nep-cfn New Economics Papers
on Corporate Finance
Issue of 2024‒03‒04
six papers chosen by
Zelia Serrasqueiro, Universidade da Beira Interior

  1. Corporate payout policy: are financial firms different? By Emmanuel Caiazzo; Leonardo Gambacorta; Tommaso Oliviero; Hyun Song Shin
  2. Strapped for cash: the role of financial constraints for innovating firms By Bøler, Esther Ann; Moxnes, Andreas; Ulltveit-Moe, Karen Helene
  3. Interest Rate Uncertainty and Firm Decisions By Anne Duquerroy; Klodiana Istrefi; Sarah Mouabbi
  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. Board Gender Diversity And Bank Performance During Covid-19: Did Women Save The Day? By Yuliana Loginova; Maria Semenova
  6. Company Performance and Its Determinants: A Study on New Hoong Fatt Holdings Berhad By Tan Ke Wen, Carmen

  1. By: Emmanuel Caiazzo; Leonardo Gambacorta; Tommaso Oliviero; Hyun Song Shin
    Abstract: It is well documented that financial firms display a larger corporate pay-out propensity than non-financial firms. By using an international sample of listed firms from advanced economies, we show that this difference vanishes after accounting for heterogeneity among corporations in their financial leverage, stock market liquidity and share-ownership by institutional investors. A theoretical model that builds on Acharya et al. (2017) provides a framework to analyze the effect of corporate structure on payout decisions and rationalizes the economic mechanisms behind our empirical results.
    Keywords: corporate payout policy, dividends, financial firms, risk-shifting
    JEL: G21 G35
    Date: 2024–02
  2. By: Bøler, Esther Ann; Moxnes, Andreas; Ulltveit-Moe, Karen Helene
    Abstract: This paper makes use of a reform that allowed firms to use patents as stand-alone collateral, to estimate the magnitude of collateral constraints and to quantify the aggregate impact of these constraints on misallocation and productivity. Using matched firm-bank data for Norway, we find that bank borrowing increased for firms affected by the reform relative to the control group. We also find an increase in the capital stock, employment and innovation as well as equity funding. We interpret the results through the lens of a model of monopolistic competition with potentially collateral constrained heterogeneous firms. Parameterizing the model using well-identified moments from the reduced form exercise, we find quantitatively large gains in output per worker in the sectors in the economy dominated by constrained (and intangible-intensive) firms. The gains are primarily driven by capital deepening, whereas within-industry misallocation plays a smaller role.
    Keywords: intangible capital; patents; credit constraints; misallocation; productivity
    JEL: G32 L25 O34 O47
    Date: 2023–03–14
  3. By: Anne Duquerroy; Klodiana Istrefi; Sarah Mouabbi
    Abstract: We examine the effects of uncertainty regarding the path of interest rates on firms’ decisions in the euro area. In the presence of heightened short-term interest rate uncertainty, firms tend to decrease their future investments and hiring activities. They also adopt a more cautious approach by hoarding cash and cutting dividend payments. Firm heterogeneity is crucial, as the negative effect on future investment is magnified when firms are ex-ante exposed to interest rate risk, face financial constraints or lack hedging strategies. These effects operate mainly through a financing and cash flow channel, highlighting the presence of a Finance-Interest-Rate-Uncertainty multiplier, whereby the effects of this uncertainty are amplified by the presence of financial constraints. Conversely, we find no significant effects of long-term interest rate uncertainty on firm decisions.
    Keywords: Interest Rate Uncertainty, Firm Heterogeneity, Financial Constraints, Rollover Risk, Investment, Employment, Cash Holding, Euro Area
    JEL: E43 E52 E22 G32
    Date: 2024
  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 that 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 merger. Furthermore, unlike voluntary liquidation and merger, macroeconomic conditions influence the likelihood of bankruptcy.
    Keywords: Bankruptcy, Debt financing, Long-term debt, Merger, Outside creditors, Start-up, Voluntary liquidation
    JEL: G33 G34 M13
    Date: 2024–01
  5. By: Yuliana Loginova (National Research University Higher School of Economics); Maria Semenova (National Research University Higher School of Economics)
    Abstract: This paper explores the impact of board gender diversity on bank performance during the COVID-19 crisis. Using data from 87 European banks from 2015 to 2021, we show that the presence of women on bank boards had a positive impact on bank profitability during the COVID-19 crisis. This effect is more pronounced in countries where the morbidity rate is higher. Our results suggest a negative relationship between the women on bank boards and bank credit risk during the pandemic. The impact of women on insolvency risk, however, appears only for banks with relatively large boards.
    Keywords: board gender diversity, COVID-19, bank profitability, credit risk
    JEL: G21 G34 O16
    Date: 2024
  6. By: Tan Ke Wen, Carmen
    Abstract: This study analysis the factors that might affect New Hoong Fatt Holdings Berhad's performance. The objective is to identify the variables, internal as well as external, and the combinations of factors that might influence New Hoong Fatt Holdings Berhad's performance. Regression analysis and statistical methods have been opted for in the current research issue in order to determine the degree of significance of the relationship between each of these variables. When a number of variables are taken into consideration, it is obvious that credit risk, rather than the remaining variables has the most influence over New Hoong Fatt Holdings Berhad's performance. However, while the closure of New Hoong Fatt Holdings Berhad's business in 2020 may have impacted the company's profitability, an analysis of the statistics suggests that the company's good management of credit risk may have also directly impacted its performance.
    Keywords: New Hoong Fatt Holdings Berhad, profitability, performance, ROE, corporate governance.
    JEL: G3
    Date: 2023–12–25

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