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on Corporate Finance |
| By: | Vazirani, Ashish; Bhattacharjee, Titas |
| Abstract: | New venture investment decisions reflect misvaluations as many deserving proposals are rejected, while most invested proposals fail to provide the required financial returns. This suggests that investors overvalue and undervalue investment proposals. We have used the arguments of dual process theory and salience theory to explain the cause of misvaluations. An experimental setup is used where the treated group is given time constraints to make the investment. Results show that investors under time constraints overvalue investment proposals, while reference-based comparison of salient information signals results in undervaluation. Results further show a significant impact of time constraints on the reference for comparison of proposals. Investors under time constraints consider only the last proposal as a reference to compare salient information signals, in contrast, they consider information from multiple previous proposals in the absence of time constraints. This study provides the specific source of misvaluations as per the context of overvaluation and undervaluation of new venture investment proposals. |
| Date: | 2024–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:az4yr&r=cfn |
| By: | Issam Samiri |
| Abstract: | I propose a general equilibrium model with endogenous defaults and a banking sector operating under a Value-at-Risk constraint. Analytical examination reveals that (a) the Value-at-Risk rule introduces a risk premium on bank lending, (b) this risk premium fluctuates with the business cycle, amplifying the impact of real shocks, and (c) bank leverage also fluctuates with real shocks, but its cyclical behaviour depends on the shocks' effects on default expectations, credit demand, and the bank's balance sheet. Assuming TFP shocks as the sole exogenous source of fluctuation, the model quantitatively replicates realistic fluctuations in banks' leverage, equity, lending, and credit spreads. |
| Keywords: | RBC, Value-at-Risk, bank leverage, Credit Spreads, Financial Frictions |
| JEL: | E13 E32 E44 G21 G32 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:555&r=cfn |
| By: | Cecilia R. Caglio; Adam Copeland |
| Abstract: | A classic question for U.S. financial firms is whether to organize themselves as entities that are affiliated with a bank-holding company (BHC). This affiliation brings benefits, such as access to liquidity from other affiliated entities, as well as costs, particularly a larger regulatory burden. This post highlights the results from a recent Staff Report that sheds light on this tradeoff. This work uses confidential data on the population of broker-dealers to study the benefits of being affiliated with a BHC, with a focus on the global financial crisis (GFC). The analysis reveals that affiliation with a BHC makes broker-dealers more resilient to the aggregate liquidity shocks that prevailed during the GFC. This results in these broker-dealers being more willing to hold riskier securities on their balance sheet relative to broker-dealers that are not affiliated with a BHC. |
| Keywords: | broker-dealers; shadow banking; liquidity risk; repo market |
| JEL: | G2 G21 G23 |
| Date: | 2024–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:98032&r=cfn |
| By: | Hoang Hiep Nguyen (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Jean-Laurent Viviani (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Sami Ben Jabeur (ESDES - ESDES, Lyon Business School - UCLy - UCLy - UCLy (Lyon Catholic University), UCLy - UCLy (Lyon Catholic University)) |
| Abstract: | Recently, ensemble-based machine learning models have been widely used and have demonstrated their efficiency in bankruptcy prediction. However, these algorithms are black box models and people cannot understand why they make their forecasts. This explains why interpretability methods in machine learning attract attention from many artificial intelligence researchers. In this paper, we evaluate the prediction performance of Random Forest, LightGBM, XGBoost, and NGBoost (Natural Gradient Boosting for probabilistic prediction) for French firms from different industries with the horizon of 1-5 years. We then use Shapley Additive Explanations (SHAP), a model-agnostic method to explain XGBoost, one of the best models for our data. SHAP can show how each feature impacts the output from XGBoost. Furthermore, single prediction can also be explained, thus allowing black box models to be used in credit risk management. |
| Keywords: | Shapley additive explanations, Explainable machine learning, Bankruptcy prediction, Ensemble-based model, XGBoost |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04223161&r=cfn |
| By: | Hanis Diyana Kamarudin ("School of Information Science, College of Computing, Informatics, and Mathematics, UiTM Selangor Branch, Puncak Perdana Campus, 40150 Shah Alam, Selangor, Malaysia " Author-2-Name: Author-2-Workplace-Name: "School of Information Science, College of Computing, Informatics, and Mathematics, UiTM Selangor Branch, Puncak Perdana Campus, 40150 Shah Alam, Selangor, Malaysia " Author-3-Name: Author-3-Workplace-Name: "School of Information Science, College of Computing, Informatics, and Mathematics, UiTM Selangor Branch, Puncak Perdana Campus, 40150 Shah Alam, Selangor, Malaysia " Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | "Objective - This study assesses the effectiveness of Business Continuity Plans (BCPs) and records management practices within small and medium-sized enterprises (SMEs) in Selangor. The primary objective is to determine the integration of records management into BCPs and identify the current development stage in SMEs' processes. Methodology/Technique - The research comprehensively examines Selangor SMEs' BCPs and records management practices. This multiple case study investigated the extent to which Small and Medium Enterprises (SMEs) in Selangor implemented business continuity management. Through document reviews and interviews with business owners and continuity managers, the study examined the integration of records management within continuity plans and assessed the impact on overall organizational resilience. Finding - The research excluded SMEs outside Selangor, focusing on managerial-level respondents from the records and information system department. The findings reveal a varied landscape, with some SMEs having well-established processes while others are still in the developmental stage. Notably, the research emphasizes the importance of identifying vital records within organizations to maintain essential operations and comply with regulatory requirements. Novelty - The study also underscores the need for regular BCP revisions and effective communication strategies to disseminate plans to employees. Moreover, it highlights the significance of including expertise in BCPs to enhance disaster preparedness and mitigation efforts. Type of Paper - Research" |
| Keywords: | Business continuity plans (BCPs), records management practices, small and medium-sized enterprises (SMEs), integration of BCPs and records management and vital records. |
| JEL: | M10 M13 M19 |
| Date: | 2024–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:gjbssr643&r=cfn |
| By: | Kathryn Bankart; Xolani Sibande; Konstantin Makrelov |
| Abstract: | Corporate credit growth remains strong despite tighter monetary policy and deteriorating global and domestic conditions. Current drivers of corporate credit, particularly general loans and advances, are normalising to pre-COVID levels as the need for working capital has increased, investment has picked up in particular sectors of the economy such as agriculture and passthrough from monetary policy actions has been limited. A simple econometric model suggests that investment is a major driver of corporate credit growth in the long-run, while lending spreads and government borrowing rates are important determinants in the short-run. |
| Date: | 2023–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:oboens:11047&r=cfn |
| By: | Bucher-Koenen, Tabea; Janssen, Bennet; Knebel, Caroline; Tzamourani, Panagiota |
| Abstract: | We examine financial literacy in Germany and its relevance for financial well-being. Using data from the Panel on Household Finances collected in 2021, we show that about 62% of German households answer the Big Three financial literacy questions correctly. Those with lower education, who are out of the labor force, women, and those living in East Germany have lower levels of financial literacy. Identifying groups with lower financial literacy and developing strategies to reach them and enhance their abilities should therefore be an integral part of the German national financial literacy strategy. Financial literacy is linked to financial well-being: we document that those with higher financial literacy have a higher stock market participation rate and are less likely to report financial difficulties. |
| Keywords: | Financial knowledge, financial well-being, inflation, investment behavior |
| JEL: | G53 D14 G51 I3 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:289445&r=cfn |
| By: | Hamza Nidaazzi (UCA - Université Cadi Ayyad [Marrakech]); Hind Hourmat Allah (UCA - Université Cadi Ayyad [Marrakech]) |
| Abstract: | Behavioral finance, a thriving domain within management science, is garnering increasing interest. However, the concept of family firms' financial conservatism in Morocco has been relatively unexplored. To facilitate the initiation of a discourse on this issue, we found it opportune to delve into and analyze this aspect. In order to open a debate on this problem, the aim of this paper is to explore and analyze the junction that can exist between financial strategy and conservatism in the family business. Using a qualitative study, this paper explores the points of view, perceptions, and behaviors of conservative managers and owners of twelve Moroccan Family firms. In contrast to the existing literature, results show that conservative family firms are profitable, have high levels of cash flow, and face lower costs in times of crisis. Our analyses also shows that financial conservatism is only threatening if it is forced due to financial constraints. |
| Abstract: | La finance comportementale, un domaine prolifique en sciences de gestion, suscite un intérêt croissant. Cependant, le concept du conservatisme financier des entreprises familiales au Maroc reste peu exploré. Et c'est pour contribuer au lancement du débat sur cette problématique que nous avons jugé opportun d'explorer et d'analyser cette question. L'objectif de ce papier consiste à analyser la jonction qui peut exister entre la stratégie financière et la culture conservatrice de l'entreprise familiale. En utilisant une étude qualitative, le papier explore les points de vue, les perceptions et les comportements des managers et propriétaires de douze entreprises familiales marocaines. Contrairement à la littérature, les résultats montrent que les entreprises familiales conservatrices sont rentables, disposent d'une grande liquidité et qu'elles étaient confrontées à un coût moindre en cas de crise. Nos analyses montrent également que le conservatisme financier n'est menaçant que s'il est forcé en raison de contraintes financières. |
| Keywords: | Family Business, Conservatism, Financial Policy, Behavioral Finance, Sustainability, Entreprise Familiale, Conservatisme, Politique Financière, Finance Comportementale, Pérennité. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04518830&r=cfn |
| By: | Ogawa, Shogo |
| Abstract: | Inventory dynamics play a significant role in business cycles, as inventory tends to be more sensitive to excess demand fluctuations than it is to production. This study addresses the decision-making problem of firms and households under possible quantity-constrained trade using a simple model based on Keynesian unemployment in disequilibrium economics. In the presented model, production and consumption are determined by the firm and household, respectively. In particular, they solve intertemporal optimizations under expected future constraints that depend on current states such as sales and income. Their independent decisions cause disequilibrium in goods: the gaps between production and sales and between planned and actual trade. While the former gap is buffered by inventory, we use United States data to show that the existence of inventory holdings cannot moderate the disequilibrium. Our simple model contributes to the body of knowledge on this topic as it endogenizes the firm's objective value of the inventory--sales ratio in Metzlerian dynamics, reproduces the qualitative inventory dynamics, and reveals how stock disequilibrium affects flow disequilibrium dynamics. |
| Keywords: | Inventory cycle; Metzlerian dynamics; Endogenous business cycle; Quantity-constrained trade |
| JEL: | E12 E32 |
| Date: | 2024–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120629&r=cfn |