nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒11‒14
seventeen papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. "Determinant of Firm's Value: Empirical Evidence from Top 100 Listed Companies in Indonesia " By Rosita Suryaningsih
  2. Firms’ Financing Dynamics around Lumpy Capacity Adjustments By Christoph Görtz; Plutarchos Sakellaris; John D. Tsoukalas
  3. Corporate governance with crowd investors in innovative entrepreneurial finance: Nominee structure and coinvestment in equity crowdfunding By Coakley, Jerry; Cumming, Douglas; Lazos, Aristogenis; Vismara, Silvio
  4. Levered Returns and Capital Structure Imbalances By Filippo Ippolito; Alessandro Villa
  5. Manager Delegation, Owner Coordination and Firms' Investment in Automation By Unsorg, Maximiliane; Stadler, Manfred
  6. Bank lending to small firms: metamorphosis of a financing model By Paolo Finaldi Russo; Valentina Nigro; Sabrina Pastorelli
  7. The heterogeneous effects of bank mergers and acquisitions on credit to firms: evidence from Italian macro-regions By Silvia Del Prete; Cristina Demma; Iconio Garrí; Marco Piazza; Giovanni Soggia
  8. Green bonds' reputation effect and its impact on the financing costs of the real estate sector By Petreski, Aleksandar; Schäfer, Dorothea; Stephan, Andreas
  9. Rising Markups, Common Ownership, and Technological Capacities By Gibbon, Alexandra J.; Schain, Jan Philip
  10. Micro-entrepreneurs’ financial and digital competences during the pandemic in Italy By Alessio D'Ignazio; Paolo Finaldi Russo; Massimiliano Stacchini
  11. Does Corporate Culture Influence IPO Pricing? By Cumming, Douglas; Köchling, Gerrit; Neukirchen, Daniel; Posch, Peter
  12. Investment and financial constraints: Does analyst coverage matter? By Sébastien Galanti; Aurélien Leroy; Anne-Gaël Vaubourg
  13. Inflation Expectations and Corporate Borrowing Decisions: New Causal Evidence By Tiziano Ropele; Yuriy Gorodnichenko; Olivier Coibion
  14. The EIF SME Access to Finance Index - October 2022 Update By Torfs, Wouter
  15. The Financial literacy of micro-entrepreneurs: evidence from Italy By Paolo Finaldi Russo; Ludovica Galotto; Cristiana Rampazzi
  16. How to account for tax planning and tax uncertainty in valuation: Separate vs. composite view By Knaisch, Jonas
  17. Organizational Resources, Country Institutions, and National Culture behind Firm Survival and Growth during COVID-19 By Liu,Yu; Peng,Mike W.; Wei,Zuobao; Xu,Jian; Xu,L. Colin

  1. By: Rosita Suryaningsih (Faculty of Business, Universitas Multimedia Nusantara Author-2-Name: Lydia Fransiska Imanuel Author-2-Workplace-Name: Faculty of Business, Universitas Multimedia Nusantara 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 - The study examines the influence of profitability, leverage, firm size, and the proportion of independent commissioners on a firm's value with dividend policy as a moderating variable of the top 100 listed companies in Indonesia. Methodology/Technique - The sample was selected using purposive sampling, which consists of publicly-traded non-finance companies listed on the Kompas 100 Index and preparing audited financial statements for the year ended December 31 using Rupiah as its reporting currency. The secondary data were analyzed with moderated regression analysis method. Findings - The result indicated that profitability, leverage, and proportion of independent commissioners significantly enhance firms' value and strengthen these conditions by dividend policy. This study also finds that company size does not influence the value of firms. Novelty - This study contributes to knowledge of a firm's value using dividend policy as a variable that moderates the effect of profitability, leverage, firm size, and proportion of independent commissioners toward the value of firms. The implication of this study could guide a company's corporate action to create a balanced return on the firm's value between existing and potential investors, giving a positively impacting Type of Paper - Empirical."
    Keywords: Corporate Governance, Payout Policy, Firm Size, Value of Firms, Financing Policy, Profitability.
    Date: 2022–09–30
  2. By: Christoph Görtz; Plutarchos Sakellaris; John D. Tsoukalas
    Abstract: We study how firms adjust their financial positions around the times when they undertake lumpy adjustments in capital or employment. Using U.S. firm level data, we document systematic patterns of cash and debt financing around lumpy adjustment, remarkably similar across capital and employment. Firm specific fundamentals in Tobin’s Q, profitability and productivity are leading indicators of the lumpy adjustment. Cash and debt capacity are actively manipulated, and contribute significantly quantitatively, to increase financial resources in anticipation of the expansion of firm capacity. Lumpy contractions in productive capacity are undertaken following years where firms reduce cash balances and hold above average levels of debt. During and after contractions, firms rebuild cash and reduce debt growth significantly in a concerted effort to restore financial resources by adjusting their productive operations.
    Keywords: lumpy adjustment, firm capital and employment dynamics, leverage, debt, cash
    JEL: G30 G32 E32
    Date: 2022
  3. By: Coakley, Jerry; Cumming, Douglas; Lazos, Aristogenis; Vismara, Silvio
    Abstract: In innovative entrepreneurial finance markets, ventures raising funds target a set of heterogeneous “digital” investors using distinct governance mechanisms. We focus on the micro-functioning of equity crowdfunding (ECF) markets by investigating the differences in terms of agency issues and potential principal-principal conflicts arising from the coinvestment of angels or venture capitalists alongside crowd investors. The nominee governance structure, by allocating the same ownership and voting rights to all investors and aggregating them into a special purpose vehicle with the nominee company as sole legal owner, can reconcile such conflicts by mitigating agency and coordination problems. This structure enables angels and venture capital funds to exploit the wisdom of the crowd and crowd investors to free ride on the former’s due diligence and monitoring. Using a platform governance lens, this paper evaluates the performance of nominee versus direct ownership structure. Based a large sample of 1,103 successful and unsuccessful initial campaigns on the three largest equity crowdfunding platforms in the UK (namely Seedrs, Crowdcube, and SyndicateRoom), we document that nominee firms exhibit better short run and long run performance. Our results hold inter-platform between crowdfunding platforms as well as intra-platform, as confirmed by a quasi-natural experiment when the nominee approach became an option for startups raising capital on the Crowdcube platform. Our findings offer valuable insights to platforms and policymakers who could channel tax incentives via nominee schemes.
    Keywords: Crowdfunding; Platforms; Digital finance; Innovative entrepreneurial finance
    Date: 2022–10–19
  4. By: Filippo Ippolito; Alessandro Villa
    Abstract: We revisit the relation between equity returns and financial leverage through the lens of a dynamic trade-off model with costly capital structure rebalancing. The model predicts that expected equity returns depend on whether a firm's leverage is above or below its target leverage. We provide empirical evidence in support of the model predictions. Controlling for leverage, overlevered (underlevered) firms earn higher (lower) returns. A quantitative version of our model reproduces key facts about capital structure rebalancing and equity returns for U.S. corporations. Overall, our results indicate that financial flexibility crucially affects the link between leverage and equity returns.
    Keywords: Leverage; Cross Section of Returns; Dynamic Capital Structure; Financial Frictions
    JEL: G12 G32
    Date: 2022–01–08
  5. By: Unsorg, Maximiliane; Stadler, Manfred
    JEL: G32 L22 L24 M52 O31
    Date: 2022
  6. By: Paolo Finaldi Russo (Bank of Italy); Valentina Nigro (Bank of Italy); Sabrina Pastorelli (Bank of Italy)
    Abstract: This paper identifies idiosyncratic credit supply shocks across firm size before and after the 2008-2013 double-dip recession in Italy. Based on a fixed effects model, the empirical framework includes both single- and multiple-lender firms and relaxes the standard assumption of homogeneous credit supply across borrowers from the same bank. Results highlight that following the crisis banks notably tightened their corporate lending policies except towards large companies. A significant difference in credit supply arose between micro-firms and the others. The divide is wider for larger banks and for those with weaker balance sheets. This may reflect the greater difficulties on the part of these financial intermediaries in disbursing loans to firms with a significant degree of informational opacity and with high fixed costs compared with the low unit volume of operations. According to these findings, the shocks that hit the banking system during the crisis translated into a persistent change in credit standards, with an important shift in the supply of new loans from smaller to larger firms.
    Keywords: bank lending channel, credit constraints, SME financing, bank risk-taking
    JEL: G21 G32 G3
    Date: 2022–10
  7. By: Silvia Del Prete (Bank of Italy); Cristina Demma (Bank of Italy); Iconio Garrí (Bank of Italy); Marco Piazza (Bank of Italy); Giovanni Soggia (Bank of Italy)
    Abstract: The literature has shown that in the short- and medium-term bank mergers and acquisitions (M&As) may generate a temporary reduction in firm credit. Using bank-firm matched data, this paper investigates the impact of M&As involving Italian banks over the period 2009-2019 on credit to firms, exploring possible heterogeneities across several dimensions. During a 3-year time window after each deal, we detect a reduction in loans to firms financed by target banks, in line with the existing evidence. The drop is smaller for infra-group mergers, when the target is healthy or is the firm’s main bank, while is larger for southern firms, independently of bank location. Other things being equal, we suggest that this “South effect†is mainly related to the negative externalities that characterize the business environment in Southern Italy, for which southern firms are more likely to be subject to a severe selection after a bank reorganization.
    Keywords: business lending, mergers and acquisitions, banking system’s structure, North-South divide
    JEL: D40 G10 G21 G34 L10
    Date: 2022–10
  8. By: Petreski, Aleksandar; Schäfer, Dorothea; Stephan, Andreas
    Abstract: This paper explores the effect of a firm's reputation of being a green bond issuer on its financing costs. Using a sample of 73 listed Swedish real estate companies issuing in total about 1500 bonds over the period from 2011 till 2021, differencein- difference analyses and instrumental variable estimations are applied to identify the causal impact of frequent green vis-à-vis frequent non-green bond issuing on a firm's cost of capital and credit rating. The paper argues that it is repetitive issuance which lowers a firm's cost of capital, while the effects from first or one-time green bond issuance is the opposite. In line with the reputation capital hypothesis, issuing green bonds even lowers the firm's cost of equity capital, while issuing non-green bonds has no effect on the cost of equity capital.
    Keywords: bond issuance,green debt,reputation capital,sustainability,ESG
    JEL: G32 R30 R32
    Date: 2022
  9. By: Gibbon, Alexandra J.; Schain, Jan Philip
    JEL: L10 L41 L60 G23 G32 O34
    Date: 2022
  10. By: Alessio D'Ignazio (Bank of Italy); Paolo Finaldi Russo (Bank of Italy); Massimiliano Stacchini (Bank of Italy)
    Abstract: We analyse new survey data from a representative sample of about 2,000 Italian micro-entrepreneurs to assess their level of financial and digital competences and to investigate whether these skills help them cope with unexpected shocks. We find that the financial literacy and digital skills of Italian micro-entrepreneurs are quite limited, especially for one-person businesses and owners with a lower level of education. By controlling for several business characteristics, we also find that financial literacy is significantly correlated with the transition to more digitalized business models and with greater resilience to external shocks: financially savvy entrepreneurs were better able to build liquidity buffers prior to the COVID-19 crisis and access government aid during the pandemic. As for the role of digital skills in supporting businesses during the crisis, empirical evidence is less clear-cut.
    Keywords: financial literacy, digitalization, micro-firms, Covid 19
    JEL: G53
    Date: 2022–10
  11. By: Cumming, Douglas; Köchling, Gerrit; Neukirchen, Daniel; Posch, Peter
    JEL: G12 G14 G30 Z10
    Date: 2022
  12. By: Sébastien Galanti (LEO - Laboratoire d'Économie d'Orleans [UMR7322] - UO - Université d'Orléans - UT - Université de Tours - CNRS - Centre National de la Recherche Scientifique); Aurélien Leroy (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - UB - Université de Bordeaux); Anne-Gaël Vaubourg (CRIEF - Centre de Recherche sur l'Intégration Economique et Financière - Université de Poitiers)
    Abstract: We aim to determine whether analyst coverage improves European firms' access to capital markets and investment. Based on a data set that includes firms from several European countries between 2000 and 2015, we implement a treatment effect framework and an instrumental variables (IV) approach, in which the intensity of industry-level waves in coverage is used as an instrument for firm-level coverage. We show that analyst coverage is favorable to firms' debt and share issuance and their investment expenses. Our paper emphasizes the key role of financial analysts in improving European firms' financial conditions.
    Date: 2022
  13. By: Tiziano Ropele; Yuriy Gorodnichenko; Olivier Coibion
    Abstract: We match survey data of Italian firms that includes a repeated experiment in which information about inflation is randomly provided to firms over time with detailed credit data that covers the borrowing decisions of firms. This allows us to study how exogenous variation in inflation expectations causally affects the borrowing decisions of Italian firms. We document a number of new results. Firms with exogenously higher inflation expectations end up paying higher interest rates on average but do not change the overall demand of loans. Instead, we find a significant rebalancing of firms’ borrowing decisions away from lower-interest long-term loans and toward higher-interest short-term loans. In anticipation of rising future interest rates linked to higher expected inflation, firms also take on new long-term loans to pay down existing loans, thereby locking in interest rate savings. Firms that are relatively more knowledgeable about financial tools engage in the latter particularly strongly.
    JEL: E02 E03
    Date: 2022–10
  14. By: Torfs, Wouter
    Abstract: This working paper elaborates on the most recent update of the EIF SME Access to Finance (ESAF) Index, a composite indicator used to monitor the state of SME external financing markets in the EU. The current update, using data for 2021, constitutes the nineth iteration of this exercise, resulting in a 9-year long time series for each of the 27 EU countries. The latest data captures the impact of the COVID-pandemic and the subsequent policy response on SME access to finance. For an extensive overview of the current state of SME financing markets the reader is referred to the EIF's European Small Business Finance Outlook (Kraemer-Eis et al., 2022). The EIF Working Papers are designed to make available to a wider readership selected topics and studies in relation to EIF's business. The Working Papers are edited by EIF's Research & Market Analysis and are typically authored or co-authored by EIF staff or are written in cooperation with EIF.
    Date: 2022
  15. By: Paolo Finaldi Russo (Banca d'Italia); Ludovica Galotto (Banca d'Italia); Cristiana Rampazzi (Banca d'Italia)
    Abstract: Entrepreneurs, including those who run very small businesses or sole proprietorships, are often assumed to have sound financial skills as they make frequent financial decisions. This paper explores the issue by analysing the level of financial literacy (FL) of Italian micro-entrepreneurs in comparison with other countries and other Italian adults. The results, based on the 2020 Survey on the Financial Literacy of Italian Adults conducted by the Bank of Italy according to the OECD/INFE methodology, are threefold. First, Italian micro-entrepreneurs have quite low levels of FL by international standards. Second, compared with other Italians, business owners have only a slightly higher level of FL; this is mainly attributable to their higher income and more frequent use of financial services. Third, thanks to their slightly more advanced financial skills, micro-entrepreneurs are more likely to make better financial decisions than other adults. These findings suggest that strengthening the financial literacy of micro-entrepreneurs can have a positive impact on their ability to make better financial decisions and ultimately on the resilience and growth of their businesses.
    Keywords: financial literacy, financial behaviour, micro-entrepreneurs, SMEs
    JEL: G53 L26 J24
    Date: 2022–10
  16. By: Knaisch, Jonas
    Abstract: I investigate how investors value tax planning and tax uncertainty for the case of publicly listed German firms. I compare two recent approaches how to account for tax uncertainty: the separate view by Drake et al. (2019) and the composite view by Jacob and Schütt (2020) to find the better suited way to incorporate tax planning and uncertainty simultaneously. In a battery of tests, I fail to produce results consistent with the separate view. In contrast, the composite view yields robust results that are in line with theory and prior literature: A one standard deviation increase in the quality of tax planning leads to an increase in the positive effect of the return on equity on the firm value of 7.7%. Investors seem to not only care about the level of firms' tax planning, but also how it is achieved. Only combining the degree of tax planning and its associated uncertainty in a single measure (Tax Planning Score) leads to robust results, thereby providing support for the notion of Jacob and Schütt (2020) that these constructs should be considered jointly.
    Keywords: Tax Avoidance,Tax Uncertainty,Firm Value,Tax Planning Score
    JEL: G32 H25 H26 M21 M41
    Date: 2022
  17. By: Liu,Yu; Peng,Mike W.; Wei,Zuobao; Xu,Jian; Xu,L. Colin
    Abstract: This paper provides one of the first comprehensive and most updated studies on the effects of firms’ organizational resources, country institutions, and national culture on the survival and growth of private firms around the world during the COVID-19 pandemic. Analyzing World Bank Enterprise Follow-up Surveys on COVID-19 that cover 18,770 firms in 36 countries, the paper documents four sets of findings. (1) During the pandemic, firms with favorable organizational resources (state ownership and affiliation with parent companies) are more likely to survive and grow, whereas firms with foreign ownership or more financial obstacles are less likely to survive or grow. Firms in countries with a higher per capita income, a lower COVID-19 spread, and a less stringent COVID-19 control policy are more likely to survive and grow. (2) Favorable ownership and parent-company affiliations help cushion the pandemic shock during the pandemic. (3) The relationship between firm characteristics and firm survival/growth is significantly affected by the stringency of a country’s COVID-19 policy. (4) Firm survival and growth are positively related to a country’s cultural tendency in terms of long-term orientation and are not significantly related to uncertainty avoidance and individualism. The overall quality of country governance is negatively linked to the odds for firm survival as well as revenue and employment growth.
    Keywords: Financial Sector Policy,Access to Finance,Macroeconomic Management,Public Health Promotion
    Date: 2021–04–15

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