nep-cfn New Economics Papers
on Corporate Finance
Issue of 2022‒12‒05
eight papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Private equity buyouts & firm exporting during the global financial crisis By Paul Lavery; Marian-Eliza Spaliara
  2. European firms, Panic Borrowing and Credit Lines Drawdowns: What did we learn from the COVID-19 shock? By Mario Cerrato; Hormoz Ramian; Shengfeng Mei
  3. Cash Flow And External Financing In The Covid Pandemic Context And Financial Constraints By Hung, Dang Ngoc
  4. Individualism Reduces Borrower Discouragement By Francis OSEI-TUTU; Laurent WEILL
  5. Characteristics of the Board of Directors and corporate financial performance – An empirical evidence By Nguyen, V.C.; Thuan, Huynh
  6. Do green bond issuers suffer from financial constraints? By Glavas, Dejan
  7. Race and Gender in Entrepreneurial Finance By Ewens, Michael
  8. Give Me a Pass: Flexible Credit for Entrepreneurs in Colombia By Lasse Brune; Xavier Giné; Dean Karlan

  1. By: Paul Lavery; Marian-Eliza Spaliara
    Abstract: This paper examines the impact of the global financial crisis on the firm-level exporting of private equity-backed companies. With a sample of over 600 UK companies which were under private equity ownership during the financial crisis, we show that the exporting of sponsored firms was significantly more resilient to the effects of the crisis, relative to a matched sample of control firms. Moreover, private equity-backed companies were also less likely to exit the export market during the crisis. We provide evidence that more efficient working capital and cash flow management may have helped sponsored companies maintain their levels of exporting relative to similar, non sponsored firms. Our results align with recent evidence that private equity-backed companies may outperform non sponsored peers during economic downturns.
    Keywords: Private equity buyouts, exporting, financial crisis
    JEL: F14 G01 G32 G34
    Date: 2022–08
  2. By: Mario Cerrato; Hormoz Ramian; Shengfeng Mei
    Abstract: “Riskier European companies draw €32bn from bank credit lines” (FT, May, 2020). The Financial Times in May 2020 highlighted a large group of European firms, took out of their credit lines an impressive €32bn to stay afloat during the pandemic shock. This was an impressive flight to liquidity as no one ever thought the whole market would draw their credit lines at once and so quickly. The Financial Times reported that the majority of firms withdrawing their credit lines were in the consumer, material and industrial sectors. In this paper we investigate why European firms drew down credit lines. We show that these firms were facing a fall in the expected revenue and a worsening of credit risk and therefore they used credit lines to top-up their liquidity position.
    Keywords: Corporate credit lines, cash holding, investment, default risk
    JEL: G21 G32 G33
    Date: 2022–05
  3. By: Hung, Dang Ngoc
    Abstract: The Article Examines The Impact Of Cash Flow On The Need To Increase Funding In The Covid Pandemic Context And The Financial Constraints Of Listed Companies In Vietnam. We Build Hypotheses Based On The Self-Ranking Match Theory Framework And Research Overview. We Use Data From 5894 Observations For 2010-2020 And The General Regression Model - GLS To Test The Expected Hypotheses. The Research Results Show That Cash Flow Significantly Influences The External Financing Needs Of The Business. In Particular, The Cash Flow Impact And Increased Need For External Financing Are More Evident In Financial Constraints And The Context Of The Covid Pandemic. The Study Also Shows That The Group Of Companies With Financial Constraints Moved To Increase Funding When Cash Flow Was In Short Supply During The Covid Pandemic. Besides, The High Financial Leverage Ratio In The Previous Year Can Be One Of The Barriers For Businesses That Want To Access A Variety Of External Financing. The Study Contributes To The Analysis And Assessment Of The Problematic Situation Of Listed Companies. In The Future, This Study Can Be Extended When Approaching Businesses In The Financial Sector And Evaluating Other Macro Factors That Can Affect The Capital Sources Of Enterprises.
    Date: 2022–10–29
  4. By: Francis OSEI-TUTU (LaRGE Research Center, Université de Strasbourg); Laurent WEILL (LaRGE Research Center, Université de Strasbourg)
    Abstract: Borrower discouragement contributes to reduce access to credit worldwide. In this paper, we test the hypothesis that individualism influences discouragement of borrowers. We use data on borrower discouragement and individualism at the firm level for a large dataset of 32,000 firms from 59 countries. We find that firms in individualistic countries are less likely to be discouraged from applying for loans. We further find that individualistic norms reduce borrower discouragement through its impact on lower corruption in lending and weak informal support networks. Our results hold after controlling for other cultural dimensions, addressing potential endogeneity and sample selection issues. Thus, our findings provide evidence that individualism reduces borrower discouragement, thereby improving access to credit of firms.
    Keywords: individualism, collectivism, borrower discouragement, access to credit.
    JEL: G21 Z10
    Date: 2022
  5. By: Nguyen, V.C.; Thuan, Huynh
    Abstract: The objectives of the research are to investigate the characteristics of the board of directors on the financial performance of the enterprise. Using a sample data from 52 construction and real estate enterprises listed on Vietnam stock exchange in the period 2006-2020. Using typical regression methods such as pooled OLS, FEM, REM and assessing the defects of the research model, the FGLS method is selected. At the same time, due to the existence of endogenous phenomena and the nature of interdependence among enterprises in Vietnam, research using the instrumental variables two-step generalized method of moments (IV-GMM) in order to correct for cross-sectional dependence, autocorrelation, endogeneity, and heteroskedasticity in the analysis. Research results suggest that board size, female board members, meeting frequency, and board members' education have a positive influence on financial performance. Moreover, the independence of the Board of Directors increases, the business efficiency decreases. The research also found a positive relationship of tangible fixed assets, and a negative relationship between capital structure choice, firm size and corporate financial performance.
    Date: 2022–10–05
  6. By: Glavas, Dejan
    Abstract: We find that green bond issuers are more financially constrained. We use three measures of financial constraint, which are the FCP index, the SA index, and the Altman’s Z score. We test the link between green bond issuance and financial constraints using difference in means, regression analyses and a matching procedure. We finally document that these constraints increase after the first green bond issuance.
    Date: 2022–07–12
  7. By: Ewens, Michael (California Institute of Technology)
    Abstract: Economic frictions pervade the founding, financing, growing, and exiting of high-growth entrepreneurial firms. This chapter considers one friction that currently affects a small, but important, set of entrepreneurs: racial and gender discrimination. I first collect facts from a large empirical literature that show clear gender and race gaps in participation and financing of startups. Female founders manage 16-25% of all startups, while Black entrepreneurs rarely exceed 3% of the startup population. Conditioning on startups that successfully raise external finance has little impact on these gaps. The complexity of the entrepreneurial process presents several opportunities for discrimination to manifest itself and produce this gap. The chapter details the major discrimination theories and the empirical methods used to test for their presence. It then provides an extensive review of a growing empirical literature in entrepreneurial finance that tests these models. The pattern of evidence reveals a nuanced and incomplete story about bias, information asymmetry, and differential treatment of underrepresented founders. The chapter ends with an extensive set of research ideas motivated by the gaps in the entrepreneurship literature and recent developments in theory and measurement of discrimination.
    Date: 2022–07–25
  8. By: Lasse Brune; Xavier Giné; Dean Karlan
    Abstract: Microcredit promised business growth for small firms lacking access to banking loans. Yet while reaching millions, recent randomized evaluations suggest limited average business impacts. Critics often blame contract rigidity, specifically the fixed and frequent installments, for the lack of productive risk-taking. But such rigidity may instill borrower discipline. We partnered with a Colombian lender that offered first-time borrowers a flexible loan that permitted delaying up to three monthly repayments. We find null effects for revenue and profits but increases in loan defaults. The evidence thus aligns with established microlender practice of offering rigid contracts to first-time borrowers.
    JEL: G21 O21
    Date: 2022–11

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