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on Corporate Finance |
| By: | David Kitulazzi; Frank K. Ametefe; Samuel Azasu; Patricia Gabaldon Quiñonones |
| Abstract: | This study investigates the impact or relationship of board composition on the performance of JSE-listed real estate firms. The study explored Panel data analysis to estimate the impact of board composition elements on the performance of JSE-listed real estate firms in South Africa using sustainability data sourced from Bloomberg. The study considered board composition elements, board size, proportions on non-executive directors, independent directors and females on boards. Three main areas were explored: financial performance, market value, and sustainability. The return on assets and return on equity measured firm financial performance; firm value was measured by Tobin’s Q; and sustainability measured by the Bloomberg environmental and social sustainability scores. The findings indicate that female directors on board positively and significantly impact financial and sustainability performance but not firm value. Board size was found to negatively and significantly impact financial performance but positively and insignificantly impact firm value and sustainability. The proportion of non-executive directors did not significantly impact any of the performance metrics examined. The proportion of independent directors on boards negatively impacts financial performance and positively impacts sustainability. Companies should emphasise the qualifications, experience and skills female board members bring to boards. CEOs and other corporate executives should not directly participate in appointing non-executive and independent board members. This would ensure that they can better play the monitoring role required. Firms should also critically consider the number of board members required for effective decision-making and monitoring. |
| Keywords: | board composition; Firm Performance; JSE-listed real estate firms; sustainability |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:afr:wpaper:afres2024-012 |
| By: | Viral V. Acharya; Heitor Almeida; Yakov Amihud; Ping Liu |
| Abstract: | We investigate how firms manage financial default risk (on debt) and operational default risk (on delivery obligations). Financially constrained firms reduce operational hedging through inventory and supply chain in favor of cash holdings. Our model predicts that firms’ markup increases with financial default risk as they cut operational hedging costs. Empirical analysis confirms this prediction and shows that the markup-credit risk relationship strengthens during adverse aggregate shocks, particularly for firms exposed to lending disruptions. Market power alone cannot explain this relationship, which reflects firms’ strategic adjustments in operational hedging practices. |
| JEL: | G31 G32 G33 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33340 |
| By: | Aral, Karca D.; Giambona, Erasmo; Lopez A., Ricardo; Wang, Ye |
| Abstract: | Supply chain strategy is one of the main prerogatives of a corporate board. How does corporate board diversity affect buyer-supplier relationships? Following a requirement for California firms to increase board gender diversity, affected buyers consolidated their supply base by reducing suppliers relative to other states’ firms, while retaining long-term, domestic, and innovative suppliers. These changes occur when female directors are better situated to influence corporate decisions. Alternative explanations, such as the coronavirus pandemic, cannot explain our results. Our findings indicate a heightened propensity to build stronger buyer-supplier relationships by firms with diverse boards as an important channel for increased performance. |
| Keywords: | Corporate diversity, board gender diversity, supply chain base, buyer-supplier relationships, supply risk. |
| JEL: | G31 G32 G33 L11 L14 L51 R3 R30 R32 R33 R4 R40 R41 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122823 |
| By: | Hong, Jifeng; Kazakis, Pantelis; Strieborny, Martin |
| Abstract: | Utilizing a staggered Difference-in-Differences (DID) approach, we investigate the impact of green bond issuance on the probability of default among Chinese firms from 2016 to 2022. We find that issuing a green bond significantly reduces the firm’s default probability, highlighting the joint advantage of financial stability and environmental sustainability. The effect is particularly strong for firms that lack strong external monitoring by financial analysts and media, for high-polluting firms, and for firms facing a high level of competition. Our results also suggest that the transmission from green bond issuance to improved financial resiliency works both through alleviating financial constraints and through increasing stock liquidity. |
| Keywords: | green bond issuance; default probability; analyst and media coverage; financial constraints; stock liquidity |
| JEL: | G14 G32 G33 |
| Date: | 2024–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123049 |
| By: | Brown, J. David (U.S. Census Bureau); Davis, Steven J. (Hoover Institution); Foster, Lucia (U.S. Census Bureau); Haltiwanger, John C. (University of Maryland); Sabelhaus, John (Brookings Institution) |
| Abstract: | The Census Bureau's Longitudinal Business Database (LBD) underpins many studies of firm-level behavior. It tracks longitudinally all employers in the nonfarm private sector but lacks information about business financing and owner characteristics. We address this shortcoming by linking LBD observations to firm-level data drawn from several large Census Bureau surveys. The resulting Longitudinal Employer, Owner, and Financing (LEOF) database contains more than 3 million observations at the firm-year level with information about start-up financing, current financing, owner demographics, ownership structure, profitability, and owner aspirations – all linked to annual firm-level employment data since the firm hired its first employee. Using the LEOF database, we document trends in owner demographics and financing patterns and investigate how these business characteristics relate to firm-level employment outcomes. |
| Keywords: | longitudinal business database, employment outcomes, profitability, owner characteristics, financing sources |
| JEL: | D22 G32 L26 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17517 |
| By: | Mensah, Albert (HEC Paris); Kim, Jeong-Bon (Simon Fraser University); Tang, Vicki Wei (Georgetown University) |
| Abstract: | Compared to dispersed, public creditors (e.g., bondholders), private block creditors (such as traditional banks) are more sophisticated, superior monitors and have privileged information about borrowers. Thus, while publicly available information about borrowers such as social media information may be useful to dispersed, public creditors in their lending decisions, it is ex-ante unclear whether such information is useful for bank loan contracting. Using Twitter as the setting, this study examines whether and how customer-generated comments on social media that portray favorable images of publicly listed borrowers affect loan pricing. In the aggregate sample, we find no evidence of a robust relationship between social media information and loan pricing. In the cross section however, we find such information to be negatively associated with loan spreads only when borrower-provided public disclosure is of questionable quality. In contrast, we find no such evidence for borrowers without information credibility issues. Leveraging favorable customer comments also reduces (increases) bank’s reliance on financial (general) covenants. Our evidence points to decline in information risk as the economic mechanism through which such effects occur. Overall, our results indicate that third-party-generated information on social media substitutes for borrower-provided information in lending decisions when borrower-provided information is less reliable. |
| Keywords: | social media; wisdom of crowds; reliability; bank loan contracting |
| JEL: | D83 G14 G21 G32 M41 |
| Date: | 2024–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1517 |
| By: | Daniel Kessler; William Wygal |
| Abstract: | We investigate whether two characteristics of non-profit hospital boards – the number of board members and whether the CEO is a board member – are associated with CEO pay and several measures of hospital performance, including price, operating margin, quality, and service to low-income patients. Although the consequences of CEO board membership for for-profit firms have been studied extensively, the consequences for non-profits in general, and non-profit hospitals in particular, have received little attention. Because most hospitals are non-profit and non-profit hospital prices have increased rapidly over the past 20 years, this gap is important. We find a strong positive association between CEO board membership and non-profit hospital prices, operating margins, and CEO pay, with a weaker positive (negative) association between CEO board membership and quality (service to low-income patients). We conclude that CEO board membership contributes to the fundamental agency problem between non-profit hospitals’ management and the hospitals’ intended beneficiaries, consistent with the concerns expressed by Fama and Jensen (1983). |
| JEL: | G39 I11 L31 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33278 |
| By: | Lars Hornuf; Johannes Voshaar |
| Abstract: | What is an effective signal in crowd funding? We asked this question to 83 expert researchers who have published the top-notch articles in this field. They stated that, in theory, strong signals include past crowdfunding success, business experience, patent ownership, and the equity share offered. Examining 145 articles published in leading business and economics journals, we find that the empirical evidence from a meta-analysis does not accord with this perception among expert researchers. Signals that expert researchers consider to be theoretically less strong are more often statistically significant predictors of crowdfunding success and have neither larger nor smaller standardized effect sizes than strong signals. A meta-regression suggests that domain-specific signals play the most important role in crowdfunding. The findings of our literature review provide important insights for investors, platform managers, and the academic review process. |
| Keywords: | signaling, crowdfunding, crowdinvesting, peer-to-peer lending, crowdlending, meta-study |
| JEL: | G21 D82 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11501 |
| By: | Marianna Endresz (Magyar Nemzeti Bank (Central Bank of Hungary)); Peter Gabriel (Magyar Nemzeti Bank (Central Bank of Hungary)) |
| Abstract: | This paper estimates the impact of acquisitions on various firm-level performance measures of Hungarian firms. Using difference-in-differences estimation with matching, we show that the performance of the acquirer improves significantly following an acquisition. By controlling for the – typically weaker – efficiency of the target, we also estimate the overall efficiency gain. Our results indicate that acquisitions are powerful tools to improve efficiency in the Hungarian economy. The estimated impacts are heterogeneous. Efficiency gains are higher if the acquirer is smaller and less efficient prior to the acquisition, highlighting that improving scale efficiency is an important motive for acquisitions. Furthermore, if the acquirer and target companies had business links beforehand, the productivity gain is twice as large. Acquisitions made during recessions are also different in some ways. Firms make fewer acquisitions, although the number of potential target companies increases. Because acquirers become more selective, the efficiency gains remain sizeable even in the unfavourable business environment. |
| Keywords: | mergers, acquisitions, efficiency, productivity, matching |
| JEL: | C22 D22 D24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:mnb:wpaper:2024/3 |
| By: | Nataliia Kriuchkova; Vyacheslav Truba; Iryna Nyenno |
| Abstract: | Understanding how economic factors affect a business is essential to making smart decisions and leading a business. However, this starts with understanding the role of internal and external factors and how they play out in a business. A start-up is no exception, although it is hard to call it a full-fledged business; a start-up is a project of any kind that is just starting to develop in the market. For the successful implementation of a new project, a certain amount of start-up capital is required. No start-up can be implemented without appropriate financial injections, without attracting investments that are quite risky and require significant attention from the investor at the investment planning stage. Almost all start-up projects are financed by investors who are willing to invest their own capital in the development of a promising project. In general, any project begins with an idea that will form the basis of a new business. If an entrepreneur manages to offer consumers a high-quality product that has no analogues in the market but is in demand, his success will be guaranteed. But to achieve this, a good idea needs to be properly developed, involving specialised professionals and investors. Venture capital funds and investment companies that invest in innovative projects are engaged in the development of such ideas, and the state stimulates these processes through a system of mechanisms and levers of economic development of business. Given the significant importance of start-ups for the economic growth of the State, the purpose of the study is to determine the role of start-ups in stimulating innovative economic growth, taking into account the challenges and risks posed by the environment. To achieve this goal, the methods of statistical data analysis, generalisation of scientific sources, specification of opportunities and risks created by start-up projects for economic systems were used. In the process of developing the study, it was found that start-ups play an important role in ensuring economic growth opportunities for the entire state, since creating favourable conditions for the development of small businesses and stimulating investment activity in innovative projects can lead to a significant increase in tax revenues to budgets of various levels in the future, but an important aspect of stimulating start-up projects is risk assessment and prudent investment in such projects. |
| Keywords: | barriers to market entry, innovation ecosystem, scaling strategies, technology commercialisation, venture funding |
| Date: | 2025–01–06 |
| URL: | https://d.repec.org/n?u=RePEc:ete:msiper:756676 |