|
on Corporate Finance |
| By: | HONDA, Tomohito; ONO, Arito; UESUGI, Iichiro; YASUDA, Yukihiro |
| Abstract: | In this study, we use a detailed and comprehensive dataset on out-of-court debt workouts for distressed small and medium-sized enterprises in Japan to describe characteristics of these workouts. We then investigate their determinants and the subsequent effects on firm performance. We find that most debt restructurings involve a rescheduling (deferral of debt repayment). In contrast, firms infrequently use more drastic measures, some of which reduce their debt overhang. For the determinants, firms with operating surpluses and negative net worth are more likely to take a drastic measure to restructure debt, which is consistent with the debt overhang theory. Firms with operating surpluses are more likely to adopt measures to hold management responsible and to use new outside executives. For performance, firms that use drastic debt restructurings have better gross sales and profits. Firms that use restructuring to hold management more responsible reduce employment and improve profits. These results indicate that firms that use measures to reduce their debt overhang and limit their moral hazard improved their performance. |
| Keywords: | out-of-court debt workouts, debt overhang, moral hazard, zombie firms |
| JEL: | G21 G33 G34 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:hit:rcesrs:dp24-2&r= |
| By: | Yaru Ren (Shenzhen Univerisity [Shenzhen]); Lin Li (Audencia Business School, Shenzhen Audencia Business School, Shenzhen University); Wilson H.S. Tong (POLYU - The Hong Kong Polytechnic University [Hong Kong]); Peter Lam (UTS - University of Technology Sydney) |
| Abstract: | Studies on corporate takeovers are voluminous but typically assume that acquirers are not financially constrained. We show that acquirers' free cash flow (FCF) levels have significant impacts on their takeover activities and consequences. Acquirers with low FCF, despite their high levels of cash holdings, tend to pay in stocks rather than cash. The targets acquired by low-FCF acquirers are of inferior quality relative to those obtained by high-FCF acquirers. After acquisition, low-FCF acquirers seriously underperform their peers, but this underperformance does not exist in high-FCF acquirers. Further, the financial leverage of low-FCF acquirers increases sharply following acquisitions, and a significant number of them become bankrupt or are acquired by other firms. Our evidence suggests the importance of acquirer's financial position to sustain the normal operation of the combined entity following the deals. Firms with financial constraints, therefore, should be conservative in advancing takeovers. |
| Keywords: | Corporate takeover Free cash flow Agency problem Financial constraints JEL: G33 G34, Corporate takeover, Free cash flow, Agency problem, Financial constraints JEL: G33, G34 |
| Date: | 2024–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04562214&r= |
| By: | Anabela Marques Santos; Michele Cincera; Giovanni Cerulli |
| Abstract: | The study assesses the impact of eight sources of financing (internal funds, bank loans, credit lines, trade credit, equity, grants, leasing and factoring) on innovation and firm growth. It provides evidence that not all external financing sources have the same impact on innovation and growth. Output additionality on turnover growth seems higher for equity financing. In contrast, employment growth appears to be more associated with financing sources linked to increased fixed assets or the solving of liquidity problems. The number of financing instruments used together also seems to matter, revealing the existence of complementarities. |
| Keywords: | Europe; Financing; Growth; Innovation |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/372408&r= |
| By: | Nina Boyarchenko; Leonardo Elias |
| Abstract: | Firms’ access to credit is a crucial determinant of their investment, employment, and overall growth decisions. While we usually think of their ability to borrow as determined by aggregate credit conditions, in reality firms have a number of markets where they can borrow, and conditions can vary across those markets. In this post, we investigate how the composition of debt instruments on U.S. firms’ balance sheets has evolved over the last twenty years. |
| Keywords: | corporate credit; bond market; debt maturity |
| JEL: | G32 G15 F30 F44 |
| Date: | 2024–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:98277&r= |
| By: | Pauline Johannes; Vivien Lefebvre (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg) |
| Abstract: | Our paper investigates vertical agency conflicts1 that result from the separation of ownership and control in privately held firms. Vertical agency conflicts can lead to vertical agency costs resulting from bonding costs, monitoring costs, and residual losses. More specifically, we focus on the roles of firm size and corporate reporting requirements in the level of these costs. We demonstrate that vertical agency costs are higher in smaller, privately held firms because shareholders have less monitoring capacity and limited access to the labor market. Furthermore, vertical agency costs in smaller firms are amplified in countries characterized by relatively weaker reporting requirements because shareholders have less information available to assess managers' actions. We suggest for the first time that firm size and strength of auditing and reporting requirements are essential to understanding agency costs' magnitude in privately held firms. Our analysis also offers a more comprehensive understanding of the factors that explain agency costs in privately held firms. Thus, this study poses important implications for public policy, as disclosure requirements are a major issue for many countries. |
| Date: | 2024–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04568173&r= |
| By: | Okan Akarsu; Altan Aldan; Huzeyfe Torun |
| Abstract: | Financial constraints may hamper firm exports since firms may have to bear export-related costs before they obtain export revenues. Hence, export credits are widely used around the world to mitigate the negative effects of financial constraints. This paper focuses on a specific type of subsidized export credit, namely the export rediscount credit scheme implemented by the Central Bank of the Republic of Türkiye (CBRT), and investigates whether credit-using firms' exports increase more than they do for firms that do not use this credit in the short run without implying a causal relationship. To achieve this, we combine four datasets: the firm-level monthly data on rediscount credit, firm-level monthly data on exports, firms’ annual balance sheet and income statements, and firm-level annual data on employment. We find that receiving rediscount credit is positively correlated with export growth in the short run. This correlation is robust to using alternative measures of credit use, such as a discrete measure of receiving the rediscount credit and the amount of credit. Second, we discover that the correlation between the use of rediscount credits and export growth is stronger among small and medium-sized enterprises (SMEs). Third, we investigate whether the association between rediscount credits and firm exports is non-linear and find that exports increase less proportionately for a higher level of rediscount credits. Finally, we find that both FX- and TL-denominated credits are positively correlated with exports. |
| Keywords: | Rediscount credit, Exports, Türkiye |
| JEL: | D22 F14 O16 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2407&r= |
| By: | Helen Laubenstein; Xavier Leflaive |
| Abstract: | This paper examines three sets of issues related to strategic investment planning and financing for water: i) Investment planning in an uncertain context; ii) The benefits of supplementing project level planning with a consideration for pathways of investments; iii) Facilitating access to a wider range of financing sources, most importantly commercial finance. Together these issues can enhance the performance of water-related finance, making the best use of available finance and assets, in a context marked by high-level of (public and private) debt and rising cost of finance. This is the first in a sub-set of four working papers within the Environment Working Paper series destined to support the further implementation of the economic pillar of the Water Framework Directive. The four papers are best read in combination and provide lessons which are relevant beyond the European Union. |
| Keywords: | financing strategy, infrastructure finance, investment pathway, investment planning, water finance |
| JEL: | H23 H54 H76 O21 Q21 Q25 Q28 Q53 Q58 |
| Date: | 2024–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:237-en&r= |
| By: | Montagnoli, Alberto (University of Sheffield); Taylor, Karl (University of Sheffield) |
| Abstract: | The aim of this paper is twofold. Firstly, we investigate the determinants of individual's attitudes towards investing responsibly, based upon Environmental, Social, and Governance (ESG) considerations. Secondly, we look at how important ESG considerations are, over and above socio-economic characteristics including financial literacy and risk attitudes, in explaining whether individuals hold shares and/or equity, and the amount invested in financial assets. Using the UK Financial Lives Survey data which is collected by the Financial Conduct Authority, our analysis reveals that, firstly, individual characteristics have little explanatory power in terms of explaining responsible investments, except for: education; gender; age; and financial literacy. Secondly, those individuals who are interested in future responsible investments are approximately 7 percentage points more likely to hold shares/equity, and have around 77% more money invested in financial assets (i.e. just under twice the amount). We also undertake several sensitivity checks including the role of selection on unobservables and the extent to which the exogeneity assumption regarding interest in future responsible investments can be relaxed, as well as matching estimation techniques to move beyond mere statistical associations. |
| Keywords: | ESG attitudes, financial literacy, portfolio investment |
| JEL: | D81 G11 D14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16952&r= |