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on Corporate Finance |
| By: | Haris, Faldi; Rahadi, Raden Aswin |
| Abstract: | VC investment has undergone a substantial transition, particularly in emerging countries, where there is a growing entrepreneurial culture. Southeast Asia (SEA) has emerged as an image of trust due to its remarkable accomplishments in venture capital funding. Notwithstanding, the VC success rate is quite low, with up to 75 percent of venture-backed businesses failing to return cash to their investors and 30 to 40 percent of those 75 percent liquidating their assets, resulting in their investors losing their entire investment (Ghosh, 2012). In light of this context, this study sets out to investigate the behavior of venture capital firms in Southeast Asia and the complex decision-making processes involved. This research aims to enhance the success rate of VC firms and contribute to the advancement of VC literature by precisely identifying the relevant parameter. This study seeks to analyze the complex landscape of venture capital activities in a highly dynamic entrepreneurial ecosystem, using the complete framework created by Gompers et al. (2023). A case study, a widely recognized method in exploratory research, is used as the primary methodology to reveal novel themes and insights obtained from respondents in venture capital firms. Using a semi-structured interview, this study implies that VC fund structure and strategy, start-up screening criteria, start-up valuation, exit, and risk management have a significant effect on determining SEA VC firm investment decisions. This study is one of the first efforts to utilize Gompers et al.'s (2023) framework in the specific setting of Southeast Asia. This study contributes to the current research on venture capital decision-making by providing innovative measurement parameters, with a particular emphasis on the notion of "runway." These features, which relate to a startup's expenditure rate and its long-term viability offer a broader understanding of the financial factors that impact investments made by SEA VC companies. |
| Date: | 2024–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:t3byd |
| By: | Ratna Sahay (National Council of Applied Economic Research, Delhi); Navya Srivastava (National Council of Applied Economic Research, Delhi); Mahima Vasishth (National Council of Applied Economic Research, Delhi) |
| Abstract: | TGlobally, women’s share in corporate leadership has been steadily rising, including in India. The female director mandate under The Companies Act (2013) in India marked a significant step toward gender-inclusive corporate leadership, requiring listed firms to have at least one woman on their board. Within a year, the percentage of listed firms without women on board plummeted from 53 percent to less than 10 percent. Despite this progress, India still lags in the share of women in middle and senior management roles at only 17 percent, compared to nearly 33 percent for the world. This paper documents the status of gender-inclusive corporate leadership and uses the woman director mandate in the Act to study its relationship with firm outcomes, including financial performance and corporate culture in India. Interestingly we find that firms, on average, were appointing more women than mandated by the Act, suggesting the favorable impact of the current government’s signal to foster women-led development and the positive experience gained by firms. At the same time, newly appointed women were younger and more educated than their male counterparts and their average directorship “stretch factor†increased significantly compared to men. Combining personnel-level data from NSE-listed firms with firm performance data and employing a reverse difference-in-difference econometric strategy, we find that having at least one woman on board is associated with higher economic performance, financial stability, and lower financial risk. Additionally, using almost 400, 000 employee reviews scraped from a company review platform, we find that higher shares of women in board positions correlate positively with employee ratings and sentiment scores only when firms also hire women in top management positions. This analysis highlights the business case of appointing more women at the top. |
| Keywords: | Women’s Leadership, Firm Performance, Firm Culture |
| JEL: | J16 L25 M59 |
| Date: | 2024–05–24 |
| URL: | https://d.repec.org/n?u=RePEc:nca:ncaerw:170 |
| By: | Senlin Miao (NUAA - Nanjing University of Aeronautics and Astronautics [Nanjing]); Zhaobo Zhu (Audencia Business School); Xiaohua Deng (University of New South Wales [Kensington]); Fenghua Wen (Central South University [Changsha]) |
| Abstract: | This paper explores the interplay between politics and law enforcement in China and its effects on firm financing decisions. By examining a sample of corporate lawsuits involving listed firms in China, we find that politically connected firms are less likely to be defendants, have higher win rates, and experience shorter litigation durations than non-connected firms. Additionally, we observe that firms with higher legal risk extend more accounts receivable and receive less accounts payable, but this relationship holds only for non-connected firms. Our findings support the financing advantage theory for politically connected firms and the legal risk compensation view for non-connected firms. Moreover, reforms in China's judicial system do not appear to mitigate the disadvantages faced by non-connected firms in terms of lawsuit outcomes and trade credit provision. Our findings suggest that well-functioned judicial independence might be still lacking in China, and that political connections continue to negatively impact law enforcement and corporate policies. |
| Keywords: | Lawsuits, Judicial reforms, Political connections, Trade credit |
| Date: | 2024–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04670162 |
| By: | Ratna Sahay (Center for Global Development; National Council of Applied Economic Research (NCAER)); Navya Srivastava (National Council of Applied Economic Research (NCAER)); Mahima Vasishth (Bocconi University; National Council of Applied Economic Research (NCAER)) |
| Abstract: | Globally, women’s share in corporate leadership has been steadily rising, including in India. The female director mandate under The Companies Act (2013) in India marked a significant step toward gender-inclusive corporate leadership, requiring listed firms to have at least one woman on their board. Within a year, the percentage of listed firms without women on board plummeted from 53 percent to less than 10 percent. Despite this progress, India still lags in the share of women in middle and senior management roles at only 17 percent, compared to nearly 33 percent for the world. This paper documents the status of gender-inclusive corporate leadership and uses the woman director mandate in the Act to study its relationship with firm outcomes, including financial performance and corporate culture in India. Interestingly we find that firms, on average, were appointing more women than mandated by the Act, suggesting the favorable impact of the current government’s signal to foster women-led development and the positive experience gained by firms. At the same time, newly appointed women were younger and more educated than their male counterparts and their average number of directorship (the “stretch factor”) increased significantly compared to men. Combining personnel-level data from NSE-listed firms with firm performance data and employing a reverse difference-in-difference econometric strategy, we find that having at least one woman on board is associated with higher economic performance and financial stability. Additionally, using almost 400, 000 employee reviews scraped from a company review platform, we find that higher shares of women in board positions correlate positively with employee ratings and sentiment scores only when firms also hire women in top management positions. This analysis highlights the business case of appointing more women at the top. |
| Keywords: | Women’s Leadership, Firm Performance, Firm Culture |
| JEL: | J16 L25 M59 |
| Date: | 2024–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:704 |
| By: | Pascal Bougssere (UV-BF - Université virtuelle du Burkna Faso); Mamadou Toe (UTS - Université Thomas Sankara); Wend-Kuuni Raïssa Yerbanga (UTS - Université Thomas Sankara) |
| Abstract: | This article examines the influence of microcredit financing conditions on the financial performance of microenterprises in Burkina Faso. To this end, an analysis was carried out using a linear model for a sample of 129 microenterprises based on panel data from 2017 to 2019. The results obtained using the Feasible Generalized Least Squares (FGLS) method show that the amount of microcredit and the repayment period have a positive impact on the financial performance of microenterprises. In contrast, the interest rate, proximity to microfinance institutions (MFIs) and the gender of the business owner negatively affect this performance. These results emphasize that in the Burkinabe context, proximity to MFIs does not guarantee the profitability of microenterprises, but rather benefits MFIs in repaying loans and expanding their portfolio. They also indicate that women-led micro-enterprises are less profitable because they have difficulties accessing credit, particularly due to a lack of collateral. Conversely, businesses run by educated owners have better financial performance. |
| Keywords: | Financing conditions, microcredit, microenterprise, financial performance |
| Date: | 2024–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04692353 |
| By: | Giraldo, Carlos (Latin American Reserve Fund); Giraldo, Iader (Latin American Reserve Fund); Huertas, Cristian (Universidad Nacional de Colombia); Sánchez, Juan Camilo (Dirección de impuestos y aduanas nacionales) |
| Abstract: | This study investigates the determinants of hedging practices among commodity-producing companies in Latin America. The extractive sector's significant economic importance in the region makes understanding these firms' hedging decisions highly relevant. The findings reveal several key insights. Firm size, leverage, and commodity prices are important factors consistent with prior research. Additionally, the region's exchange rate exposure means that firms' acquisition of US dollar-denominated debt is a significant determinant of their hedging activities, as well as the firms’ access to the international markets. Notably, the type of ownership also significantly impacts hedging, as state-owned firms are more likely to hedge to reduce volatility in their revenues for the case of oil-firms. In contrast to the limited research on Latin American extractive firms, an extensive literature has explored hedging strategies in developed countries' extractive companies. This study aims to address the gap by investigating the determinants of hedging practices among commodity-producing companies in Latin America. |
| Keywords: | hedging; risk management; derivatives; commodity-producing companies; |
| JEL: | C23 D81 G30 G32 Q02 |
| Date: | 2024–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:021196 |
| By: | GAVIGAN James (European Commission - JRC); FAKO Peter (European Commission - JRC); COMPANO Ramon (European Commission - JRC) |
| Abstract: | The ongoing transformation of the automotive sector is in part driven by factors such as the unrelenting onslaught of electric/hybrid powertrain technologies, in-vehicle and networked software applications, rising demand for electric vehicles, and the emergence of new entrants like Tesla and others notably in China. The response of automotive firms to these challenges includes, inter alia, Open Innovation (OI) tools and strategies of which Corporate Venture Capital (CVC) is one element. CVC investments by large automotive companies are globally spread, but there is a clear concentration of these investments in the US, particularly in California. The vast majority of CVC investments in startups are made in conjunction with other co-investors, reflecting the high-risk nature of the innovative technologies being developed. Newcomers to the automotive industry, such as Tesla and BYD, are primarily beneficiaries of venture capital financing, including corporate VC, rather than themselves engaging in venture financing. Despite a drop in CVC in 2023, the rising trend in automotive CVC may return over the medium to long term, driven by increasing startup activity in automotive-relevant areas. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:wpaper:202402 |
| By: | Ambler, Kate; Balana, Bedru; Bloem, Jeffrey R.; Maruyama, Eduardo; Olanrewaju, Opeyemi |
| Abstract: | Smallholder farmers must invest in agricultural inputs (i.e., seeds, chemicals, equipment, land, and labor) during the planting season before earning income from the sale of agricultural produce after harvest. Credit can help relax liquidity constraints. In rural Nigeria, access to credit is limited, especially formal credit from financial institutions. Less than a third of households in rural Nigeria report using credit and only two percent of rural households borrowed credit from formal financial institutions (EFInA 2020). The rest is borrowed informally from friends, family, or local money lenders. Credit can take many different forms. For example, credit can take the form of a cash loan, where funds are provided to a borrower to make an investment of any kind. Another common form of credit is when specific goods, for instance agricultural inputs, are provided in advance to a payment. In both cases, the borrower must pay back both the loan amount, and any interest incurred from the loan. We partnered with Crop2Cash, a digital financial technology startup company operating in Nigeria, to test take-up for these two forms of credit. |
| Keywords: | smallholders; farm inputs; income; agriculture; credit; loans; Southern Africa; Western Africa; Nigeria |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:cgiarp:152224 |