nep-cfn New Economics Papers
on Corporate Finance
Issue of 2023‒06‒26
eleven papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Investment, Implicit Debt Targets and Debt Maturity By Enzo Dia; Marco Rispoli
  2. European Small Business Finance Outlook 2022 By Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter
  3. Female access to finance: A survey of literature By Pavlova, Elitsa; Gvetadze, Salome
  4. The market for CEOs By Cziraki, Peter; Jenter, Dirk
  5. The Effect of Financial Constraints on Inventory Holdings By Bustos, Emil
  6. Climate-related disclosure commitment of the lenders, credit rationing, and borrower environmental performance By Hasan, Iftekhar; Lee, Haekwon; Qiu, Buhui; Saunders, Anthony
  7. Export impact on dividend policy for big Colombian exporting firms, 2006-2014 By Merchan Alvarez, Federico Alberto
  9. Ethnic diversity and firm performance: Evidence from India By Sefa Awaworyi Churchill; Yeti Nisha Madhoo; Shyam Nath
  10. Crowdfunding and Risk By David Cimon
  11. Corporate Green Bonds: The Role of External Reviews for Investment Greenness and Disclosure Quality By Tami Dinh; Florian Eugster; Anna Husmann

  1. By: Enzo Dia; Marco Rispoli
    Abstract: We analyse industrial firms’ financial policies by modelling investment and debt issuances as endogenous variables. In our setup, firms issue costly short-and long-term debt to cover their capital expenditure. This strategy does not assume the existence of explicit debt targets but allows the recovery of implicit debt targets from firms’ investment and financing decisions. The empirical analysis reveals sizeable cross-sectional variation: Implicit debt targets vary with financial conditions, firm size, and investment opportunities. Furthermore, we find that the magnitude of the implicit debt target ratio is sensitive to the investment type.
    Keywords: Implicit Debt Targets, Debt Maturity, Financial Cost, Maturity-matching
    JEL: G14 G31 G32
    Date: 2022
  2. By: Kraemer-Eis, Helmut; Botsari, Antonia; Gvetadze, Salome; Lang, Frank; Torfs, Wouter
    Abstract: This working paper provides an overview of the main markets relevant to the EIF, thereby documenting the impact of the current inflationary environment, the war in Ukraine and the aftermath of the pandemic on the SME financing environment. The publication first discusses the general market environment and then covers the markets for SME equity and debt products. In addition, it focuses on a number of thematic policy areas that are of particular interest to the EIF, such as Inclusive Finance, Fintech and Green finance & investment.
    Keywords: SMEs, SME financing, private equity, bank guarantee, microfinance, financial technology, sustainable investment, Europe
    Date: 2022
  3. By: Pavlova, Elitsa; Gvetadze, Salome
    Abstract: This working paper examines the current academic literature on access to finance for female entrepreneurs and female-led enterprises. It covers two main financing markets: credit and venture capital (VC). The paper finds wide consensus in the academic field that gender-related credit and VC gaps exist in Europe. It also collects some of the most prominent empirical findings with respect to the gender imbalance in the European credit and VC markets during the last decade. This suggests an important role for gender-smart policy interventions at EU-level through the use of both equity and debt financing instruments.
    Keywords: Finance, Gender bias, small businesses
    Date: 2023
  4. By: Cziraki, Peter; Jenter, Dirk
    Abstract: We study the market for CEOs of large publicly-traded US firms, analyze new CEOs' prior connections to the hiring firm, and explore how hiring choices are determined. Firms are hiring from a surprisingly small pool of candidates. More than 80% of new CEOs are insiders, defined as current or former employees or board members. Boards are already familiar with more than 90% of new CEOs, as they are either insiders or executives who directors have previously worked with. There are few reallocations of CEOs across firms - firms raid CEOs of other firms in only 3% of cases. Pay differences appear too small to explain these hiring choices. The evidence suggests that firm-specific human capital, asymmetric information, and other frictions have first-order effects on the assignment of CEOs to firms.
    Keywords: CEO labor markets; CEO-firm matching; assignment models; CEO turnover; CEO compensation
    JEL: G30 G34 M12
    Date: 2021–06–14
  5. By: Bustos, Emil (Research Institute of Industrial Economics (IFN))
    Abstract: This paper investigates the impact of financial constraints on firms’ inventory holdings, an area of significant interest given that inventories are volatile over the business cycle. I use detailed data on Swedish firms’ balance sheets, income statements, and credit scores. I employ a regression discontinuity design and a difference-in-differences analysis to examine the causal effects of financial constraints on inventory management. Firms with relaxed financing constraints increase their inventories by 20% when they get a better credit score, yet there is no robust effect on inventories relative to firm size. This study offers new insights into the influence of financial constraints on firms’ inventory strategies amidst changing economic conditions.
    Keywords: Financial Constraints; Risk Management; Inventories; Credit Scores; Private Firms
    JEL: D22 D25 G32 G32
    Date: 2023–05–24
  6. By: Hasan, Iftekhar; Lee, Haekwon; Qiu, Buhui; Saunders, Anthony
    Abstract: Using lenders becoming members of the Task Force on Climate-Related Financial Disclosures (TCFD) as a plausible exogeneous shock, we examine whether and how lenders' commitment to transparent climate-related disclosures affects borrower firms' environmental performance. We find that client firms of TCFD-member lenders, relative to control firms, significantly improve their environmental performance after the TCFD launch. The effects are stronger for polluting firms. Moreover, TCFD-member lenders influence their borrowers' environmental performance via charging higher loan spread and reducing the number and amount of new loans issued to polluting firms. Finally, polluting clients of TCFD-member lenders experience tightened financial constraints subsequently.
    Keywords: Climate-related Disclosure Commitment, Credit Rationing, Borrower Environmental Performance
    JEL: G21 G30 Q54
    Date: 2023
  7. By: Merchan Alvarez, Federico Alberto
    Abstract: This paper studies the impact of exogenous export demand shocks on firms' dividend policy using firm specific real exchange rate variation as instrumental variable. IV exclusion restriction is plausibly satisfied because real exchange rate shocks were unanticipated -partly explained because of international oil price fluctuation-, and first stage results confirm relevance condition fulfillment. The results indicate that big private Colombian exporting firms decree dividends as a way to mitigate the agency cost generated by exogeneous exports variation via higher free cash flow and cash flow volatility, especially in poor managerial quality firms. Evidence supports agency cost theory and denies signaling.
    Keywords: dividends, exports, agency cost, free cash flow, volatility
    JEL: F14 F10 G30 G32 G14 G35
    Date: 2023
  8. By: Admkew Haile
    Abstract: The reviewed literature articles are studies related to sub-Saharan African agribusiness, finance and value chain financing published since 2016–2022 to provide insights and information on barriers and prospects of agribusiness financing in sub–Saharan Africa. The review is concerned on identifying and understanding the barriers faced by the agribusiness firm, who seek financing for agribusiness activities, who would provide it, and who would invest in agribusiness. It also identifies prospects for addressing critical barriers that can help close the financing gap in agribusiness. Agriculture and agribusiness are identified as a potential and turning points for African economic transformations and developments. Agribusiness in Africa is suffering from financial access and service despite its economic contributions to the regions. Despite, the significant need for working and investment capital, many value chain actors faced difficulties getting access to financing from formal sources, and the few who do find it mostly inadequate. Difficulties accessing finance and financial services are prevalent, with lending to agribusiness and affordable access to other financial services lagging far behind other sectors of the economy. The reliance on collateral and number of documents required discriminates against many small and medium agribusiness firms, who may have viable businesses but do not have the assets. The restrictions on access to finance for agribusiness, banks and some other financing institutions are starting to grow their agribusiness investment and their number of branches to rural areas where such needs are high is considered as a positive prospect for agribusiness finance accessibilities. The growing of urban food markets driven mainly by income growth and rapid urbanization are creating need for high-value agribusiness products, new supply chains, and supporting services in the agribusiness industry. The new jobs and income prospects created by this growth can significantly contribute to Africa’s economic transformation and development. However, to take advantage of these growth opportunities, Sub-Saharan Africa needs to close the agribusiness financing gap. Key words: Agribusiness, Finance Access, Barriers, Financing, Prospects, Sub-Saharan Africa
    Date: 2023–03
  9. By: Sefa Awaworyi Churchill; Yeti Nisha Madhoo; Shyam Nath
    Abstract: We examine if the financial performance of firms in India depends on the level of ethnic diversity in the state or district in which they operate. Thus, using data on 1, 199 listed firms in the materials, industrial and infirmation technology sectors in India, we examine the impact of ethnic diversity on various measures of firm financial performance. Based on indices of fractionalization calculated for 15 states and 74 districts in which these firms operate, we find evidence of negative effects of ethnic diversity on firm performance. These results are robust to endogeneity and alternative ways of measuring diversity.
    Keywords: Environmental governance; fiscal decentralization; atmospheric pollution; spillover effects; non-point source pollution; India
    JEL: J15 L25
    Date: 2022
  10. By: David Cimon
    Abstract: This paper examines the role of rewards-based and equity-based crowdfunding in funding new businesses. In this model, crowdfunding is a unique technology that serves as a real option for production and eliminates downside risk. It affords entrepreneurs who face uncertain consumer demand a viable means of funding new projects. Crowdfunding performs well for projects with a high variability in demand and a low probability of success. Conversely, crowdfunding does not perform well for large projects with little variability in demand or for projects where the production side is uncertain.
    Keywords: Digital currencies and fintech; Financial markets; Financial services
    JEL: G21 G24 G32
    Date: 2023–05
  11. By: Tami Dinh (University of St. Gallen); Florian Eugster (University of St. Gallen and Swiss Finance Institute); Anna Husmann (University of St. Gallen)
    Abstract: Based on signaling theory, we examine the role of external reviews during the life-cycle of corporate green bonds. We focus on (1) whether investment greenness is related to external review upon issuing a green bond and (2) whether disclosure quality is positively associated with the assurance of green bond reports. Our results indicate that although companies with worse environmental performance are more likely to obtain at-issuance external reviews for their green bonds, their certified investments are more likely to be greener than those companies that did not obtain a review at issuance. This suggests that a more regulated form of external review may serve as a credible signal for green proceeds invested. In addition, we develop a disclosure index for green bond reports and show that post-issuance report assurance is associated with increased transparency. Our findings provide evidence that external reviews in the green bond issuance process are important governance factors to rule out potential greenwashing through the use of corporate green bonds.
    Keywords: Green Bonds, External Review, Assurance, Sustainable Investments, Disclosure Quality
    JEL: G23 M14 M41 M42
    Date: 2023–05

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