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on Corporate Finance |
| By: | Saul Estrin (Department of Management, London School of Economics and Political Science, London, UK); Jan Hanousek (Department of Economics, Faculty of Business and Economics, Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic; CEPR, London, UK); Anastasiya Shamshur (King's Business School, King's College London, London, UK) |
| Abstract: | We explore how the type of owner affects private enterprise investment decisions in Europe. In contrast to the literature, we analyze firms with concentrated (more than 95%) ownership stakes to reduce the potential that agency problems contaminate our results. We consider four types of supermajority owners – family, institutional, corporate, and state and use detailed ownership and financial information from a large sample of private firms from 24 European countries from 2001 to 2018. We find that family-owned firms exhibit higher gross investment rates and substantially higher sensitivity to investment opportunities, profitability, cash flow, and value-added growth compared to corporate and institutional owners. At the same time, and more consistent with the literature, family-owned firms invest significantly less in intangible assets than other ownership types. To demonstrate the robustness of our results, we employ matching samples complemented by analysis of owner-type transitions from family owners to corporate and institutional owners. |
| Keywords: | private firms, panel data, Europe, ownership types, investments, cash flow sensitivity, profitability, business opportunities |
| JEL: | G31 G32 D22 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:men:wpaper:91_2023&r=cfn |
| By: | Kanis Saengchote |
| Abstract: | Leveraged developers facing rollover risk are more likely to engage in fire sales. Using COVID-19 as a natural experiment, we find evidence of fire sale externalities in the Thai condominium market. Resales in properties whose developers have higher leverage ratios have lower listing prices for listed developers (who have access to capital market financing) but not unlisted developers (who primarily use bank financing). We attribute this difference to the flexibility of bank loan renegotiation versus the rigidity of debt capital market repayments and highlight the role of commercial banks in financial intermediation in the presence of information asymmetry. |
| Keywords: | Fire sale externalities; Property developers; Leverage; Rollover risk |
| JEL: | G10 G18 G21 G32 R30 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:212&r=cfn |
| By: | Chloé Zapha |
| Abstract: | This paper identifies the bank credit restrictions that small firms face after bankruptcy. Using the French credit register, I implement a difference-in-difference strategy that exploits staggered removal of bankruptcy flags in the form of an exogenous change in credit ratings. I focus on small and medium-sized businesses between 2012 and 2019 and show that flag removal leads to an increase in bank credit of 1.7% and a 2 percentage point higher chance of forming new banking relationships. Less well-informed banks increase their credit supply after flag removal, particularly to firms whose credit rating reveals good financial performance. New banks start lending to the most constrained firms. As a result, firms substitute trade credit for bank credit and increase their investment rate. This paper supports the policy choice of shortening the bankruptcy flag. |
| Keywords: | Corporate bankruptcy, Debt Restructuring, Credit Rating, Bank Lending Relationship, SMEs |
| JEL: | G21 G24 G33 G34 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:928&r=cfn |
| By: | Mona Yaghoubi (University of Canterbury) |
| Abstract: | This study examines the relationship between geopolitical risk and firms’ capital structure decisions, focusing on the moderating effects of executive characteristics. Using US corporation data from 1992 to 2020, we find that firms adopt more conservative capital structure choices in response to higher exposure to geopolitical risk. Furthermore, we investigate how executives’ age and gender influence this relationship. Our findings indicate that firms with a higher proportion of female executives demonstrate heightened sensitivity to geopolitical risk, leading to more risk-averse financial decisions. In contrast, firms with older executives attenuate the adverse impact of geopolitical risk on financial leverage, suggesting a mitigating effect. The robustness of our results is confirmed through alternative measures of capital structure and estimation methods. We also identify risk aversion as a potential channel through which geopolitical risk affects capital structure choices and examine the role of executive characteristics in this channel using a moderated mediation model. |
| Keywords: | Geopolitical risk, capital structure, executives age, executives’ gender and risk-aversion |
| JEL: | G32 G41 D80 F50 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:23/14&r=cfn |
| By: | Bayly, Nicholas (Australian National University); Breunig, Robert (Australian National University); Wokker, Chris (Australian National University) |
| Abstract: | Despite a conventional wisdom that female board members positively impact firm performance, a thorough examination of the research to date reveals no consensus that female board members have either a positive or negative effect on firm performance. We build the largest dataset of Australian board appointments assembled to date. We use our data to demonstrate how difficult it is to replicate existing research, with one example from Australia and one from the US. Using event studies and regression analyses we demonstrate that there is little evidence that female board representation affects firm financial performance. |
| Keywords: | firm performance, board of directors, gender representation, female directors |
| JEL: | J16 N20 G32 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16617&r=cfn |
| By: | Guglielmo Maria Caporale; Cristiana Donati; Nicola Spagnolo |
| Abstract: | This paper investigates how access to finance and skilled workforce endowments affect the propensity of European small and medium sized enterprises (SMEs) to adopt different types of resource efficiency measures (REMs), possibly simultaneously. For this purpose, a Multinomial Logit model is estimated using data from the 2017 Flash Eurobarometer survey covering a large sample of European firms. The analysis is carried out first for the whole sample and then for clusters based on two contextual factors measured by the Ease of Access to Loans Index (EAL) and the European Skill Index (ESI). The findings suggest that the two firm characteristics considered lead to the adoption of more than one REM simultaneously. Moreover, the propensity to implement them is stronger in the case of firms located in countries with easier access to financial resources, whilst the workforce skill-set appears to be a less important factor in this context. |
| Keywords: | resource efficiency measures, financing, SMEs, workforce skills |
| JEL: | G32 O16 Q40 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10799&r=cfn |
| By: | Kanis Saengchote |
| Abstract: | Leveraged developers facing rollover risk are more likely to engage in fire sales. Using COVID-19 as a natural experiment, we find evidence of fire sale externalities in the Thai condominium market. Resales in properties whose developers have higher leverage ratios have lower listing prices for listed developers (who have access to capital market financing) but not unlisted developers (who primarily use bank financing). We attribute this difference to the flexibility of bank loan renegotiation versus the rigidity of debt capital market repayments and highlight the role of commercial banks in financial intermediation in the presence of information asymmetry. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.05013&r=cfn |
| By: | Andrea Bellucci (Universita' degli Studi dell'Insubria and Mo.Fi.R.); Alexander Borisov (Lindner College of Business, University of Cincinnati and MoFiR); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR) |
| Abstract: | This paper studies the interplay between allocation of decision-making authority and information production within a bank in the context of small business lending. Using a sample of credit lines to small businesses and changes in the overlap between decision-making authority and information production following an organizational restructuring of the bank, we show that an increase in the authority of the information-producing loan officer leads to a reduction in the use of collateral but leaves interest rates broadly unchanged. The reduction of collateral requirements is more pronounced when loan officers have tacit local knowledge or soft information or when their real authority is limited pre-restructuring. Our results highlight the effect of alignment of information production and decision-making authority on the contract terms of bank credit. |
| Keywords: | Soft and hard information, Collateral, Interest rate, Organizational hierarchies, SMEs financing |
| JEL: | D83 D21 G21 G30 L11 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:184&r=cfn |
| By: | Kongphop WONGKAEW; SAITO Yukiko |
| Abstract: | This study investigates the impact of the COVID-19 pandemic on zombification, firm exit, and chief executive officer (CEO) succession, and examines how CEO age moderates these effects. Using Japanese firm-level data from 2013 to 2021, we discover that the prevalence of zombification increased during the COVID-19 pandemic, as firm performance deteriorated and financial leverage increased. However, the pandemic had a limited impact on firm exit. We also find that the impact of the pandemic on firms varied depending on the age of their CEOs. Firms led by younger CEOs were more likely to increase their long-term borrowing and less likely to exit the market. Conversely, firms led by older CEOs were more likely to exit voluntarily or experience CEO turnover, and this was true especially for family-owned firms and those in peripheral prefectures. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:23080&r=cfn |
| By: | Ghinami, Francesca; Montresor, Sandro |
| Abstract: | This paper aims to investigate the role that different forms of proximity have in the access to Venture Capital (VC) by Innovative Startup Companies (ISC). By referring to the population of Italian innovative startups, we find that tangible (spatial) proximity account for this matching, but more in functional than in geographical terms. Industrial proximity between the two actors matters too, and makes the role of functional proximity less binding for the matching. The greatest correlation emerges with respect to a relational kind of proximity, due to the closeness between partners in organisational and social terms. |
| Date: | 2023–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:hqrj7&r=cfn |
| By: | Efendi; Rahmadani Srifitri; Septriza Berliana |
| Abstract: | Financial decisions are the decisions that managers take with regard to the finances of a company. This article aims to examine and explain the effect of interest rates on economic and financial decisions such as investment, funding, and dividend in a firm. This research uses the correlation coefficient analysis methods and descriptive methods to illustrate the relationship between interest rates and financial decisions. The data used in this research was obtained from several government reports and leading economic sources. The results of this research show that interest rates have a negatively insignificant effect on investment and funding decisions, but positively moderate effect on dividend decisions. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.14738&r=cfn |