nep-cfn New Economics Papers
on Corporate Finance
Issue of 2024‒02‒26
fifteen papers chosen by
Zelia Serrasqueiro, Universidade da Beira Interior

  1. The signaling value of legal form in debt financing By Bracht, Felix; Mahieu, Jeroen; Vanhaverbeke, Steven
  2. Asset Life, Leverage, and Debt Maturity Matching By Thomas Geelen; Jakub Hajda; Erwan Morellec; Adam Winegar
  3. The Role of Long-Term Contracting in Business Lending By Phoebe Tian
  4. Outside or inside the firm? The impact of debt financing on the exit routes of start-up firms By HONJO, Yuji; IWAKI, Yunosuke; KATO, Masatoshi
  5. Precautionary Debt Capacity By Aydin, Deniz; Kim, Olivia S.
  6. Corporate Governance and Its Determinants: A Study of Pharmaniaga Sdn Bhd By Azmi, Siti Nor Aisyah
  7. Board Structure in Emerging Markets : A Simultaneous Equation Modeling By IWASAKI, Ichiro; MA, Xinxin; MIZOBATA, Satoshi
  8. Corporate Governance and Its Determinants : A study on Apex Healthcare Berhad Malaysia By Yap, Chia Ying
  9. Business Restructuring and Corporate Governance: Evidence from survey data By TAKAHASHI Hidetomo; XU Peng
  10. A Study on KPJ Healthcare Sdn Bhd in Malaysia Performance and Its Determinants. By AZMI, NURUL NAJWANIE FATIEHAH
  11. Capital, Ideas, and the Costs of Financial Frictions By Pablo Ottonello; Thomas Winberry
  12. Empirical investigation of the Fintech and financial literacy nexus: small business managers' insights in Cameroon By Prince HIKOUATCHA; Alain G. TAGNE FOKA; Armand D. FOSSI; Simplice A ASONGU
  13. Dividend Policy and Earnings Quality: A Curvilinear Relationship By Ghassen Allani; Yves Mard
  14. Firms' intellectual property ownership aggressiveness in university–industry collaboration projects: Choosing the right governance mode By Gretsch, Oliver; Tietze, Frank; Kock, Alexander
  15. Interdisciplinary Approach to Corporate Governance Structure By Anatoliy Kostruba

  1. By: Bracht, Felix; Mahieu, Jeroen; Vanhaverbeke, Steven
    Abstract: We examine if a startup's legal form choice is used as a signal by credit providers to infer its risk to default on a loan. We propose that choosing a legal form with low minimum capital requirements signals higher default risk. Arguably, small relationship banks are more likely to use legal form as a screening device when deciding on a loan. Using data from Orbis and the IAB/ZEW Start-up Panel for a sample of German firms, we find evidence consistent with our hypotheses but inconsistent with predictions of several competing explanations, including differential demand for debt or growth opportunities.
    Keywords: legal form; minimum capital requirements; signaling; access to debt; financial constraint
    JEL: D80 G30 M40
    Date: 2023–04–17
  2. By: Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (HEC Montreal - Department of Finance); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute); Adam Winegar (BI Norwegian Business School)
    Abstract: Capital ages and must eventually be replaced. We propose a theory of financing in which firms borrow to finance investment and deleverage as capital ages to have enough financial slack to finance replacement investments. To achieve these dynamics, firms issue debt with a maturity that matches the useful life of assets and a repayment schedule that reflects the need to free up debt capacity as capital ages. In the model, leverage and debt maturity are negatively related to capital age while debt maturity and the length of debt cycles are positively related to asset life. We provide empirical evidence that strongly supports these predictions.
    Keywords: capital age, asset life, maturity matching, debt cycles, maturity cycles
    JEL: E32 G31 G32
    Date: 2024–01
  3. By: Phoebe Tian
    Abstract: This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. I develop and estimate a dynamic model where firms repeatedly interact with the same lender. All loans are short-term. Collateral can be used to deter a strategic default by a firm, but the lender cannot recover the full value of the collateral in the case of a default. The endogenous contract terms—including interest rates, loan size and collateral—reflect a firm’s probability of default in equilibrium. Learning drives the dynamics of contract terms because a firm’s profitability type is unknown. Long-term contracts improve welfare mainly by mitigating the incentives for a firm to default.
    Keywords: Financial institutions
    JEL: D83 D86 G21 L14 L26
    Date: 2024–02
  4. By: HONJO, Yuji; IWAKI, Yunosuke; KATO, Masatoshi
    Abstract: This study explores the impact of initial debt financing on the survival of start-up firms by identifying three types of exit routes: bankruptcy, voluntary liquidation, and merger. Using a discrete-time duration model for Japanese start-up firms, we examine how debt financing affects the time from founding to exit. We find that firms that initially rely on debt financing from outside creditors are more likely to go bankrupt, and long-term debt, rather than short-term debt, is positively associated with the time to exit due to bankruptcy. In contrast, such firms are less likely to liquidate voluntarily, and long-term debt is negatively associated with the time to voluntary liquidation. Moreover, they are less likely to exit via merger, and long-term debt is negatively associated with the time to exit via mergers. Furthermore, macroeconomic conditions influence the likelihood of bankruptcy, unlike voluntary liquidation and merger.
    Keywords: Bankruptcy, Debt financing, Long-term debt, Merger, Outside creditors, Start-up
    Date: 2024–01
  5. By: Aydin, Deniz; Kim, Olivia S.
    Abstract: Firms with ample financial slack are unconstrained... or are they? In a field experiment that randomly expands debt capacity on business credit lines, treated small-and-medium enterprises (SMEs) draw down 35 cents on the dollar of expanded debt capacity in the short-run and 55 cents in the long-run despite having debt levels far below their borrowing limit before the intervention. SMEs direct new borrowing to financing investment gradually over time and do not exhibit a measurable impact on delinquencies. Heterogeneity analysis by the risk of being at the credit line limit supports the SME motive to preserve financial flexibility.
    Keywords: field experiment, RCT, finance, investment, debt structure
    Date: 2024
  6. By: Azmi, Siti Nor Aisyah
    Abstract: This study focusses at the aspects that can impact the outcomes of Pharmaniaga Berhad. The goal is to discover internal and external variables, as well as the combination of factors that may have an impact on the performance of Pharmaniaga Berhad. To determine the degree of significance of the connection between these variables, methods such as statistical and regression techniques have opted in this research case. When certain variables are considered, it becomes evident that return of equity (ROE) compared to other determinants, has the most significant influence on Pharmaniaga Berhad’ s performance. Nevertheless, even though the Pharmaniaga Berhad financial issue in 2022 possibly had an impact in the company subsequent slump in their performance but it is highlight that the financial issue is not coming from the any fraudulent activities.
    Keywords: Pharmaniaga Sdn Bhd (Malaysia), performance, profitability, Return of Assets (ROA), corporate governance
    JEL: G3
    Date: 2023–12–30
  7. By: IWASAKI, Ichiro; MA, Xinxin; MIZOBATA, Satoshi
    Abstract: This paper unravels the board structure of 42, 146 firms in China and 21 European emerging markets and empirically examines its determinants. Structural estimation of simultaneous equation models that endogenize board size, outside board chairmanship, and board independence produced evidence supporting our predictions about potential factors that determine these three variables, which are based on previous studies of developed economies. However, we found striking differences in the combination of factors that strongly affect board structure between China and European emerging markets and between public and private companies. Furthermore, the empirical results in this paper suggest that the close interdependence among board components requires analytical consideration.
    Keywords: board structure, emerging market firms, simultaneous equation modeling, China, Eastern Europe
    JEL: D22 G32 G34 K22 L22 P34
    Date: 2024–02
  8. By: Yap, Chia Ying
    Abstract: The performance of a company is influenced by the internal and external factors and these factors will cause inefficient management. This research investigates the relationship or the impact of the internal factors on the performance of the company by using return on asset (ROA) as the dependent variable as well as the relationship of the ROA with the external factors in Apex Healthcare Berhad (Malaysia). The method of this study is using statistical and regression techniques in determining the significance of ROA with these variables. In conducting the regression progress, the data of the Apex Healthcare Berhad (Malaysia) from 2018 to 2022 in the annual report will be extracted and key in excel to calculate the relevant ratios and to run the regression models. According to the findings and analysis, it found that the return on equity (performance) has the most significant influence on Apex Healthcare Berhad’s (Malaysia) annual profit and financial performance and the current ratio of Apex Healthcare Berhad (Malaysia) is not stable as the ratio has fluctuated over the 5 years.
    Keywords: Apex Healthcare Berhad (Malaysia), profitability, performance, ROA, corporate governance
    JEL: G3
    Date: 2023–12–30
  9. By: TAKAHASHI Hidetomo; XU Peng
    Abstract: Utilizing a unique questionnaire survey, we investigate difficulties in actual exit and organizational weaknesses in dealing with exit. Less profitable companies are more likely to answer that they have difficulties in making decisions related to downsizing and exit due to a lack of criteria. The higher the foreign investor ownership ratio and the higher the leverage, the less likely that firms answer that the internal procedures for deciding divestment lack clarity. Market-to-book ratio and the presence of a labor union increase problems associated with coordination with employees and with succession of employment after a sale. Interestingly, cash holdings per lifetime employee alleviate the labor problem concerning divestment. In terms of organization, small firms, high valuable firms, and cash rich firms are less likely to have criteria for evaluating divestment. Executive ownership significantly increases the likelihood of criteria but increasing size of board of directors decreases the existence of criteria. Likewise, small firms, high valuable firms, and cash rich firms tend not to have a process for evaluating divestment. Firms with high executive ownership or high foreign investors’ ownership are more likely to have procedures in place for evaluating downsizing and exit in response to such proposals. The effect of outside directors on the criteria and process for exit decision making as well as on issues involved in actual exit is insignificant.
    Date: 2024–01
    Abstract: This research looks at the aspects that can impact the outcomes of KPJ Healthcare Sdn Bhd. The goal is to discover internal and external variables, as well as the combination of factors that may have an impact of the performance of KPJ Healthcare Sdn Bhd. To determine the degree of significance of the connection between these variables, methods such as statistical and regression techniques have opted in this research case. When certain variables are considered, it becomes evident that operational risk instead of other determinants has the most significant influence on KPJ Healthcare Sdn Bhd performance. However, despite the fact that the KPJ Healthcare Sdn Bhd controversy in 2022 possibly reveals that the corporation’s poor operational risk management might directly impact their performance as well.
    Keywords: KPJ Healthcare Sdn Bhd, profitability, performance, ROE, corporate governance
    JEL: G3
    Date: 2023–12–30
  11. By: Pablo Ottonello; Thomas Winberry
    Abstract: We study the role of financial frictions in determining the allocation of investment and innovation. Empirically, we find that firms are investment-intensive when they have low net worth but become innovation-intensive as they accumulate more net worth. To interpret these findings, we develop an endogenous growth model with heterogeneous firms and financial frictions. In our model, low net worth firms are investment-intensive because their returns to capital are high. Financial frictions slow the rate at which firms exhaust the returns to capital and shift towards innovation. Calibrating to the US economy, we find that the resulting lower growth implies large GDP losses even though capital misallocation is small. In other words, financial markets effectively fund the implementation of existing ideas, but do not adequately fund the discovery of new ideas. If innovation has positive spillovers, a planner would not only raise innovation but also lower investment expenditures among constrained firms.
    JEL: E22 E23 G3 O30 O4
    Date: 2024–01
  12. By: Prince HIKOUATCHA (University of Dschang, Dschang, Cameroon); Alain G. TAGNE FOKA (niversity of Dschang, Dschang, Cameroon); Armand D. FOSSI (niversity of Dschang, Dschang, Cameroon); Simplice A ASONGU (Johannesburg, South Africa)
    Abstract: Recent and ongoing advancements in the field of ICT have led to the introduction of increasingly diversified financial products, and their use is improving people's level of financial knowledge and skills. This article aims at assessing the effect of Fintech on the level of financial literacy of small business’ managers in Cameroon. To this end, information was gathered using a questionnaire from 209 small business managers in Cameroon. Descriptive statistics, Principal Component Analysis (PCA), and multiple linear regression are used. Results lead to two main conclusions. On the one hand, unlike knowledge of their existence, the frequency of use of Fintech tools is better able to contribute to improving financial literacy levels overall. On the other hand, specifically, this result is more important when it comes to competence and self-confidence in managing financial affairs. As a result, increasing the utilization of financial technology instruments in companies is imperative for efficiency.
    Keywords: Financial Skill; Financial Knowledge; Financial literacy; Fintech; Small business
    JEL: G53 M2 O33
    Date: 2023–01
  13. By: Ghassen Allani (UPHF - Université Polytechnique Hauts-de-France, LARSH - Laboratoire de Recherche Sociétés & Humanités - UPHF - Université Polytechnique Hauts-de-France - INSA Hauts-De-France - INSA Institut National des Sciences Appliquées Hauts-de-France - INSA - Institut National des Sciences Appliquées); Yves Mard (CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020])
    Abstract: This paper examines the impact of dividend policy on earnings quality in the French context over the period 1994-2018. Using four measures of earnings quality, we find an inverted U-shaped relationship between dividend level and earnings quality. Dividend level positively influences earnings quality up to a certain payout level. Beyond this threshold, the dividend increase is detrimental to earnings quality. We also observe that the decrease in earnings persistence observed for high values of dividend ratios is explained by earnings management. Moreover, we find that the curvilinear relationship between dividend level and earnings quality is moderated for large firms and firms with volatile dividends. Our results in the French context extend the existing literature and reconcile the mixed results in previous research.
    Keywords: Dividend policy, Earnings quality, Curvilinear relationship
    Date: 2024
  14. By: Gretsch, Oliver; Tietze, Frank; Kock, Alexander
    Abstract: Intellectual property (IP) ownership aggressiveness constitutes an organization's strategic stance that prioritizes its IP protection. An organization thus pursues a rigid approach to protect its background IP and strives for exclusive ownership of the foreground IP that results from collaborative projects. This paper investigates how firms' IP ownership aggressiveness influences university–industry collaboration (UIC) project success and examines if the relationship is contingent on the governance modes that firms employ in UICs, especially the intensity of contract formality and shared governance. Analysing survey data from UIC projects of medium‐sized to large firms covering four industries, we find that the levels of contract formality and shared governance moderate the effect of firms' IP ownership aggressiveness on project success. Strong contract formality leads to a negative relationship between firms' IP ownership aggressiveness and UIC project success. Conversely, if firms apply strong shared governance, the relationship between IP ownership aggressiveness and UIC project success is positive. Given firms' strategic approach to protect background IP and claim ownership of foreground IP, these results have implications for UIC managers when selecting governance modes to best support UIC project success.
    Date: 2024–01–26
  15. By: Anatoliy Kostruba (UP1 - Université Paris 1 Panthéon-Sorbonne)
    Abstract: The scientific publication analyses the interdisciplinary concept of corporate governance, thereby illuminating different aspects of this phenomenon. Three interconnected aspects are observed: corporate governance as a management category, its social context and its legal implications. Examining each component in isolation from the others serves to limit the corporation's functionality to its applied value in the social arena. An assessment of corporate governance as behavioural models, considering representation, efficiency, growth, financial structure and attitude toward stakeholders, enables the depersonalisation of organisational unity, a defining characteristic of any legal entity. Through an interdisciplinary approach, we demonstrate how corporate management functions to organise a corporation's activities by influencing the subjects of management in microeconomic processes and their interaction with one another, ultimately ensuring optimal socioeconomic viability of the corporation within the macroeconomic environment.
    Abstract: La publication scientifique analyse le concept interdisciplinaire de gouvernance d'entreprise, éclairant ainsi différents aspects de ce phénomène. Trois aspects interconnectés sont observés : la gouvernance d'entreprise en tant que catégorie de gestion, son contexte social et ses implications juridiques. Examiner chaque composante indépendamment des autres sert à limiter la fonctionnalité de l'entreprise à sa valeur appliquée dans le domaine social. Une évaluation de la gouvernance d'entreprise en tant que modèles comportementaux, prenant en compte la représentation, l'efficacité, la croissance, la structure financière et l'attitude envers les parties prenantes, permet de dépersonnaliser l'unité organisationnelle, caractéristique déterminante de toute entité juridique. Grâce à une approche interdisciplinaire, nous démontrons comment la gestion d'entreprise fonctionne pour organiser les activités d'une entreprise en influençant les sujets de gestion dans les processus microéconomiques et leur interaction les uns avec les autres, garantissant finalement une viabilité socio-économique optimale de l'entreprise dans l'environnement macroéconomique.
    Keywords: Corporation, Corporate governance, Board of directors, Shareholders, Legal entities, Ownership, Management Boards, Legal entities of commercial law, Kostruba, corporate law, Gouvernance d'entreprise, Actionnaires majoritaires et minoritaires, Personnes morales corporatives, Propriété, Direction d'entreprise, Société Anonyme SA, Société
    Date: 2024–01–20

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.