nep-cfn New Economics Papers
on Corporate Finance
Issue of 2023‒08‒28
eight papers chosen by
Zelia Serrasqueiro, Universidade da Beira Interior

  1. Clear(ed) Decision: The Effect of Central Clearing on Firms Financing Decision By Maximilian Jager; Frederick Zadow
  2. The Role of Mediation of Financial Performance in the Relations of Islamic Corporate Governance and Islamic Social Reporting to Corporate Values By Amin, Asbi
  3. Are Acquirer Shareholders Happier when Their Industries Are Unhappy? By Jana P. Fidrmuc; Tereza Tykvova
  4. "Empirical Analysis of Unlisted Companies' Valuation Using Discounted Cash Flow Methods " By Ramzi DRISSI
  5. Research and/or Development? Financial Frictions and Innovation Investment By Filippo Mezzanotti; Timothy Simcoe
  6. "The Role of Financial Behavior, Financial Stress, and Financial Well-Being in Explaining Islamic Financial Literacy among University Students " By Aubaidillah Doloh
  7. Capital Structure Theories and its Practice, A study with reference to select NSE listed public sectors banks, India By Kurada T S S Satyanarayana; Addada Narasimha Rao
  8. Loan Recoveries and the Financing of Zombie Firms over the Business Cycle By Demirguc-Kunt, Asli; Horvath, Balint L.; Huizinga, Harry

  1. By: Maximilian Jager; Frederick Zadow
    Abstract: Does credit derivative market regulation affect corporate finance decisions? We investigate this question in the setting of the central counterparty (CCP) clearing reform on the corporate credit default swap (CDS) market. Exploiting the staggered introduction of CCP clearing to CDS contracts – an insurance against firm default – we uncover a shift in the debt composition of firms with adverse real economic consequences. Firms whose CDS contracts are eligible for clearing with the monopolist CCP lose bond market funding, but increase their demand for bank loans. Insufficient bank credit supply forces firms to shrink their balance sheet, cut investment and become less profitable. We theoretically motivate two potential channels of effect from clearing firms’ CDS contracts onto bond demand. The empirical evidence strongly supports an “arbitrage channel”: lower counterparty risk on the centrally cleared CDS market attracts investors away from the bond market.
    Keywords: central clearing, firm capital structure, financial regulation, real effects
    JEL: G12 G14 G18 G32
    Date: 2023–08
  2. By: Amin, Asbi
    Abstract: The purpose of this study is to examine the effect of Islamic Corporate Governance on company value; to examine the effect of Islamic Social Reporting on firm values; to test the influence of Islamic corporate governance on financial performance; to test the effect of Islamic Social Reporting on financial performance; to test the effect of financial performance on firm value; to examine the effect of Islamic Corporate Governance on corporate value through financial performance; to test the effect of Islamic Social Reporting on firm value through financial performance. The research method used is descriptive and associative research methods with a quantitative approach. In this study, researchers will measure the influence of Islamic corporate governance, Islamic Social Reporting on financial performance and firm value in Islamic banks in Indonesia, then the resulting data will be tested using the Structural Equation Modeling (SEM) method with the Partial Least Square (PLS) technique. The population in this study is the financial statements of Islamic banking which are listed on the Indonesia Stock Exchange for 2012-2020 of 14 companies. Then the sampling technique was carried out by purposive sampling. So the total sample in this study was 70 financial report data for 10 years. The software used to process this data is Smart PLS 3.0 as a descriptive statistical measurement tool. The results of this study found that Islamic Corporate Governance has a significant effect on company value; Islamic Social Reporting has a significant effect on company value; Islamic Corporate Governance has no significant effect on financial performance; Financial performance has a significant positive effect on firm value; Financial performance is able to mediate the relationship between Islamic Corporate Governance and company values; Financial performance is not able to mediate the disclosure of Islamic Social Reporting on company values
    Date: 2023–04–29
  3. By: Jana P. Fidrmuc (University of Warwick); Tereza Tykvova (University of St. Gallen; Swiss Finance Institute)
    Abstract: Many mergers destroy shareholder value because managers intentionally waste corporate resources to pursue private benefits. Using textual analysis, we link industry conditions as reflected in acquirer peers' 10-K statements to acquirer announcement abnormal returns. We find that more negative industry conditions are associated with higher acquirer abnormal returns. Our results suggest that difficult times impose discipline on managers who then tend to focus on deals that create value for acquirer shareholders.
    Keywords: mergers and acquisitions, corporate investment decisions, industry situation, acquirer abnormal returns
    JEL: G34 G41
    Date: 2023–06
  4. By: Ramzi DRISSI ("Department of Insurance, College of Islamic Economics and Finance, Umm Al-Qura University, Makkah, 24243, Saudi Arabia " Author-2-Name: Author-2-Workplace-Name: 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 - This paper aims to examine the theoretical and practical aspects of the widely used discounted cash flow (DCF) valuation method. Methodology – The proposed method is probably the most widely used approach in the valuation of unlisted companies. It involves estimating the future cash flows that the company is expected to generate and discounting them to their present value using a discount rate. The study was conducted on Spanish olive oil companies between 2005 and 2020. Findings – Our results show that there are two values for valuing companies: static and dynamic values. Both values are calculated based on the sum of the updated cash value plus the remaining value. The static value provides only one value, while the dynamic value provides a range of values, resulting in a more accurate understanding of a company's value and a better comprehension of the risks associated with that value. Therefore, the company is considered a cash flow generator, and the value of the company is found by calculating the present value of these flows using an appropriate discount rate. Novelty – Despite this method being a powerful tool for evaluating companies, even in complex situations, the DCF method is subject to a significant assumption bias, and even slight changes in the underlying assumptions of the analysis can greatly alter the evaluation results. Type of Paper - Empirical"
    Keywords: Cash flow; Unlisted companies; Valuation methods; Discounted Cash flow
    JEL: G12 G31 M21
    Date: 2023–07–30
  5. By: Filippo Mezzanotti; Timothy Simcoe
    Abstract: U.S. firms have reduced their investment in scientific research (“R”) compared to product development (“D”), raising questions about the returns to each type of investment, and about the reasons for this shift. We use Census data that disaggregates “R” from “D” to study how US firms adjust their innovation investments in response to an external increase in funding cost. Companies with greater demand for refinancing during the 2008 financial crisis, made larger cuts to R&D investment. This reduction in R&D is achieved almost entirely by reducing investment in research. Development remains essentially unchanged. If other firms patenting similar technologies must refinance, however, then Development investment declines. We interpret the latter result as evidence of technological competition: firms are reluctant to cut Development expenditures when that could place them at a disadvantage compared to potential rivals.
    Keywords: Research and Development, Financial Crisis, Technology Competition.
    JEL: O32 O31 G30 L20
    Date: 2023–08
  6. By: Aubaidillah Doloh (IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia Author-2-Name: Nur Harena Redzuan Author-2-Workplace-Name: IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia 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 objectives of the study are to assess the level of students' knowledge of Islamic finance and examine their financial behavior (FB), financial stress (FS), and financial well-being (FWB). Methodology – The study applies a quantitative research method with primary data collection using a non-probability convenience sampling technique. The questionnaires were distributed to 155 students, including undergraduate and postgraduate students. Findings and Novelty – The study concludes that only the financial well-being hypothesis was supported, meaning that financial well-being influences the level of Islamic financial literacy (IFL). The study contributes to the various stakeholders. For the government authority, this study can be a reliable benchmark for the level of Islamic financial literacy among university students. For the university authority, this study helps the university assess students' Islamic financial literacy level. For the Islamic financial industry, it tells what needs to be improved by the community members. Moreover, this study contributes to the existing literature on Islamic financial literacy. The study also recommends future research to study other variables related to Islamic financial literacy and include a wider sample from different universities. Type of Paper - Empirical"
    Keywords: Islamic financial literacy; financial behaviors; financial stress; financial well-being
    JEL: I22 M29 O16
    Date: 2023–07–30
  7. By: Kurada T S S Satyanarayana; Addada Narasimha Rao
    Abstract: Among the various factors affecting the firms positioning and performance in modern day markets, capital structure of the firm has its own way of expressing itself as a crucial one. With the rapid changes in technology, firms are being pushed onto a paradigm that is burdening the capital management process. Hence the study of capital structure changes gives the investors an insight into firm's behavior and intrinsic goals. These changes will vary for firms in different sectors. This work considers the banking sector, which has a unique capital structure for the given regulations of its operations in India. The capital structure behavioral changes in a few public sector banks are studied in this paper. A theoretical framework has been developed from the popular capital structure theories and hypotheses are derived from them accordingly. The main idea is to validate different theories with real time performance of the select banks from 2011 to 2022. Using statistical techniques like regression and correlation, tested hypotheses have resulted in establishing the relation between debt component and financial performance variables of the select banks which are helping in understanding the theories in practice.
    Date: 2023–07
  8. By: Demirguc-Kunt, Asli; Horvath, Balint L.; Huizinga, Harry (Tilburg University, School of Economics and Management)
    Date: 2023

This nep-cfn issue is ©2023 by Zelia Serrasqueiro. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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