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on Corporate Finance |
| By: | Katarzyna A. Bilicka; Irem Guceri; Evangelos Koumanakos |
| Abstract: | We analyze the short and long-run performance of firms that were differentially affected by a new tax on dividends in the lead-up to the Global Financial Crisis. We use exogenous policy variation for firms with different legal statuses and financial year-end dates to causally identify the policy impact. Consistent with intertemporal tax arbitrage, immediately-affected firms significantly reduce payouts. At a time of severe liquidity shortage, the average firm uses the undistributed cash to pay back debt. In the long run, the allocation of undistributed cash to investment, retained earnings, and debt repayment predicts growth and the likelihood of bankruptcy. |
| JEL: | G11 G32 H25 H32 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30808&r=cfn |
| By: | Katarzyna Bilicka; Irem Güçeri; Evangelos Koumanakos; Katarzyna Anna Bilicka; Irem Guceri |
| Abstract: | We analyze the short and long-run performance of firms that were differentially affected by a new tax on dividends in the lead-up to the Global Financial Crisis. We use exogenous policy variation for firms with different legal statuses and financial year-end dates to causally identify the policy impact. Consistent with intertemporal tax arbitrage, immediately-affected firms significantly reduce payouts. At a time of severe liquidity shortage, the average firm uses the undistributed cash to pay back debt. In the long run, the allocation of undistributed cash to investment, retained earnings, and debt repayment predicts growth and the likelihood of bankruptcy. |
| Keywords: | dividend tax, firm survival, investment, intertemporal tax arbitrage |
| JEL: | H32 H25 G32 G11 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10185&r=cfn |
| By: | M. Ali Choudhary; Anil K. Jain |
| Abstract: | https://www.federalreserve.gov/econres/i fdp/credit-access-and-relational-contrac ts.htm |
| Keywords: | enforcement; credit markets; contracts; screening; banks; asymmetric information |
| JEL: | O16 C93 G21 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:2022&r=cfn |
| By: | Ida Nervik Hjelseth; Arvid Raknerud; Bjørn H. Vatne |
| Abstract: | We propose an econometric model for predicting the share of bank debt held by bankrupt firms by combining a novel set of firm-level financial variables and macroeconomic indicators. Our firm-level data include payment remarks in the form of debt collections from private agencies and attachments from private and public agencies and cover all Norwegian limited liability companies for the period 2010–2021. We use logistic Lasso regressions to select bankruptcy predictors from a large set of potential predictors, comparing a highly sparse variable selection criterion (“the one standard error rule†) with the minimum cross validation error (CVE) criterion. Moreover, we examine the implications of using debt shares as weights in the estimation and find that weighting has a large impact on variable selection and predictions and, generally, leads to lower out-of-sample prediction errors than alternative approaches. Debt weighting combined with sparse variable selection gives the best predictions of the risk of bankruptcy in firms holding high shares of the bank debt. |
| Keywords: | Bankruptcy prediction, credit risk, corporate bank debt, Lasso, weighted logistic regression |
| JEL: | C25 C33 C53 G33 D22 |
| Date: | 2022–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2022_7&r=cfn |
| By: | Gábor Pintér (Bank of England); Chaojun Wang (Wharton); Junyuan Zou (INSEAD) |
| Abstract: | We show that larger trades incur lower trading costs in government bond markets (“size discount”), but costs increase in trade size after controlling for clients’ identities (“size penalty”). The size discount is driven by the cross-client variation of larger traders obtaining better prices, consistent with theories of trading with imperfect competition. The size penalty, driven by the within-client variation, is larger for corporate bonds and during major macroeconomic surprises as well as during COVID-19. These differences are larger among more sophisticated clients, consistent with theories of asymmetric information. We propose a trading model with bilateral bargaining and adverse selection to rationalise the co-existence of the size penalty and discount. |
| Keywords: | Trading Costs, Government and Corporate Bonds, Trader Identities, Size Discount, Size Penalty |
| JEL: | G12 G14 G24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2114&r=cfn |
| By: | Francesco Aiello (Department of Economics, Statistics and Finance 'Giovanni Anania', University of Calabria, Rende (Italy)); Lidia mannarino (Department of Economics, Statistics and Finance 'Giovanni Anania', University of Calabria, Rende (Italy)); Valeria Pupo (Department of Economics, Statistics and Finance 'Giovanni Anania', University of Calabria, Rende (Italy)) |
| Abstract: | This study revises the moderating effect of size and age on the relationship between family ownership and innovation. The research hypotheses are tested on a large sample of Italian firms observed over the 2010–2017 period, using a zero-inflated non-linear count model. Results from a three-way interaction approach suggest that the patenting gap between family firms (FFs) and non-family firms is sensitive to size and age. Compared to non-FFs, FFs underperform when they are small and young or large and old, while there are no substantial differences for other types of firms. Much of the evidence is driven by the founder effect which differs over the firm life. |
| Keywords: | innovation, patent, family firms, size, age |
| JEL: | D22 L25 L60 O30 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:202301&r=cfn |
| By: | Ragnar E. Juelsrud; Plamen T. Nenov |
| Abstract: | We study the dividend payouts of U.S. banks during the 2008 financial crisis. Using a difference-in-differences methodology, we shows that banks with higher share of short-term liabilities to total liabilities, which were thus more exposed to the rollover crisis that took place in 2008, increased their dividend payouts relative to less exposed banks. This relative increase in dividend payouts is concentrated in relatively cash-rich banks. The dividend payout increase was associated with a short-run increase in stock valuations. We argue that this front-loading of dividends of more exposed banks is consistent with a theory of dividend payouts, in which the payout policy has a (short-run) stabilizing role on the bank’s liquidity position by signaling information to short-term lenders about the bank’s available liquidity. |
| Keywords: | payout policies, dividend signaling, rollover crises, bank runs, liquidity crises |
| JEL: | G01 G21 G35 |
| Date: | 2022–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2022_9&r=cfn |
| By: | Meg Adachi-Sato (Research Institute for Economics & Business Administration, Kobe University Faculty of Business Administration, JAPAN and Accountancy, Khon Kaen University, THAILAND); Hiroshi Osano (Faculty of Economics, Konan University, JAPAN) |
| Abstract: | This paper considers how profit-motivated fund managers of sustainable and passive funds govern the firms in the portfolios they construct using the capital collected from socially responsible investors. The fund managers endogenously choose their level of engagement with these firms to increase their profit, while reducing the negative externality. Using the search model framework between fund managers and investors, we derive several theoretical and empirical implications regarding the effects of improvement in environmental, social, and governance (ESG) information quality, sustainable fund growth, and passive fund growth on ESG and monetary performances generated by portfolio firms. |
| Keywords: | Delegated asset investment; ESG; Passive fund; Social impact; Socially responsible investing; Sustainable fund |
| JEL: | D83 G23 G32 M14 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2023-01&r=cfn |
| By: | Ulrike Schaede (Full Professor, School of Global Strategy and Policy, University of California, San Diego (E-mail: uschaede@ucsd.edu)) |
| Abstract: | This paper argues that Japan is experiencing an increase in " financialization" - a process of marketization where the primary focus in all transaction is on the immediate monetary value earned. Left unregulated, excessive financialization can erode the core architecture and health of an economy. Japan's financialization will be further accelerated by the interrelated forces of the digital transformation (DX), societal and employment system changes, and the need for corporate reinvention and repositioning. To showcase the difficulty of finding a balance between the positive discipline of the market and the dangers of excessive short-termism, this paper introduces Japan's emerging private equity (PE) market. Corporate need for a new market for spinouts and carve-outs meets global investors eager to find alternative investments. Together, they create new pressures for short-term financial results, even for companies not targeted by these investments, thus increasing financialization overall. The paper introduces recent U.S. proposals on regulating the PE industry to ensure long-term value creation while reining in financial schemes that are detrimental to the health of companies and the economy. As Japan shows signs of increasing financialization, it may warrant attention to the current discussion regarding the PE industry in the U.S. |
| Keywords: | Japan, financialization, marketization, private equity, digital transformation, corporate reorganization |
| JEL: | G30 L10 K20 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:22-e-18&r=cfn |
| By: | Keiichiro KOBAYASHI; Daichi SHIRAI |
| Abstract: | Economic growth slows for an extended period after a financial crisis. We construct a model in which a one-time buildup of debt can depress the economy persistently, even when there is no financial technology shock. We consider the debt dynamics of firms under endogenous borrowing constraints, with lenders having an option to forgive defaulting borrowers. A firm is referred to as debt-ridden when it owes maximum debt and pays all income in each period as an interest payment. In the deterministic case, a debt-ridden firm continues inefficient production permanently. Further, if the initial debt exceeds a certain threshold, the firm intentionally chooses to increase borrowing and, thus, to become debt-ridden. The emergence of a substantial number of debt-ridden firms lowers economic growth persistently. A debt restructuring policy or the relief of debt-ridden borrowers from excessive debt may be able to restore their efficiency and economic growth. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:22-008e&r=cfn |