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on Corporate Finance |
| By: | VEUGELERS Reinhilde; AMARAL-GARCIA Sofia (European Commission - JRC) |
| Abstract: | The EU is challenged by a persistent leadership gap in the global health innovation landscape, with the US leading in corporate health innovation and venture capital (VC) funding. The EU health innovation landscape is more concentrated in older "incumbent leading firms, " while the US has a more dynamic landscape with higher R&D growth rates. Financing constraints are highly relevant in the health sector, particularly for startups and scale-ups with risky breakthrough ideas and technologies. The EU-US gap in dynamic innovative performance in health may be partly due to differences in access to risk finance, particularly venture capital. This paper analyzes trends in VC financing for health-related innovations in Europe compared to the US, using data from Dealroom. The results show that the weakness of the European health VC market continues to hold in the early and late stages, where less progress seems to have been made. Some of the main findings include the following: the EU is lagging behind the US in the number of health VC deals, with a larger gap in late-stage deals; European deal sizes are below the US, with a larger gap in late-stage deals, the EU has a lower occurrence of co-investment deals, which does not help reduce the gap in health VC deals. Overall, the European health VC market is particularly missing larger-sized investors (investment funds) with late-stage deals. To address this gap, policy attention is needed to identify and reduce barriers for European health VC investors to grow to a critical scale and engage in a higher number and larger-sized deals. All in all, Europe should further develop and strengthen its strongest asset, i.e., its Open Single Market, reducing the fragmentation in flows of venture capital, reaching a truly single European Venture Capital market. For an EU open strategic autonomy industrial policy for health, an open single market for health remains the critical instrument to further develop and monitor. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:wpaper:202501 |
| By: | Jan Schymik; Matthias Meier; Alexander Schramm; Alexander Schwemmer |
| Abstract: | This paper studies how managerial pay shapes the allocation of capital within firms. We leverage quasi-experimental variation in the composition of managerial pay between cash bonuses and equity compensation. We find that a relative increase in cash bonuses leads firms to reallocate capital toward less durable investment projects. To rationalize the empirical evidence, we develop a quantitative model with agency frictions. In the model, a relative increase in cash bonuses strengthens managerial short-termism, which shifts the investment composition toward less durable projects. The observed change in managerial pay exacerbates within-firm capital misallocation and leads to a sizeable contraction in output. |
| Keywords: | Investment, Firms, Managerial Pay, Capital Misallocation. |
| JEL: | D25 E22 E32 G31 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_637 |
| By: | Dolores Añon Higón (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Juan A. Máñez (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Amparo Sanchis (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)); Juan A. Sanchis (Department of Applied Economics II and ERICES, Faculty of Economics (Universitat de València), Avda. Tarongers, s/n, 46022 Valencia (Spain)) |
| Abstract: | We examine how financial constraints influence the digitalization of Spanish manufacturing firms, taking into account the business cycle. Our study covers a representative sample of Spanish manufacturing firms from 2001 to 2017. We offer empirical insights into the moderating role of the business cycle on the impact of financial constraints on firms’ digitalization efforts, distinguishing between large firms and small and medium-sized enterprises (SMEs). We build a firm-year financial score aimed to mirror the extent of financial constraints, and a synthetic index of digitalization, both at the firm level. We estimate a panel data specification for firms’ digitalization intensity using a fractional response method. Our findings highlight that financial constraints pose a hurdle to digitalization, particularly for SMEs, and show that firms’ digitalization exhibits a counter-cyclical pattern, both for SMEs and large firms. |
| Keywords: | Digitalization, manufacturing firms, financial constraints, business cycle |
| JEL: | L60 L23 M20 O33 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:eec:wpaper:2502 |
| By: | Paul Gertler; Sean Higgins; Ulrike Malmendier; Waldo Ojeda |
| Abstract: | Firms frequently fail to adopt profitable business opportunities even when they do not face informational or liquidity constraints. We explore three behavioral frictions that explain inertia among individuals—present bias, limited memory, and distrust—in a managerial setting. In partnership with a FinTech payments company in Mexico, we randomly offer 33, 978 firms the opportunity to pay a lower merchant fee. We vary whether the offer has a deadline, reminder, pre-announced reminder, and the size of the fee reduction. Reminders increase take-up by 15%, suggesting a role of memory. Announced reminders increase take-up by an additional 7%. Survey data reveal the likely mechanism: When the FinTech company follows through with the pre-announced reminder, firms' trust in the offer increases. The deadline does not affect larger firms, implying limited or no present bias, but does increase take-up by 8% for smaller firms. Overall, behavioral frictions contribute significantly to explaining profit-reducing firm behavior. |
| JEL: | D9 G4 M1 O14 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33387 |
| By: | Abdelati El Arfaoui (UMI - جامعة مولاي إسماعيل = Université Moulay Ismaïl); Nouredine Marchoud (UMI - جامعة مولاي إسماعيل = Université Moulay Ismaïl) |
| Abstract: | Companies are currently focusing on activities that increasingly benefit stakeholders, within the framework of corporate responsibility (CSR). Moreover, environmental, social and governance (ESG) aspects are the main dimensions of corporate responsibility practices and efforts.Companies engage in ESG activities in order to signal their compliance to the market, but also to improve their financial returns. However, the link between ESG performance and financial performance is not yet well established. Our analysis seeks to synthesise the literature on the following theme: ESG performance and its impact on financial performance. We therefore seek to better understand the relationship between the financial performance of companies and CSR activities (in terms of ESG performance).In other words, can the allocation of company resources to environmental, social and governance (ESG) aspects be a source of improved financial performance for the benefit of the company and its stakeholders? As part of a systematic literature review and in order to shed light on this question, we analysed the content of 63 articles identified as dealingwith the relationship between ESG performance and financial performance. This analysis shows that although most of the studies carried out indicate a positive relationship, others have concluded the existence of negative or even mixed relationships. It therefore confirms the need for more in-depth research into this relationship and the variables that may influence it. |
| Abstract: | Actuellement les entreprises se donnent aux activités qui profitent de plus en plus aux parties prenantes, dans le cadre de la responsabilité des entreprises (RSE). Et les aspects environnementaux, sociaux et de gouvernance (ESG) sont les principales dimensions des pratiques et des efforts de responsabilité des entreprises. Les entreprises s'engagent dans des activités ESG afin de signaler leur conformité sur le marché, mais aussi pour améliorer leurs rendements financiers. Cependant, le lien entre performance ESG et performance financière n'est pas encore bien déterminée. Notre analyse cherche à synthétiser la littérature sur le thème suivant : la performance ESG est son impact sur la performance financière. Et donc chercher à mieux cerner la relation ente la performance financière des entreprises et les activités de RSE (sous l'aspect de la performance ESG).En d'autres termes, l'allocation des ressources de l'entreprise aux aspects environnementaux, sociaux et de gouvernance (ESG) peut-elle être une source d'amélioration de la performance financière au profit de l'entreprise et de ses parties prenantes ? Dans le cadre d'une revue de littérature systématique et afin d'apporter un éclairage sur cette question, nous avons analysé le contenu de 63 articles identifiés traitant la relation entre la performance ESG et la performance financière. Cette analyse montre que même si la plupart des études menées indiquent une relation positive, d'autre ont conclus l'existence de relations négatives voir mitigées. Elle confirme donc la nécessité de recherches plus approfondies concernant cette relation ainsi que les variables qui peuvent l'influencer. |
| Keywords: | Sustainable development, corporate social responsibility, ESG performance, financial performance, Développement durable, Responsabilité sociale des entreprises, performance ESG, performance financière |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04864136 |