|
on Corporate Finance |
| By: | Andrea Bellucci (University of Insubria and MoFiR); Alexander Borisov (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: | 2023–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:697&r=cfn |
| By: | Köppl-Turyna, Monika; Köppl, Stefan; Christopulos, Dimitris |
| Abstract: | In this paper we analyze how different types of venture capital investments - private, public and indirect public - affect performance of "cleantech" start-ups in Europe. We hand collected a unique dataset on the institutional setting (public/indirect/private) of almost 15000 investors in Europe, which we combine with portfolio-company and deals data from Preqin to assess performance. Two results stand out: First, public venture capital does not underperform private venture capital in a broad crosscountry sample of European deals. This is a novel finding, as it doesn't confirm some previous findings in the literature that government-backed VCs underperform their private counterparts. We also find that there is no significant difference between direct and indirect government support of venture capital for cleantech investments. Second, GVCs perform well when they specialize in cleantech investments and are well connected within a network of other investors. |
| Keywords: | venture capital, governmental venture capital, European Investment Fund, public policy, green technology, cleantech |
| JEL: | G24 G28 H81 L26 D73 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ecoarp:280983&r=cfn |
| By: | Akbas, Ozan E.; Betz, Frank; Gattini, Luca |
| Abstract: | The credit gap in this study is given by the financing needs of firms that are bankable but discouraged from applying for a loan. To quantify the credit gap, we combine a scoring model that assesses the creditworthiness of discouraged firms with a credit allocation rule. Our study covers 35 emerging markets and developing economies and uses the 2018-2020 EBRD-EIB-World Bank Enterprise Survey. We show that on average discouraged firms are less creditworthy than successful applicants. Nonetheless, the share of bankable discouraged firms is large, suggesting inefficient credit rationing. The baseline results point to an aggregate credit gap of 8.4% of GDP with significant variation across countries. SMEs account for more than two-thirds of the total, reflecting both their contribution to economic activity and the fact that they are more likely to be credit-constrained. |
| Keywords: | credit rationing, discouraged borrowers, firm-level data, EMDEs |
| JEL: | D22 D45 E51 G21 G32 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:280955&r=cfn |
| By: | Martin Eling (University of St. Gallen); Anastasia V. Kartasheva (University of St. Gallen); Dingchen Ning (University of St. Gallen) |
| Abstract: | Cyber risk economic losses are large and growing, yet the insurance market for cyber risk is tiny, amounting to 0.4% ($2.8 billion) of premiums in the US property casualty insurance market in 2020. In this paper, we analyze the constraints that the insurance industry faces in providing larger capacity. We argue that cyber risk is special in that it combines (i) heavy-tailedness, (ii) uncertain loss distribution, and (iii) asymmetric information in underwriting. The combination of factors (i)-(iii) creates a tension between a need to raise substantial amounts of capital to finance heavy-tailed and uncertain risks and an expensive compensation demanded by investors due to information frictions. To circumvent asymmetric information costs, insurers can use internal capital. Hence, suppliers of cyber insurance are large insurance groups with a deep internal capital market. However, their capacity is constrained by the group’s size. We document stylized facts about the US cyber risk insurance market. We then establish the causal inference that insurers primarily rely on the internal capital market to supply cyber risk insurance using an exogenous shock of the non-US affiliated reinsurance tax treatment in 2017. Finally, we test which of the three features (i)–(iii) of cyber risk contribute to the cost of external capital and confirm that all of them play a significant role. |
| Keywords: | cyber risk insurance, large risks financing, internal capital market, reinsurance, information frictions |
| JEL: | G22 G32 L11 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp23118&r=cfn |
| By: | Wentian Zhang |
| Abstract: | This paper studies the effect of antitrust enforcement on venture capital (VC) investments and VC-backed companies. To establish causality, I exploit the DOJ's decision to close several antitrust field offices in 2013, which reduced the antitrust enforcement in areas near the closed offices. I find that the reduction in antitrust enforcement causes a significant decrease in VC investments in startups located in the affected areas. Furthermore, these affected VC-backed startups exhibit a reduced likelihood of successful exits and diminished innovation performance. These negative results are mainly driven by startups in concentrated industries, where incumbents tend to engage in anticompetitive behaviors more frequently. To mitigate the adverse effect, startups should innovate more to differentiate their products. This paper sheds light on the importance of local antitrust enforcement in fostering competition and innovation. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.13564&r=cfn |
| By: | Sven Kunisch (Aarhus University [Aarhus]); Julian Birkinshaw (London Business School); Michael Boppel; Kira Choi (EM - emlyon business school) |
| Abstract: | "We study strategic change as a visible and substantive action by examining the circumstances under which firms launch corporate change programs. Drawing on prior literature and corroborated by insights from interviews with executives, we propose a contingency perspective on the launch of corporate change programs (i.e. that different types of programs are launched under different circumstances). To do so, we combine arguments for three general motives for launching a corporate change program with two distinct types of corporate change programs. More specifically, we argue that firms are more likely to launch growth-oriented programs when the market situation is buoyant, when they have prior experience, and when they are underperforming. Furthermore, we argue that firms are more likely to launch efficiency-oriented programs when there is a new CEO, when they are underperforming, and when they are facing high levels of organizational complexity. To test our hypotheses regarding the motives for launching programs, we conducted a large-scale empirical study. Using hand-collected data for the European financial services and insurance industry over a ten-year period, we found support for our predictions. We discuss the implications of these findings for strategic change research." |
| Keywords: | Corporate change programs, Strategic change, Strategic initiative, Strategic agenda, Coordination, Complexity |
| Date: | 2023–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04325790&r=cfn |