nep-cfn New Economics Papers
on Corporate Finance
Issue of 2024‒02‒12
nine papers chosen by
Zelia Serrasqueiro, Universidade da Beira Interior

  1. Is the Nexus Between Capital Structure and Firm Performance Asymmetric? An Emerging Market Perspective By M N, Nikhil; S Shenoy, Sandeep; Chakraborty, Suman; B M, Lithin
  2. Migration Fear and Stock Price Crash Risk By Kuntal K. Das; Mona Yaghoubi
  3. Gender Quotas, Board Diversity and Spillover Effects. Evidence from Italian Banks By Del Prete, Silvia; Papini, Giulio; Tonello, Marco
  4. The Impact of Capital Structure on Business Performance of Vietnamese Enterprises During the Covid 19 Pandemic By Hung, Dang Ngoc
  5. Women Directors and Cost Efficiency By Anastasia Litina; Luca J. Uberti; Skerdilajda Zanaj
  6. Regulation, information asymmetries and the funding of new ventures By Matteo Aquilina; Giulio Cornelli; Marina Sanchez del Villar
  7. Early Patent Disclosure and R&D Investment in Family Firms By Katrin Hussinger; Wunnam Issah
  8. Evaluating the gendered credit constraints and uptake of an insurance-linked credit product By Timu, Anne G.; Shee, Apurba; Ward, Patrick S.; You, Liangzhi
  9. Question design and the gender gap in financial literacy By Alicia Lloro; Ellen A. Merry; Anna Tranfaglia

  1. By: M N, Nikhil; S Shenoy, Sandeep; Chakraborty, Suman; B M, Lithin
    Abstract: The nature of the relationship between leverage and firm performance has been a subject of investigation in extant literature. We re-examine the nature of the association by using a sample of 78 non-financial firms listed in the Nifty 100 index during the 2013-2023 period by applying the quantile regression technique and comparing the result with the linear regression approach (system GMM technique). Our empirical analysis demonstrates that leverage negatively impacts the performance of firms. Further, results show that the association is non-homogeneous among firms of different quantiles: leverage withers the performance of highly profitable firms (upper quantile) than low profitable firms (lower quantile). The identified concave relationship highlights the prominence of optimal capital structure and the role of finance managers in designing a sound financial policy that matches firm characteristics and borrowing requirements. The findings of our study draw insightful implications for managers and policymakers while contributing to the ongoing leverage and firm performance debate reported in previous studies.
    Keywords: leverage, profitability, non-homogeneous, nonlinear relation, quantile regression, GMM, India
    JEL: C23 C26 C33 G30 G32
    Date: 2023–09–02
  2. By: Kuntal K. Das (University of Canterbury); Mona Yaghoubi (University of Canterbury)
    Abstract: We examine whether migration fear increases future stock price crash risk. We find that a 10 percentage point increase in the migration fear index increases the future stock price crash risk by 17 to 19 percentage points. Our results hold after controlling for macroeconomic conditions, including economic policy uncertainty, and using instrumental variables to address endogeneity issues. The impact of migration fear on crash risk is larger for firms with greater asymmetric information and firms with weaker monitoring mechanisms. We conclude that migration fear can significantly change risk tolerance in financial markets and affect stock price crash risk.
    Keywords: Migration fear, Asymmetric information, Stock price crash risk
    JEL: G10 G41
    Date: 2024–01–01
  3. By: Del Prete, Silvia; Papini, Giulio; Tonello, Marco
    Abstract: We study the impact of a law, which required the increase of the proportion of women on boards of listed companies to at least one third. We look at its impact on listed banks, but also test whether it led to spillovers into non-listed banks belonging to listed groups or along other board diversity dimensions. Using administrative data, we compare diversity measures of boards of listed and non-listed banks in listed groups with those in non-listed groups, before and after the introduction of the law, in a difference-in-differences specifi- cation. We find that the imposition of the gender quota only changed the composition of the boards of listed banks, with no effect on their economic performance, nor spillovers on other non-listed banks in listed groups. The law enhanced diversity of boards of listed banks, also along individual characteristics other than gender.
    Keywords: bank boards, diversity, gender, corporate governance
    JEL: G21 G38 J48 J78
    Date: 2024
  4. By: Hung, Dang Ngoc
    Abstract: This paper investigates the impact of capital structure on business performance of Vietnamese enterprises during the Covid-19 pandemic. The study focuses on key performance indicators such as return on total assets (ROA), return on equity (ROE), and earnings per share (EPS). The analysis employs the table data regression method using a dataset comprising 5747 enterprise observations for the period of 2019 to 2022. The findings indicate that capital structure has a significant negative influence on the business performance of Vietnamese enterprises. Moreover, the study highlights the substantial effect of capital structure on business performance when considering different aspects and debt structures, particularly within the framework of the Covid-19 pandemic. Based on these research findings, the article recommends that business administrators carefully consider the optimal capital structure to enhance business efficiency, especially given the unpredictable nature of the Covid-19 pandemic
    Date: 2024–01–05
  5. By: Anastasia Litina (University of Macedonia); Luca J. Uberti (University of Milano-Bicocca,); Skerdilajda Zanaj (DEM, Université du Luxembourg)
    Abstract: In an era where gender norms vary widely and quite frequently hint to gender inequality in the labor market, previous studies have shown that higher gender diversity is associated with better economic outcomes. Using a novel dataset that provides granular data at the firm level, we test this hypothesis in the context of gold mining companies. We concentrate on a relatively overlooked aspect, namely cost efficiency, and study whether a larger number of women directors is associated with more efficient use of a company’s resources. We use a stochastic frontier methodology to estimate the cost-efficiency of gold mines for a representative sample of global mining companies. Using fixed-effects and instrumental-variable regressions, we find that an increase in female representation on the parent company’s board translates into significant efficiency gains for the mining operations controlled by the parent company. Specifically, a one standard-deviation increase in the share of female directors increases cost-efficiency by 12 percent of a standard deviation of our main efficiency index. This finding is robust to using alternative instruments for female representation, alternative stochastic-frontier methodologies, and different specifications of the main estimating equation. Interestingly, the efficiency gains induced by female directors do not necessarily improve the overall performance of the company as measured by accounting profitability. Yet, cost efficiency is associated with higher cost-sustainability and long-term viability of a firm, thereby rendering it more resilient. This hints that the underlying mechanism is consistent with evidence that suggests that women directors exert a higher monitoring and audit effort than their male counterparts. Our results provide additional evidence of a distinctly female style in corporate leadership and shed light to different aspects of a firm’s productivity. Understanding differences in styles of leadership, allows policy makers to implement more inclusive policies in the labor market and firms to endorse diversity in leadership. This ultimately can lead to more inclusive norms in the labor market.
    Keywords: Gender; Boards of directors; Cost efficiency; Stochastic Frontier Analysis; Mining.
    JEL: L2 L25 M14 Z1
    Date: 2023
  6. By: Matteo Aquilina; Giulio Cornelli; Marina Sanchez del Villar
    Abstract: Can regulation ease problems of asymmetric information for young and innovative firms? The new and largely unregulated cryptocurrency ecosystem offers a unique setting to test this hypothesis. We construct a comprehensive measure of regulatory stringency at the state-month level for the United States and find that more stringent regulation is conducive to more private capital, but only in states with a more developed financial sector. Looking at granular deal-level data we trace the increase in access to capital triggered by a more stringent regulatory environment to a reduction in information asymmetries. Consistently with a reduction in information asymmetry, we find that younger firms with less tangible assets benefit more, and foreign investors, investors that are not specialised in the crypto sector and those with fewer investment professionals invest more capital.
    Keywords: corporate finance, venture capital, asymmetric information, cryptocurrency
    JEL: D82 G24 G28 O1
    Date: 2024–01
  7. By: Katrin Hussinger (DEM, Université du Luxembourg); Wunnam Issah (University of Leicester School of Business, UK)
    Abstract: This paper shows that the American Inventor’s Protection Act, which introduced the disclosure of patent applications after 18 months, i.e. before a grant decision is taken and, hence, before it is known whether the respective technology receives legal protection, is associated with a reduction of family firms’ research and development (R&D) investment. This suggests that early disclosure of patent applications is perceived as a threat to family firms’ innovation activity and discourages their R&D investment. This finding deserves our attention because family firms account for a large share of the U.S. economy and a reduction of their R&D investment can have long-term consequences.
    Keywords: R&D investments, AIPA, Family firms, Socio-emotional wealth (SEW)
    JEL: O30 O34 O38 G32
    Date: 2023
  8. By: Timu, Anne G.; Shee, Apurba; Ward, Patrick S.; You, Liangzhi
    Abstract: Smallholder farmers in low- and medium-income countries lack sufficient access to agricultural production credit that can help them adopt new technologies and improve their farm production. Compared to men, women smallholder farmers face additional social, and economic barriers that further limit their credit access. Bundling agricultural credit with insurance, or risk contingent credit (RCC), provides a mechanism for addressing some of the credit access constraints and reducing credit rationing among smallholder farmers. In this paper, we evaluate the gendered determinants of credit rationing and the gender differences of the effects of RCC innovation on credit uptake decisions. We use three-wave panel data from a randomized control trial (RCT) in Kenya. We find that female-headed households (FHH) are significantly more risk rationed (or demand-side credit constrained) compared to male-headed households (MHH), however, the gender of the household head does not significantly determine the household quantity rationing status (supply-side constrained). We also find that farmers randomly assigned to be offered the RCC are up to four percent more likely to take up credit. RCC’s impacts on credit uptake decisions do not vary with the gender of the household head, however, RCC has a differential positive and significant impact on the credit uptake decisions of farmers that were previously (at baseline) risk rationed. Based on these findings, we suggest that policies should focus on reducing gendered demand-side barriers to credit access, especially among poorer women households. Climate financing innovations such as RCC should also be designed and delivered in a gender-inclusive manner to accommodate women farmers who face time, liquidity, and financial literacy barriers.
    Keywords: smallholders; agricultural production; credit; agricultural technology; gender; insurance; climate resilience; rural finance; risk contingent credit (RCC); credit rationing; KENYA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA
    Date: 2023
  9. By: Alicia Lloro; Ellen A. Merry; Anna Tranfaglia
    Abstract: Many surveys have measured people's financial literacy with a standard set of questions covering interest, inflation, and investment diversification. Results from these surveys have consistently shown that women are less likely than men to answer the financial literacy questions correctly – the so-called financial literacy gender gap.
    Date: 2024–01–02

This nep-cfn issue is ©2024 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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