nep-cfn New Economics Papers
on Corporate Finance
Issue of 2023‒12‒04
nine papers chosen by
Zelia Serrasqueiro, Universidade da Beira Interior

  1. The impact of corporate governance & corporate social responsibility on SA- REITs performance By Nosipho Moloi; Omokolade Akinsomi; Chuyuan Wong
  2. Impact of Environmental, Social and Governance (ESG) on the Performance of Listed Real Estate Firms By Badr Hayar; Jan Muckenhaupt; Bing Zhu
  3. Trade Uncertainty and U.S. Bank Lending By Ricardo Correa; Julian di Giovanni; Linda S. Goldberg; Camelia Minoiu
  4. A Critical Review of the Common Ownership Literature By Kristopher Gerardi; Michelle Lowry; Carola Schenone
  5. Population Aging and Small Business Dynamics By XU Peng
  6. Did Fintech Loans Default More During the COVID-19 Pandemic? Were Fintech Firms “Cream-Skimming” the Best Borrowers? By Brandon Goldstein; Julapa Jagtiani; Catharine Lemieux
  7. Financial Literacy's Influence on Investment Decisions By Markonah Markonah
  8. Banking Profitability: How do the banking intermediary, secondary reserve, operational efficiency, and credit risk effect? By Herry Achmad Buchory
  9. Sustainability and private investors By Buchanan, Bonnie; Silvola, Hanna; Vähämaa, Emilia

  1. By: Nosipho Moloi; Omokolade Akinsomi; Chuyuan Wong
    Abstract: This paper employs a CGI Index formulated from KING III and IV report to examine the link between corporate performance and quality of corporate governance (CG) and corporate social responsibility (CSR) of SA-REITs listed on the Johannesburg Stock Exchange (JSE). The CGI index is created from King III and IV. The empirical investigation using multiple correspondence analysis (MCA) reveals that corporate governance (CG) practices have a positive influence on firm performances measured by (such as total share return and return on assets). The results imply CG influences the firm performance of SA-REITs. The CSR index is created from the King reports, also the MCA was used, and CSR will likely improve SA-REITs performance by 13%.
    Keywords: Corporate Governance; Corporate Social Responsibility; Performance; REITs
    JEL: R3
    Date: 2023–01–01
  2. By: Badr Hayar; Jan Muckenhaupt; Bing Zhu
    Abstract: This paper investigates the relationship between ESG ratings and the operational, financial and market performance of Public Real Estate Companies (PRECs). By investigating a large sample of listed real estate firms from 2015 to 2021 in 35 countries, we find a positive relationship between overhead ESG metrics (and its sub-components) and firms’ market performance. Furthermore, we observe a negative relationship between ESG-Scores and the net operating income, general and administrative costs and financial costs. Our results remain robust after correcting for selection bias. Our results suggest that firms engaged in more socially responsible practices suffer from more financial costs and thus, have lower operational and financial performance. On the other hand, the stock market appreciates any decent investment in ESG, by overvaluing the corresponding companies.
    Keywords: Esg; Listed Real Estate; Performance; Public Real Estate Companies
    JEL: R3
    Date: 2023–01–01
  3. By: Ricardo Correa; Julian di Giovanni; Linda S. Goldberg; Camelia Minoiu
    Abstract: This paper uses U.S. loan-level credit register data and the 2018–2019 Trade War to test for the effects of international trade uncertainty on domestic credit supply. We exploit cross-sectional heterogeneity in banks’ ex-ante exposure to trade uncertainty and find that an increase in trade uncertainty is associated with a contraction in bank lending to all firms irrespective of the uncertainty that the firms face. This baseline result holds for lending at the intensive and extensive margins. We document two channels underlying the estimated credit supply effect: a wait-and-see channel by which exposed banks assess their borrowers as riskier and reduce the maturity of their loans, and a financial frictions channel by which exposed banks facing relatively higher balance sheet constraints contract lending more. The decline in credit supply has real effects: firms that borrow from more exposed banks experience lower debt growth and investment rates. These effects are stronger for firms that are more reliant on bank finance.
    Keywords: trade uncertainty; bank loans; trade finance; global value chains; trade war
    JEL: F34 F42 G21
    Date: 2023–11–01
  4. By: Kristopher Gerardi; Michelle Lowry; Carola Schenone
    Abstract: The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policymakers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. This paper provides an overview of the theoretical underpinnings of common ownership and critically reviews the empirical literature. Measurement issues and identification challenges are detailed, and a discussion of plausible causal mechanisms is provided. Across the newest papers employing the most credible identification techniques, there is relatively little evidence that common ownership causes lower competition. However, further research is necessary before broad conclusions can be reached.
    Keywords: common ownership; institutional investors; corporate governance
    JEL: G23 G32 G34 L22
    Date: 2023–11–08
  5. By: XU Peng
    Abstract: This paper uses a large sample of small and medium-sized enterprise financial data (2008-2019) to empirically analyze the effect of a prefecture's population aging on successions, mergers, suspensions/closures, and bankruptcies. The higher the proportion of the population aged 65 and over, the more serious the problem of finding successors for small businesses, that is, the decline in the turnover of aged business owners occurring through succession. Compared to inherited small and medium-sized enterprises, bankrupt enterprises, closed enterprises, and acquired enterprises tend to suffer from poor performance and sales. Companies that suffer from sluggish sales or poor performance go bankrupt, close, or merge; in other words, the metabolism of small and medium-sized enterprises also slow down as the population ages, not only impeding small business metabolism, but also performance— profitability, investment and growth rates--decline with increases in the population aged 65 and older. On the other hand, cash holdings of small businesses increase with population aging, likely because of increases in precautionary liquidity demand in preparation for future business closures.
    Date: 2023–11
  6. By: Brandon Goldstein; Julapa Jagtiani; Catharine Lemieux
    Abstract: A growing portion of consumer credit has recently been devoted to unsecured personal installment loans. Fintech firms have been active players in this market, with an increasing market share, while the market share of banks has declined. Studies of fintech lending have shown that their digital access and ability to leverage alternative data have increased accessibility in underserved areas, enabled consumers with thin credit files to obtain credit, and provided a lower cost alternative to long-term credit card financing. This paper exams three questions: (1) Do proprietary loan rating systems accurately predict the likelihood of default? (2) Can a proprietary loan rating system, leveraging alternative data, that was developed in a favorable economic period continue to perform well under adverse economic conditions (such as the COVID-19 pandemic)? (3) Have fintechs been “cream skimming, ” i.e., underpricing the cost of credit to top-tier customers? This study uses data from LendingClub, one of the largest fintech lenders in the personal loan market. We find that LendingClub’s loan rating system is superior to traditional measures of credit risk when predicting the likelihood of default and that the loan rating system continued to perform well during the pandemic period. Finally, we find no evidence of cream skimming.
    Keywords: Fintech; peer-to-peer (P2P); alternative data; financial inclusion; credit access; COVID-19; fintech loan default; cream skimming; fintech loan rate
    JEL: G21 G28 G18 L21
    Date: 2023–11–10
  7. By: Markonah Markonah (Perbanas Institute, Indonesia Author-2-Name: Hedwigis Esti Riwayati Author-2-Workplace-Name: Perbanas Institute, Indonesia Author-3-Name: Yohanes Ferry Cahaya Author-3-Workplace-Name: Perbanas Institute, Indonesia 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 study examines how financial literacy affects Indonesia's millennial generation's financial behavior and investment decisions. This study will also look at the influence of financial literacy as mediated by financial behavior on the millennial generation's investment decisions. Methodology/Technique - This research utilizes quantitative methods. The demography for this study is the millennial generation in Jakarta, Indonesia, which comprises 15, 575 people. A non-probability and purposive sampling strategy were used to sample 100 people. The analytical tool makes use of path analysis and Smart-PLS. Result - According to the study's findings, basic financial literacy does not impact the millennial age's investment decisions or financial behavior. Advanced financial literacy cannot impact the investment decisions of the millennial generation in Jakarta, but it can influence their financial behavior. The millennial generation's financial behavior might impact investing decisions. Basic financial knowledge does not influence Millennial investing decisions as mediated through financial behavior. Advanced financial literacy can influence Millennial investing decisions as mediated through financial behavior. Novelty - This research is expected to be a reference for the millennial generation in making investment decisions. The millennial generation is expected to increase financial literacy and improve financial behavior in making investment decisions. Type of Paper - Empirical"
    Keywords: Basic Financial Literacy, Millennial Generation, Financial Behavior, Investment Decisions
    JEL: G2 G23
    Date: 2023–06–30
  8. By: Herry Achmad Buchory ("Sekolah Tinggi Ilmu Ekonomi Ekuitas, Jln. PHH. Mustopa No. 31, 40124, Bandung, Indonesia " 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 - A Bank is a financial institution that collects and distributes funds to the public to obtain Profitability. The Covid-19 pandemic has affected the economic sector, especially the banking sector. The intermediation function needs to run optimally, increasing investment in secondary reserves, decreasing operational efficiency, increasing credit risk, and reducing bank profitability. The research aimed to determine the effect of Banking Intermediation, Secondary Reserves, Operational Efficiency, and Credit Risk on Profitability at Regional Development Banks in Indonesia for the 2019 – 2022 period, partially and simultaneously. Banking Intermediation is measured by the ratio of credit to total third-party funds (Loan to Deposit Ratio/LDR), Secondary Reserve is measured by the percentage of securities held to third-party funds (TPF), Operational Efficiency is measured by the ratio of operating expenses to operating income (OEOI), Credit Risk is measured by Non-performing Loans (NPLs), and Profitability is measured by Return on Assets (ROA). Methodology – Descriptive and verification methods with a quantitative approach will be used in this study with secondary data from published financial reports from 22 Regional Development Banks in Indonesia. The data analysis technique used is multiple linear regression. Findings – The study's findings show that partially LDR has a positive and significant effect on ROA; Secondary reserve has a positive but not significant impact on ROA; OEOI and NPLs ratios have a negative and significant effect on ROA. While simultaneously, LDR, Secondary Reserve, OEOI Ratio, and NPLs substantially impact ROA. Novelty – Compared to previous studies, bank profitability is not only influenced by banking intermediation, operational efficiency, and credit risk but also by secondary reserves, although not significantly. Type of Paper - Empirical"
    Keywords: Banking Intermediation, Banking Profitability, Credit Risk, Operational Efficiency, Secondary Reserve.
    JEL: G21 G32
    Date: 2023–09–30
  9. By: Buchanan, Bonnie; Silvola, Hanna; Vähämaa, Emilia
    Abstract: Private investors are an increasingly important voice in sustainability challenges. We examine investors' attitudes and behavior towards sustainable investing through a survey of 5, 030 Finnish private investors. We document that 60 percent of all respondents consider environmental, social, and governance (ESG) factors when making investment decisions. Our results indicate that women and millennials are more likely to follow sustainable investment strategies than investors on average. We also find that language background, location and education levels influence investment behavior. Moreover, our findings suggest that both sustainable and traditional investors are willing to take risks in their investment strategy. We also report the effects of the COVID pandemic on investor behavior and find that investors who started investing during the pandemic are less likely to choose traditional investment strategies. Our findings have implications for financial market participants and policymakers.
    Keywords: private investors, sustainability, investment strategies, ESG, risk-taking, COVID-19
    JEL: G01 G21 G30 M14
    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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