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on Corporate Finance |
| By: | Christopher M. Hair; Sabrina T. Howell; Mark J. Johnson; Siena Matsumoto |
| Abstract: | Younger entrepreneurs are disadvantaged by traditional loan underwriting, which relies heavily on personal credit scores. With data from three fintech companies, we show that incorporating timely information about ability to repay from business checking account statements particularly improves default prediction performance for younger business owners. We develop a novel method to compare model predictions across subgroups—Tail Analysis for Comparative Outcomes (TACO)—which finds that switching from a Baseline (FICO-driven) model to a Cash Flow-enhanced model benefits younger entrepreneurs. We confirm this in causal analysis of approval decisions, showing that access to cash flow-intensive underwriting increases approval rates for younger vs. older entrepreneurs. |
| JEL: | G21 G23 G32 J14 J16 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33367 |
| By: | Masashige Hamano; Philip Schnattinger; Mototsugu Shintani; Iichiro Uesugi; Francesco Zanetti |
| Abstract: | We develop a simple model of financial intermediation with search and matching frictions between banks and firms. The model links credit market tightness –encapsulating the abundance of credit– to the search and opportunity costs of credit intermediation. Search costs generate lending to unprofitable firms (i.e., zombies) and the opportunity costs of searching exert countervailing forces on the incentives for banks and firms to participate in zombie lending, generating an inverted U-shaped relationship between credit market tightness and the share of zombie lending. High bargaining power of firms decreases the opportunity cost of firms foregoing credit relationships, reduces the share of zombie firms and increases the efficacy of capital injections to reduce zombie lending. Using data for 31 industries in Japan over the period 2000-2019, we test and corroborate our theoretical predictions by constructing theory-consistent measures of credit market tightness and bargaining power. Consistent with our theory, the findings reveal that capital injections are more effective in industries with higher credit market tightness and greater bargaining power of firms. |
| Keywords: | zombie firms, bank lending, credit market tightness |
| JEL: | E22 E23 E32 E44 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-05 |
| By: | Pérez Reyna, David (Universidad de los Andes); Rozada-Najar, Angie (Banco de la República); Suaza, Fausto (Universidad de los Andes) |
| Abstract: | Using a unique dataset combining Colombian firm, bank, and credit registry data from 2006 to 2021, we investigate the relationship between bank productivity and the productivity of firms they lend to. We find a positive correlation that strengthened after 2017. We posit a theoretical model to rationalize this finding: more productive banks optimally choose to lend to more productive firms because they can better afford the fixed costs of accessing higher-quality firm profiles. |
| Keywords: | firm productivity; bank productivity; lending relationships; productivity measurement |
| JEL: | D24 E44 G21 |
| Date: | 2025–01–20 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021298 |
| By: | Ulimwengu, John M. |
| Abstract: | Food systems are integral to ensuring access to sustainable healthy diets for all, thereby supporting public health, livelihoods, and environmental sustainability. However, these systems are increasingly vulnerable to a range of shocks and stressors, from economic downturns and financial constraints to the impacts of cli mate change and pandemics. One of the most critical determinants of food system resilience is the ability to effectively manage financing vulnerabilities. Financing vulnerability refers to the susceptibility of food system components to performance degradation due to inadequate, inefficient, or uneven allocation of financial re sources. Addressing this issue is paramount for enhancing the system’s capacity to withstand and recover from disruptions while maintaining functionality. |
| Keywords: | food systems; healthy diets; sustainability; financing; vulnerability |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:othbrf:163239 |
| By: | Matthew R. Denes; Spyridon Lagaras; Margarita Tsoutsoura |
| Abstract: | Platform intermediation of goods and services has considerably transformed the U.S. economy. We use administrative data on U.S. tax returns to study the role of the gig economy on entrepreneurship. We find that gig workers are more likely to become entrepreneurs, particularly those who are lower income, younger, and benefit from flexibility. We track all newly created firms and show that gig workers start firms in similar industries as their gig experience, which are less likely to survive and demonstrate higher performance. Overall, our findings suggest on-the-job learning promotes entrepreneurial entry and shifts the types of firms started by entrepreneurs. |
| JEL: | G30 J21 J22 J24 L26 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33347 |