angel
    JEL: G21 G24 G32 J16 G41 M13
    Date: 2022–06
  5. By: Viral V. Acharya; Cecilia Parlatore; Suresh Sundaresan
    Abstract: We examine the optimal financing of infrastructure when governments have limited financial commitment and can expropriate rents from private sector firms that manage infrastructure. While private firms need incentives to implement projects well, governments need incentives to limit expropriation. This double moral hazard limits the willingness of outside investors to fund infrastructure projects. Optimal financing involves government guarantees to investors against project failure to incentivize the government to commit not to expropriate which improves private sector incentives and project quality. The model captures several other features prevalent in infrastructure financing such as government co-investment, tax subsidies, development rights, and cross-guarantees.
    JEL: D82 G30 G32 G38 H20 H41 H44
    Date: 2022–06
  6. By: Phan, Trang Hoai; Stachuletz, Rainer; Nguyen, Hai Thi Hong
    Abstract: The growing demand for goods and technology increases capital requirements, especially in exporting enterprises. However, many firms have difficulty accessing external capital due to institutional obstacles. This study analyzes two main issues: the influence of institutional obstacles on credit constraints and the relationship between credit constraints and export decisions, adopting firm-level data from 131 countries. The study’s remarkable contribution is to cluster the data into four country groups based on their national income. The typical specification of each group can lead to more precise results, thereby highlighting the role of institutions. More advanced, this study complements the literature’s gap in the relationship between credit constraints and exports by controlling for institutions as interactive variables in the model. This work upgrades assessments to be more accurate, thereby providing more valuable information to policymakers. In addition, credit constraints are measured by both quantitative and qualitative methods. The essential role of firm size is emphasized in further analysis. This study approaches the Probit method. Furthermore, an instrumental variable is used to solve the endogeneity problem. The results found that a weak institution prevents access to finance, especially in middle-income countries. In addition, firms’ access to capital negatively affects exports in all regions. The finding in the group of rich countries is most pronounced.
    Date: 2022
  7. By: Chiara Mio (Dept. of Management, Università Ca' Foscari Venice); Marco Fasan (Dept. of Management, Università Ca' Foscari Venice); Carlo Marcon (Dept. of Management, Università Ca' Foscari Venice); Silvia Panfilo (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: This study aims at investigating whether Enterprise Risk Management (ERM) sophistication shaped different COVID-19 crisis communication strategies. We assess the level of ERM sophistication of the FTSE-MIB Italian listed companies, and we study the pattern of risk communication strategies building on Situational Crisis Communication Theory (SCCT). We find that companies with a low level of ERM sophistication generally adopt a crisis communication strategy based on a “denying/diminish” approach. In contrast, companies with higher ERM sophistication adopt a “diminish/rebuild” strategy. Our results extend previous literature on crisis communication by looking at the unique case of the COVID-19, a non-company-specific crisis that hit all firms. Results show company crisis communication strategies depend on prior risk management characteristics. Thus companies willing to protect their reputation and (re)build public trust because of a crisis should invest not only in risk communication but also in their risk management process.
    Keywords: COVID-19, Enterprise Risk Management, Situational Crisis Communication Theory, Risk communication, Crisis communication strategies, Corporate reputation.
    JEL: M14 G3
    Date: 2022–05
  8. By: Rabah Arezki; Caleb Cho; Ha Nguyen; Kate Nguyen; Anh Pham
    Abstract: This paper explores the effect of oil price fluctuations on the stock returns of U.S. oil firms using a strategy of identification through heteroskedasticity exploiting the 2020 oil crash. Results are twofold. First, we find that a decline in oil prices statistically significantly reduces stock returns of oil firms. On average, a one percent decline in oil prices leads to a 0.44 percent decline in stock prices. Second, results point to the “irrelevance” of debt in mediating the effect of oil prices on stock returns of oil firms. The liquidity backstop provided by the Federal Reserve appears not to have muted the role of debt for oil firms.
    Keywords: oil prices, stock returns, debt
    JEL: E44 G12 Q43
    Date: 2022

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