nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒08‒22
twelve papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. "Corporate Governance and Financial Distress: Empirical Evidence from listed Consumer Services Firms in Sri Lanka " By Balagobei, S
  2. Yoke of Corporate Governance and Firm Performance: A Study of Listed Firms in Pakistan By Ali, Amjad; Alim, Wajid; Ahmed, Jawad; Nisar, Sabahat
  3. How do firms cope with losses from extreme weather events? By Benincasa, Emanuela; Betz, Frank; Gattini, Luca
  4. All you need is G(overnance): Sustainable Finance Following Ambrogio Lorenzetti's Frescoes By Costanza Consolandi; Giovanni Ferri; Andrea Roncella
  5. A study on Determinants of Dividend Policy and its Impact on Financial Performances: A Panel Data Analysis for Indian Listed Firms By Suresh N; Pooja M
  6. Government-backed venture capital investments and performance of companies: The role of networks By Köppl-Turyna, Monika; Köppl, Stefan; Christopulos, Dimitris
  7. Determinants of Earnings Management Actions in Indonesian Banking Companies By Arna Suryani
  8. Conflicting fiduciary duties and fire sales of VC-backed start-ups By Bian, Bo; Li, Yingxiang; Nigro, Casimiro A.
  9. When are large female-led firms more resilient against shocks? Learnings from Indian enterprises during COVID-19 with diff-in-diff and causal forests By Merlin Stein
  10. The performance of Italian Industrial Districts in and out of the 2008-2012 crisis By Valter Di Giacinto; Andrea Sechi; Alessandro Tosoni
  11. A Study on the Impact of Human Resource Accounting on Firms Value with Respect to Companies Listed in National Stock Exchange By Anil S; Sudharani R; Suresh N
  12. Creative Destruction and Stock Price Informativeness in Emerging Economies By Dai, Shangze; Fan, Fei; Zhang, Keke

  1. By: Balagobei, S (University of Jaffna, Sri Lanka. Author-2-Name: Keerthana, G Author-2-Workplace-Name: University of Jaffna, Sri Lanka. Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: " Objective - COVID – 19 has created unique and very profound challenges for almost all listed firms in Sri Lanka. The purpose of the study is to examine the influence of corporate governance practices on the financial distress status of listed companies in the consumer services sector in Sri Lanka. Methodology/Technique - To assess the level of corporate governance, the current study constructs six dimensions of corporate governance, such as board size, board composition, CEO duality, board meeting, director ownership, and audit committee size. The Altman Z-score is used as a proxy for financial distress and measures it inversely. The bigger the Z-score indicates the smaller the risk of financial distress. Using 108 individual observations of consumer services firms listed on the Colombo Stock Exchange for the period of 2019 to 2021 and employing the fixed effects model, the effect of corporate governance practices on financial distress is evaluated. Findings - The results from panel data regression analysis reveal that firms having a large number of directors on the board have a low likelihood of financial distress of listed consumer services companies in Sri Lanka. Furthermore, when a chief executive officer serves as the chairman of the board at a company, the more likely it is that the company will experience financial distress. The current study also provides evidence that firm-specific characteristics, such as firm size, leverage, and profitability, could be useful in determining the likelihood of financial distress. Novelty - This study extends the existing literature by investigating the association between corporate governance practices and financial distress in listed companies in the emerging markets during the period of the COVID 19 pandemic. Type of Paper - Empirical."
    Keywords: Board size, CEO duality, corporate governance, financial distress
    JEL: G30 G34
    Date: 2022–07–30
  2. By: Ali, Amjad; Alim, Wajid; Ahmed, Jawad; Nisar, Sabahat
    Abstract: The objective of this exploration is to show the relationships between corporate governance tools (board size, board independence, CEO status, Board Education, and Established Years of the firm) and firm performance which is determined by the return on asset (ROA). Quantitative data are used to discover the association between the variables. The top 75 companies registered on the Pakistan Stock Exchange involving the period from 2010 to 2019 are taken as a sample. The research found that there is a connection between the performance of the firm with the overall extent of directors, board independence, and average education of board representatives. Insignificant results came for CEO duality and established years of the firm. The result predicted that an increase in total board members and average education of board members will increase firm performance (ROA), whereas a reduction in board independence will reduce firm performance (ROA) which explains the importance of corporate governance for the success of firm performance. Unlike the previous studies, this study tried to find the long-term influence of corporate governance on firm performance by analyzing five different variables for the listed firms in Pakistan. The study provides the importance of corporate governance tools and their effectiveness for the success of organizations, especially in Pakistan.
    Keywords: Board education, board independence, the board size, CEO duality, corporate governance, firm performance, Pakistan, return on asset
    JEL: G3 G30
    Date: 2022–01
  3. By: Benincasa, Emanuela; Betz, Frank; Gattini, Luca
    Abstract: We document the investment and financing decisions of firms that experience monetary losses due to extreme weather events. Our sample covers firms operating in 41 economies, mainly emerging and developing markets. Consistent with the need to either replenish damaged capital or to adapt to climate change, firms hit by extreme weather are more likely to invest in long-term assets. In addition, they are more likely to integrate climate-friendly measures in their production processes. Although these firms have higher needs for bank credit, they are not more likely to be credit constrained than the average firm. Nonetheless, they face higher loan rejection rates and they are more leveraged than otherwise comparable firms. This suggests that climate change has the potential to erode the quality of firm balance sheets over time.
    Keywords: Physical climate risk,Extreme weather,Access to credit,Corporate investment
    JEL: D22 G21 G32 L20 Q54
    Date: 2022
  4. By: Costanza Consolandi (University of Siena); Giovanni Ferri (LUMSA University); Andrea Roncella (Fondazione RUI)
    Abstract: This paper takes at firm level the inspiration of the Allegory of the Good and Bad Government, the 14th century series of frescoes by Ambrogio Lorenzetti. Namely, we investigate whether a good corporate governance stabilizes financial performance and whether such superior governance improves ‘ESG (Environmental, Social, Governance) resilience’ against controversies related to sustainability issues. Using a large sample of European listed firms from 2006 to 2019, we find that a good governance is the key factor not only in getting ESG controversies managed, therefore increasing firm sustainability resilience, but also in reducing equity volatility, therefore stabilizing firm financial performance.
    Keywords: Corporate governance, financial performance, ESG resilience
    JEL: G32
    Date: 2022–07
  5. By: Suresh N; Pooja M
    Abstract: Determination of the correct mix of dividend and retained earnings and its effect on profitability has been a subject of controversy in financial management literature. This paper seeks to contribute to the ongoing debate by examining the relationship between dividend payout policy and the financial performance of 60 firms listed on the National Stock Exchange between 2009-2018. The Return on Assets (ROA) served as a surrogate for the dependent variable, profitability, while the Dividend Pay-out ratio proxied for dividend policy and was the only explanatory variable. Control variables include firm size, asset tangibility, and leverage. Regression result reveals a positive and significant relationship between dividend payout policy (DPO) and firm performance (ROA). It is recommended that companies should endeavor to put in place a robust dividend payout policy that would encourage investment in projects that give positive Net Present Value.
    Date: 2022–07
  6. By: Köppl-Turyna, Monika; Köppl, Stefan; Christopulos, Dimitris
    Abstract: In this paper we analyze how different types of venture capital investments - private, public and indirect public - affect performance of portfolio companies. We use data on more than 20,000 VC deals in Europe between 2000 and 2018 and we hand collected a unique dataset on the institutional setting (public/indirect/private) of almost 5000 investors. We find that public VC investors perform consistently worse than purely private ones, while indirect public investments (such as the "Juncker Plan" or InvestEU investments) perform consistently better. We link these findings to the fact that public funds do not enter the best performing cliques of investments. On the other hand, indirect funds invest in the VC funds with the best network characteristics, which raises a question of whether indirect VC investments are associated with a high level of windfall gain, and not necessarily improve the value added by the VC funds. We confirm the main conclusions using instrumental variables' specifications.
    Keywords: venture capital,network analysis,governmental venture capital,European Investment Fund,syndication,public policy
    JEL: G24 G28 H81 L26 D73
    Date: 2022
  7. By: Arna Suryani (Faculty of Economics, Batanghari University, Jambi, 36122, Indonesia Author-2-Name: Ariayani Author-2-Workplace-Name: Faculty of Economics, Batanghari University, Jambi, 36122, Indonesia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: "Objective - This study aims to examine the influence of Investment Opportunity Set and Corporate Social Responsibility Disclosure through Profitability on Earnings Management. The companies examined are banking companies listed on the LQ45 Index of the Indonesia Stock Exchange (IDX). Methodology – This study used data sourced from annual financial reports of banking companies on the LQ45 Index of the Indonesia Stock Exchange for the 2016-2020 periods. This study used descriptive and verification analysis methods with path analysis and hypothesis testing. Investment Opportunity Set is measured by Market Value to Book Value of Assets, Corporate Social Responsibility Disclosure is measured by Global Reporting Initiative G4 indicators, Profitability is measured by Return on Assets, and Earnings Management is measured by Discretionary Accruals. Findings – The results indicate that Investment Opportunity Set and Corporate Social Responsibility Disclosure and Profitability have no effect on Earnings Management. This implies that Earnings Management actions in companies are more likely to be influenced by other variables which closely related to agency theory and hard to predict the determinants by using only several variables. Novelty – Based on the results of this study, Profitability as an intervening variable does not mediate the effect of Investment Opportunity Set and Corporate Social Responsibility on Earnings Management. This might happens because profitability is quite common for investors and users of financial statements in assessing the company's financial performance so that it is easier for users of financial statements to know the Earnings Management actions done by the company. Type of Paper - Empirical"
    Keywords: Bank; Investment Opportunity Set; Corporate Social Responsibility; Profitability; Earnings Management.
    JEL: G11 G20
    Date: 2022–07–30
  8. By: Bian, Bo; Li, Yingxiang; Nigro, Casimiro A.
    Abstract: This paper studies the interactions between corporate law and VC exits by acquisitions, an increasingly common source of VC-related litigation. We find that transactions by VC funds under liquidity pressure are characterized by (i) a substantially lower sale price; (ii) a greater probability of industry outsiders as acquirers; (iii) a positive abnormal return for acquirers. These features indicate the existence of fire sales, which satisfy VCs' liquidation preferences but hurt common shareholders, leaving board members with conflicting fiduciary duties and litigation risks. Exploiting an important court ruling that establishes the board's fiduciary duties to common shareholders as a priority, we find that after the ruling maturing VCs become less likely to exit by fire sales and they distribute cash to their investors less timely. However, VCs experience more difficult fundraising ex-ante, highlighting the potential cost of a common-favoring regime. Overall the evidence has important implications for optimal fiduciary duty design in VC-backed start-ups.
    Keywords: Acquisitions,Corporate Governance,Fiduciary Duties,Fire Sales,Liquidation Preferences,Trados,Venture Capital
    JEL: G24 G33 G34 K20 K22 K40 M13
    Date: 2022
  9. By: Merlin Stein
    Abstract: In which kind of companies did the prevalence of women on corporate boards matter during the first wave of Covid-19? 2500 large Indian firms, of which only 78% initially complied with an exogenous gender quota enable a quantitative evaluation. By comparing their quarterly revenues with a Difference-in-Differences analysis, this research initially finds a significantly positive relationship between the compliance with the one-female-board-member policy and the change in revenues during the first economic shock of the Covid-19 crisis in 2020. A Triple-Difference and Causal Forest analysis indicates that this is likely endogenously driven by (self-)selection based on sectors, capital dynamics, size, independence of directors and further firm characteristics. There is no simple association of female directors and crisis revenues: The spectrum encompasses a mix of firms with a positive, a neutral and a negative association. With rare causal context for evaluating board gender diversity or other corporate governance and ESG dynamics, this piece of research illustrates the value and limitations of applying adjusted Random Forests to overcome linearity and dimensionality limitations for deeply understanding heterogeneities-within-heterogeneities as indicators of relevant distinctions.
    Keywords: Generalized Random Forest, Causal Machine Learning in Double and Triple Difference, Covid-19, large rms, women on corporate boards, female leadership, quota
    JEL: C21 C53 D22 G30 J16 K22
    Date: 2022–01–04
  10. By: Valter Di Giacinto (Bank of Italy); Andrea Sechi (Bank of Italy); Alessandro Tosoni (Bank of Italy)
    Abstract: By exploiting firm level balance sheet data from the Cerved database and employment data from the INPS database, we provide a detailed description of the productivity performance of Italian industrial districts firms over the 2003-2017 period. The main structural features of industrial districts are first compared with those of the other types of local labour market areas. The performance of district firms is subsequently analysed both overall and separately for the firms belonging to the core district industry and the remaining companies. We find evidence of a positive and sizeable district productivity premium, increasing over the period of analysis. However, in order to consolidate their performance, industrial districts had to undergo significant structural changes. Medium-sized and large firms have grown in importance, also through a process of capital deepening that involved both tangible and intangible fixed assets. At the same time, structural adaptation involved the acquisition of a more significant role by firms not operating in the main district industry.
    Keywords: industrial districts, agglomeration economies, structural adaptation
    JEL: L25 L60 R11
    Date: 2022–06
  11. By: Anil S; Sudharani R; Suresh N
    Abstract: The study focuses on the Impact of Employment Benefit Cots on the Profitability of Companies listed in the National Stock Exchange. The study has considered the Amount spent on Employment Benefit Cots as an Independent variable and Profit after tax, Total Assets, Return on Equity, and Return on Asset and Debt equity Ration as the Dependent variable. The present study is to analyses the relationship between Employment Benefit Cots and Profit after tax, Total Assets, Return on Equity, Return on Asset, and Debt equity Ration. The data is collected from 20 companies listed on the National Stock Exchange for 10 years from the Annual reports of companies. The data collected were analyzed using Panel data Regression in E-Views. Results revealed that there is a significant Relationship between Employment Benefit Cots and Profit after tax, Total Assets, Return on Equity, Return on Asset, and Debt equity Ration. The study shows that Employment Benefit Cots impact positively on Firms profitability.
    Date: 2022–07
  12. By: Dai, Shangze; Fan, Fei; Zhang, Keke
    Abstract: It is generally accepted that creative destruction can increase stock price informativeness, for innovative companies tend to behave more surprisingly. However, we believe the rising of stock price informativeness by enterprise innovation in emerging or developing markets is, in some sense, the result of executive ownership and insider trading. To investigate our proposition, we build a rational expectation framework model and define stock price informativeness (SPI) as the Kolmogorov-Smirnov distance between expected distribution and actual distribution of stock prices. Then we use Chinese listed company data to perform benchmark and mediation effects regressions, along with instrumental variable regression in the empirical sector. After that, we use Thailand and Indonesia listed company data for robustness tests. Finally, we divide Chinese listed companies into developed-economy funded and others to do grouping regression. The main conclusion is: Creative destruction can raise stock price informativeness, while executive ownership plays a partial mediating effect in the path of such influence. However, that mechanism is not significant when we use developed-country-funded enterprises listed in China as the sample for regression. Thus, the effects of creative destruction on stock price informativeness are uneven across countries, and executive ownership plays a vital role in that impact in emerging economies.
    Keywords: Stock price synchronicity; Enterprise innovation; Inside information; Executive ownership; Rational expectation
    JEL: G2 G3 G32
    Date: 2022–07–05

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