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on Corporate Finance |
| By: | Vivien Lefebvre (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg) |
| Keywords: | Potential slack zero-debt firms performance SMEs, Potential slack, zero-debt firms, performance, SMEs |
| Date: | 2023–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04585954&r= |
| By: | Manthos Delis (Audencia Business School); Iftekhar Hasan (Fordham University [New York]); Thomas To (The University of Sydney); Eliza Wu (The University of Sydney) |
| Abstract: | Bank lobbying has a bitter taste in most forums, ringing the bell of preferential treatment of big banks from governments and regulators. Using corporate loan facilities and hand-matched information on bank lobbying from 1999 to 2017, we show that lobbying banks increase their borrowers' overall performance. This positive effect is stronger for opaque and credit-constrained borrowers, when the lobbying lender possesses valuable information on the borrower, and for borrowers with strong corporate governance. Our findings are consistent with the theory positing that lobbying can provide access to valuable lender-borrower information, resulting in improved efficiency in large firms' corporate financing. |
| Keywords: | JEL classification: D72 G21 G30 Bank lobbying Firm performance Syndicated loans Information-transmission theory Opaque firms, JEL classification: D72, G21, G30 Bank lobbying, Firm performance, Syndicated loans, Information-transmission theory, Opaque firms |
| Date: | 2024–05–23 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04585664&r= |
| By: | Elisa Rodepeter; Christoph Gschnaidtner; Hanna Hottenrott |
| Abstract: | Big Data (BD) is becoming widely available and manageable. This raises the question of whether Big Data Analytics (BDA) in companies leads to better decision-making and hence performance. Based on a large, representative set of start-ups in Germany, we study the adoption of BDA among small and young ventures and analyze its economic effects using various short- and longer-term performance measures. We investigate the effect of adopting BDA on the new ventures’ cost structure, sales, profits, survival rate, growth, and their probability of receiving Venture Capital (VC) financing while taking into account fac- tors that drive BDA adoption. Our findings, however, show that using BDA does not lead to an immediate competitive advantage in terms of the classical short-term performance measures. BDA adoption is rather associated with greater sales/profit uncertainty, higher (personnel) costs, and a higher probability of failure. Yet, the increased risk of adopt- ing BDA is compensated by a prospect of higher long-term performance conditional on survival. BDA-adopting start-ups perform better than comparable ones when considering longer-term performance measures such as their growth and their ability to secure VC. |
| Keywords: | Big data, Innovation, Productivity, Start-ups, Survival, Venture capital |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:bav:wpaper:232_rodepeter_et_al&r= |
| By: | Fabian Alex |
| Abstract: | Using the modelling framework of Stiglitz & Weiss (1981), we show that – perhaps surprisingly – there is no influence of projects’ riskiness on the capital market equilibrium. The savings interest rate fully determines the amount of credit rationing and the nature of an equilibrium (adverse selection, two-prices etc.). This rate is, in turn, fully determined by the relative probabilities of success of firms’ projects (and, thus, repayment of their debt). Hence, making capital markets overall “less risky†, which may for example be the case when financial markets become greener, does not alle- viate concerns of asymmetric information. The result holds both for cases of hidden information and for those of hidden actions. |
| Keywords: | Asymmetric Information, Financial Markets, Green Loans, Hidden Information, Hidden Action, Project Risk |
| JEL: | D82 G14 G21 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:bav:wpaper:235_fabian_alex&r= |
| By: | Philipp Krug; Dominika Langenmayr |
| Abstract: | In many OECD countries, family firms face lower or no succession taxes if they fulfill continuation requirements. We study the effects of such preferential treat- ment in a two-generation model. Preferential treatment of continued firms leads to more entrepreneurship and higher wages, as entrepreneurs invest more as they value passing on a larger firm. However, more low-ability heirs continue the firm, leading to efficiency losses. In the presence of financial frictions, richer (but less able) heirs may invest more than buyers from outside. |
| Keywords: | Inheritance taxation, family firms, preferential tax treatment, estate taxation |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:bav:wpaper:233_krug_langenmayr&r= |
| By: | Andrea Bellucci (Universita' degli Studi dell'Insubria and Mo.Fi.R.); Alexander Borisov (Lindner College of Business, University of Cincinnati and MoFiR); Gianluca Gucciardi (Department of Economics, Management and Statistics, University of Milano-Bicocca and MoFiR); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR) |
| Abstract: | Technological advancements and globalization of venture capital (VC) point to a diminishing role of direct face-to-face (F2F) interactions between VCs and entrepreneurs seeking funding. We show that ability to conduct such interactions remains an important factor for segments of the VC market, and especially for its internationalization. Using a sample of VC deals around the world, and the staggered implementation of travel restrictions across countries in response to the spread of Covid-19 in 2020, we find that investment by foreign VCs in a country drops after it halts inbound travel. Our analysis of possible channels suggests that information asymmetry between contracting parties is the main driver of the importance of F2F, while technological constraints on the transmission of information and cultural differences are less significant. |
| Keywords: | Face-to-Face Interaction, Investments, Venture Capital |
| JEL: | G24 F21 D81 E22 E44 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:185&r= |
| By: | J. David Brown; Matthew Denes; Ran Duchin; John Hackney |
| Abstract: | Industry size standards that determine eligibility for small business subsidies have vastly increased over the past decade. We exploit quasi-random variation in the implementation of size standard increases to study the effects on small firms, subsidy allocation, and industry outcomes using Census Bureau microdata. Following size standard increases, revenues decline for an industry’s smallest firms, and they are less likely to survive. We link these effects to a reallocation of government procurement contracts from smaller to larger firms. Consequently, industries become more concentrated and growth declines. These findings highlight the broad economic effects of changing eligibility for small business subsidies. |
| Keywords: | government subsidies, small firms, procurement |
| JEL: | E24 G38 H25 H57 L25 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-28&r= |
| By: | Campbell, Douglas; Brodeur, Abel; Johannesson, Magnus; Kopecky, Joseph; Lusher, Lester; Tsoy, Nikita |
| Abstract: | Aghion, Van Reenen and Zingales (2013) find that institutional ownership causes an increase in innovation as measured by citation-weighted patent counts. To identify a causal effect, they use membership in the S&P 500 as an instrument for institutional ownership in a panel regression. We first replicate all regression tables in Aghion et al., and then test for robustness, mainly by adding in firm and sector*year fixed effects. We find that the positive relationship between institutional ownership and innovation is robust in 22% of robustness checks. On average, 2nd stage z-scores were just 42.7% of the original study. We find that when we include firm fixed effects, membership in the S&P 500 actually has a negative (though significant only at the 10% level) impact on institutional ownership (among non-indexed funds). Lastly, we find that the original control-function IV regression suffers from multi-collinearity, complicating inference. |
| Keywords: | Innovation, Patents, Institutional Investment |
| JEL: | G23 G32 L25 M10 O31 O34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:134&r= |
| By: | Mikaela Gavas (Managing Director & Senior Policy Fellow, Center for Global Development); Samuel Pleeck (Research Associate, Center for Global Development); Andrew Rogerson (Center for Global Development); San Bilal (Senior Executive & Associate Director, European Centre for Development Policy Management); Karim Karaki (Head of Economic Recovery and Transformation, European Centre for Development Policy Management) |
| Abstract: | Already constrained by the economic aftershocks of COVID-19, the impact of the war in Ukraine, and the food and climate crisis, low-income countries and lower-middle-income countries now face a combination of soaring debt and high interest rates. Confronted with insufficient liquidity to respond to these challenges and unable to access capital markets, they need additional concessional finance, in the form of grants and soft loans. The European Union (EU) already provides concessional finance, but it is not nearly enough to respond to their growing needs. With European budgets under more strain than ever, this paper puts forward the case for finding ways to maximise the overall efficiency and impact of European concessional finance and in doing so, better articulating and combining grants and concessional loans in its support and investment toolbox. To remain relevant and maintain relationships and influence with partner countries–even more in a world characterised by the polycrisis and geopolitical fragmentation–the EU will have to step up its game when it comes to providing more strategic concessional finance. The paper sets out six complementary and non-mutually exclusive options for maximising EU concessional finance with a view to a strategic set of decisions to be made for the next EU Multiannual Financial Framework. |
| Date: | 2024–03–21 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:325&r= |
| By: | Willem J. Kooi; Ronald Albers |
| Abstract: | The Covid-19 pandemic threated squeezing companies’ liquidity as cash inflows fell with the sudden drop in sales and cash got locked up, for instance in inventories. At the same time, companies still had to service their payment obligations, with trade credit exposures We examine the potential for liquidity stress due to cross-exposures in key parts of non-financial corporations and firms that can occur in the face of adverse and asymmetric aggregate demand and supply shocks. Companies are exposed to these differently depending on their activity, level of human interaction, degree of automation and digitalisation, integration in vulnerable (cross-border) supply chains, and, crucially, their access to finance. We take the case of Sweden, where such corporate asymmetric cross-exposures are relatively large in an EU perspective. For this purpose, we develop a new indicator of potential liquidity stress with an assessment of possible cascading effects across sectors using an input-output framework to gauge the risk of liquidity shortages in the most directly affected branches rippling through the supply chain. We conclude that potential for liquidity stress and significant cascading effects was present at the onset of the Covid-19 pandemic but that forceful policy action prevented such risks from materialising, However, we argue that part of the pass-through via such financial cross-exposures might happen with a delay as policy support is withdrawn, and/or as new major disturbances hit the economy. |
| Keywords: | Trade credit, corporate liquidity, pandemic, Albers, Kooi. |
| JEL: | D22 D25 E32 E65 G31 O52 |
| Date: | 2022–10 |
| URL: | https://d.repec.org/n?u=RePEc:euf:ecobri:073&r= |