nep-cfn New Economics Papers
on Corporate Finance
Issue of 2023‒08‒21
twelve papers chosen by
Zelia Serrasqueiro
Universidade da Beira Interior

  1. Firm-bank relationships: A cross-country comparison By Kosekova, Kamelia; Maddaloni, Angela; Papoutsi, Melina; Schivardi, Fabiano
  2. Institutional shareholding, common ownership and productivity: A cross-country analysis By Maria Bas; Lilas Demmou; Guido Franco; Javier Garcia-Bernardo
  3. Access to Financing and Racial Pay Gap Inside Firms By Janet Gao; Wenting Ma; Qiping Xu
  4. Optimal Ownership and Firm Performance: An Analysis of China’s FDI Liberalization By Peter Eppinger; Hong Ma
  5. "Catalysing Entrepreneurial Growth: Unleashing the Potential of Venture Capital and Private Equity in Developing Nations" By Asuamah Yeboah, Samuel
  6. Impacts of ownership changes on emissions and industrial production: Evidence from Europe By Chlond, Bettina; Germeshausen, Robert
  7. Bank dividend restrictions and banks' institutional investors By Mücke, Christian
  8. The invasion of Ukraine and the energy crisis: comparative advantages in equity valuations By Fabrizio Ferriani; Andrea Gazzani
  9. The effect of staged projekt management on product innovation: Evidence from a firm survey By Haneda, Shoko; Kurihara, Koki; Ono, Arito
  10. Does Incentive Pay Substitute for Monitoring? The Role of Managerial Skills and Span of Control By Filippo Belloc; Stefano Dughera; Fabio landini
  11. Effects of extreme temperature on the European equity market By Bellocca, Gian Pietro Enzo; Alessi, Lucia; Poncela Blanco, Maria Pilar; Ruiz Ortega, Esther
  12. Board Gender Diversity Reform and Corporate Carbon Emissions By Raul Barroso; Tinghua Duan; Siyue Guo; Oskar Kowalewski

  1. By: Kosekova, Kamelia; Maddaloni, Angela; Papoutsi, Melina; Schivardi, Fabiano
    Abstract: We document the structure of firm-bank relationships across the eleven largest euro area countries and present new stylised facts using novel data from the recent credit registry of the Eurosystem - AnaCredit. We look at the number of banking relationships, reliance on the main bank, credit instruments, loan maturity and interest rates. The granularity of the data allows us to account for cross country differences in firm characteristics. Firms in Southern European countries borrow from a larger number of banks and obtain a lower share of credit from the main bank compared to those in Northern European countries. They also tend to borrow more on short term, more expensive instruments and to obtain loans with shorter maturity. This is consistent with the hypothesis that Southern European countries rely less on relationship banking and obtain credit less conducive to firm growth, in line with the smaller average size of Southern European firms. Instead, no clear pattern emerges in terms of interest rates, consistent with the idea that banks appropriate part of the surplus generated by relationship lending through higher rates.
    Keywords: AnaCredit, Firm-bank relationship, Corporate financing, Bank Credit
    JEL: G21 G3 G32
    Date: 2023
  2. By: Maria Bas; Lilas Demmou; Guido Franco; Javier Garcia-Bernardo
    Abstract: The increase in institutional ownership, the shift towards passive portfolio management and the rise of common ownership have transformed OECD countries financial markets in the last decades. The paper investigates the potential consequences of these transformations on firm’s productivity, using granular data on firms financial and ownership structure as well as a variety of econometric methods. The analysis suggests that the rise of institutional investors is overall not a major concern from a productivity standpoint: firms displaying higher institutional ownership tend to have higher productivity levels and growth rates compared to their peers, though the positive relationship tends to vanish when institutional investors’ time horizon is short. Moreover, inter-industry common ownership is related to higher firm-level productivity and this positive relation is stronger for firms operating in intangible-intensive and digital sectors, potentially hinting to an easing of vertical relationships and/or technological spillovers when firms operating in different sectors are owned by the same equity holders. On the contrary, the correlation with intra-industry common ownership appears negative, though not always significantly, potentially due to lower competition.
    Keywords: common ownership, institutional ownership, productivity
    JEL: D22 D24 G32
    Date: 2023–08–04
  3. By: Janet Gao; Wenting Ma; Qiping Xu
    Abstract: How does access to financing influence racial pay inequality inside firms? We answer this question using the employer-employee matched data administered by the U.S. Census Bureau and detailed resume data recording workers’ career trajectories. Exploiting exogenous shocks to firms’ debt capacity, we find that better access to debt financing significantly narrows the earnings gap between minority and white workers. Minority workers experience a persistent increase in earnings and also a rise in the pay rank relative to white workers in the same firm. The effect is more pronounced among mid- and high-skill minority workers, in areas where white workers are in shorter supply, and for firms with ex-ante less diverse boards and greater pre-existing racial inequality. With better access to financing, minority workers are also more likely to be promoted or be reassigned to technology-oriented occupations compared to white workers. Our evidence is consistent with access to financing making firms better utilize minority workers’ human capital.
    Keywords: Racial Inequality, Diversity, Financing Friction, Access to Debt.
    JEL: J31 J71 G3
    Date: 2023–07
  4. By: Peter Eppinger; Hong Ma
    Abstract: Seminal theories of the firm posit that firm ownership is allocated to minimize contractual inefficiencies. Yet, it remains unclear how much the optimal ownership choice affects firm performance in practice. This paper provides a first quantification of the gains from optimal ownership within multinational firms, by exploiting a major liberalization of China’s policy restrictions on foreign ownership. The liberalization allowed previously restricted firms to become fully foreign owned. We find that these reoptimized ownership choices raise firm output by 40% and productivity by 7.5% on average. An extended property-rights theory of the multinational firm rationalizes these effects and their heterogeneity.
    Keywords: multinational firms, ownership, integration, firm performance, property-rights theory, China
    JEL: D23 F21 F23 L22 L23
    Date: 2023
  5. By: Asuamah Yeboah, Samuel
    Abstract: This systematic review examines the importance, role, and challenges of venture capital (VC) and private equity (PE) in driving entrepreneurial activities in developing nations. The review synthesizes existing literature and identifies key findings related to the impact of VC and PE on entrepreneurial growth and economic development. It explores barriers to accessing VC and PE, regulatory and legal challenges, as well as cultural and institutional factors that shape the VC and PE landscape in developing nations. The review also provides policy recommendations and highlights areas for further research, emphasizing the potential impact of VC and PE in driving entrepreneurial activities and fostering sustainable economic development in developing nations.
    Keywords: Venture capital, private equity, entrepreneurship, economic development, developing nations, access to capital, regulatory framework, institutional factors
    JEL: G24 L26 O16
    Date: 2023–06–12
  6. By: Chlond, Bettina; Germeshausen, Robert
    Abstract: Firm ownership is a major determinant for the economic performance of firms, and emissions of pollutants are often by-products of industrial production. We investigate the impact of ownership on pollutant emissions of firms and their in- dustrial facilities in Europe jointly with their output, productivity, and other key economic outcomes. To disentangle the influence of ownership from other firm characteristics, we analyse the effects of ownership changes in an event-study approach. We find that industrial facilities and firms decrease their emissions and industrial output after a change in ownership. Emissions intensity and productivity do not change suggesting that reductions in emissions follow proportional reductions in output rather than reflecting changes in pollution abatement technology. We find some evidence for positive spillover effects on productivity and profits of other facilities and firms owned by the acquiring parent company after a change in ownership.
    Keywords: Ownership changes, pollution, productivity, event study
    JEL: D22 D23 Q53
    Date: 2023
  7. By: Mücke, Christian
    Abstract: This paper studies the impact of banks' dividend restrictions on the behavior of their institutional investors. Using an identification strategy that relies on the within investor variation and a difference in difference setup, I find that funds permanently decrease their ownership shares at treated banks during the 2020 dividend restrictions in the Eurozone and even exit treated banks' stocks. Using data before the introduction of the ban reveals a positive relationship between fund ownership and banks' dividend yield, highlighting again the importance of dividends for European banks' fund investors. This reaction also has pricing implications since there is a negative relationship between the dividend restriction announcement day cumulative abnormal returns and the percentage of fund owners per bank.
    Keywords: Dividend Policy, Mutual Funds, Institutional Investors' Ownership, Banking Supervision, COVID-19 Pandemic
    JEL: G12 G21 G23 G28 G35
    Date: 2023
  8. By: Fabrizio Ferriani (Bank of Italy); Andrea Gazzani (Bank of Italy)
    Abstract: We study the impact of the widening energy price differentials caused by the war in Ukraine on the returns of European and US firms. Using several measures of firms' exposure to energy consumption, we show that return differentials between EU and US firms widened significantly after the outbreak of the war in Ukraine. Our results indicate a persistent comparative disadvantage between the two regions, driven by heterogeneous energy costs, which has continued even after the partial subsiding of the energy shock by the end of 2022. These findings suggest that the impact of the war on energy prices may have lasting economic implications for Europe, potentially exacerbating its competitiveness disadvantages compared with other geographic regions that have access to more affordable energy inputs.
    Keywords: war in Ukraine, energy impacts, energy comparative advantage, financial performance
    JEL: G12 G14 G32 G33
    Date: 2023–07
  9. By: Haneda, Shoko; Kurihara, Koki; Ono, Arito
    Abstract: This study examines whether staged project management is beneficial or harmful for making product innovations. Using a unique firm urvey for Japan, we find that firms that employed staged project management had a higher likelihood of introducing new products to the market. Additional estimations show that the positive effect of staged project management on product innovation is stronger when firms provided feedback at the interim stages. In contrast, whether and how firms set milestones was not associated with the likelihood of product innovation. The marginal effect of feedback was larger for new-to-market product innovation than for new-to-firm product innovation, and the feedback from non-R&D organizations within the firm in the initial stages was particularly beneficial for the introduction of new-to-market products. Our findings suggest that staged project management is beneficial for product innovation, but its effectiveness depends on how firms set milestones and feedback as well as the nature of innovation.
    Keywords: staged project management, product innovation, milestones, feedback, exploration, exploitation
    JEL: D22 G32 M11 O31
    Date: 2023
  10. By: Filippo Belloc; Stefano Dughera; Fabio landini
    Abstract: We model the conditions under which firm agency issues are tackled through incentive pay as opposed to monitoring. The model shows that a larger span of control makes labor surveillance less effective as an effort extraction mechanism, whereas managerial skills increase the opportunity cost of monitoring. As a result, the use of pay-for-performance schemes is more likely in firms with a lower staff-to-managers ratio and more skilled managers. An empirical analysis on firm-level Italian data produces results coherent with our theoretical predictions. Taken together, our results help to explain the highly heterogeneous use of incentive contracts among firms
    Keywords: Incentive pay, Managerial ability, Span of control
    JEL: L23 M52 C72 J33 J41
    Date: 2023–06
  11. By: Bellocca, Gian Pietro Enzo; Alessi, Lucia; Poncela Blanco, Maria Pilar; Ruiz Ortega, Esther
    Abstract: The increasing frequency and severity of extreme temperatures are potential threats to financial stability. Indeed, physical risk related to these extreme phenomena can affect the whole financial system and, in particular, the equity market. In this study, we analyze the impact of extreme temperature exposure on firms' performance in Europe over the XXI century. We show that extreme temperatures can affect firms' profitability depending on their industry and the quarter of the year. Our results are of interest for both investors operating in the equity market and for regulators in charge of securing financial stability.
    Keywords: Climate Change; Equity Market; Firm Performance; Physical Risk; Temperatures
    JEL: C23 C55 G12 G14 Q54
    Date: 2023–07–24
  12. By: Raul Barroso (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France); Tinghua Duan (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France); Siyue Guo (IESEG School of Management, France); Oskar Kowalewski (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Économie, F-59000 Lille, France)
    Abstract: We examine the impact of international gender diversity reforms in the board of directors on carbon emissions. Employing a difference-in-differences-in-differences analysis, we analyze the relationship between the increase in female representation on boards following these reforms and changes in firms' carbon emissions. Our results reveal a significant decline in carbon emissions with an increase in the proportion of female board members. The reduction in carbon emissions is observed to be more pronounced when gender reform is legally enforced. Additionally, our findings indicate that a combination of climate regulations and higher female representation on boards leads to a decline in both, direct and indirect carbon emissions. These findings underscore the importance of legal enforcement in promoting board gender diversity, which, in turn, plays a critical role in addressing climate change.
    Keywords: : gender diversity reforms, climate change, law, enforcement
    JEL: G34 J16 Q54 K42
    Date: 2023–07

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