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on Corporate Finance |
| By: | Elena Shkrekova (Ss. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje); Aleksandar Naumoski (Ss. Cyril and Methodius University in Skopje, Faculty of Economics - Skopje) |
| Abstract: | This study explores the determinants of capital structure within industrial firms in North Macedonia, focusing on a decade-long panel of companies listed on the Macedonian Stock Exchange from 2012 to 2022. Using panel regression analysis, the research examines the impact of key factors—firm size, profitability, asset tangibility, growth, risk, and taxation—on the leverage decisions of these firms. The results reveal that firm size and asset tangibility are positively associated with leverage, indicating these companies’ reliance on debt, especially when supported by substantial physical assets. In contrast, profitability demonstrates a negative relationship with leverage, consistent with the Pecking Order Theory, suggesting that profitable firms in this emerging market prefer internal financing. Growth, measured through sales, shows a positive correlation with leverage, though the impact varies with growth metrics. Overall, this study highlights the unique capital structure dynamics in a transitioning economy and provides valuable insights for financial managers operating in similar markets. |
| Keywords: | Capital structure, Leverage, Theories of capital structure, Trade-off theory, Pecking order theory |
| JEL: | G21 G30 G32 G33 |
| Date: | 2024–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2024:i:5:p:251-263 |
| By: | Milan Čupić (University of Kragujevac, Faculty of Economics, Serbia); Predrag Dragičević (State Audit Institution of Serbia); Stefan Vržina (University of Kragujevac, Faculty of Economics, Serbia) |
| Abstract: | The main objective of the paper is to examine the impact of the COVID-19 pandemic on the relationship between corporate governance and the financial performance of Serbian companies. The research was conducted on 22 non-financial companies listed on the Belgrade Stock Exchange between 2018 and 2022. The data are retrieved from the official websites of the Serbian Business Registers Agency and Belgrade Stock Exchange. The results suggest that the impact of ownership concentration on profitability is negative, while the impact on the market value is positive. On the other hand, the size of the board of directors negatively impacts profitability, while the share of non-executive directors in the board of directors negatively impacts market value. Results also indicate that the COVID-19 pandemic affected the relationship between corporate governance and financial performance and that the impact of corporate governance on financial performance was more significant before the COVID-19 pandemic. |
| Keywords: | COVID-19 pandemic, Ownership structure, Corporate governance, Financial performance, Non-financial companies |
| JEL: | G34 H12 L25 |
| Date: | 2024–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2024:i:5:p:46-56 |
| By: | Wang, Jiancheng; Li, Xiaoye |
| Abstract: | This paper studies China's big digital platforms’ value-added effect as venture capitalists, using a dataset of companies registered in China that eventually reach the initial public offering stage. We find that China's digital platforms’ investments positively affect their portfolio firms’ IPO performance, in terms of higher IPO valuation, lower underpricing, and shorter time to reach the IPO stage, which is inconsistent with the grandstanding hypothesis. The plausible underlying channels are the certification and monitoring roles played by China's digital platform. The results remain robust after addressing several concerns. Our study sheds new light on VCs’ characteristics and digital platforms’ activities. |
| Keywords: | digital platforms; IPO performance; new ventures; value adding; venture capital |
| JEL: | G23 G24 G32 L20 |
| Date: | 2023–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:118665 |
| By: | Andrea Lanteri; Adriano A. Rampini |
| Abstract: | We analyze the adoption of clean technology by heterogeneous firms subject to financing constraints. In the model, capital goods differ in terms of their energy needs and age. In equilibrium, cleaner and newer capital requires more financial resources. Therefore, financial constraints induce an endogenous pattern in clean technology adoption: Financially constrained, smaller firms optimally invest in dirtier and older capital than unconstrained, larger firms. The model is consistent with the empirical patterns of technology adoption we document using data on commercial shipping fleets. We use a calibrated version of our model to simulate the aggregate transition dynamics to cleaner technology. |
| JEL: | E22 G31 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33545 |
| By: | Defever, Fabrice; Riaño, Alejandro; Varela, Gonzalo |
| Abstract: | This paper evaluates the impact of two large export finance support schemes on firm-level export performance. The Export Finance Scheme (EFS) and the Long-Term Finance Facility for Plant & Machinery (LTFF), provide loans at subsidized interest rates for Pakistani exporters to finance working capital and the purchase of machinery and equipment respectively. We combine customs data with information on firms' participation in each program between 2015 and 2017 and use matching combined with difference-in-differences to estimate the effect of the subsidies on firms' export values, the number of products exported and the number of destinations they serve. We find that both programs deliver a large and positive impact on export growth rates - primarily along the intensive margin - and do so in an effective way relative to the direct financial cost of the subsidies. |
| Keywords: | trade finance; export subsidies; working capital; machinery and equipment; export margins; Pakistan |
| JEL: | G21 F13 F14 |
| Date: | 2024–08–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126843 |
| By: | Jiuli Huang; Yabin Wang; Min Zhu |
| Abstract: | This paper studies the firm-level impact of the world’s largest targeted capital import subsidy program implemented in China. Drawing on rich manufacturing firm survey data, product-level trade transactions, and a comprehensive list of capital goods eligible for subsidies, we exploit variation in firms’ exposure to the subsidy program to assess its impact on credit access, investment, sales, and trade. We find that a one-standard-deviation increase in a firm’s exposure to the subsidy leads to a 0.03% increase in total borrowing and a 0.05% reduction in financing costs. These financial benefits translate into substantial real effects, including a 0.15% rise in investment and a 1.39% improvement in the marginal revenue product of capital. The program’s benefits persist over time and are especially pronounced for financially constrained firms and non-state enterprises, indicating that targeted import subsidies can effectively alleviate market frictions and foster industrial development. |
| Keywords: | Government subsidy, credit allocation, investment, financial constraint |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:not:notgep:2025-05 |
| By: | Dominic Russel; Claire Shi; Rowan Clarke |
| Abstract: | We use transaction-level data from a major payment processor in South Africa to study revenue-based financing for small businesses provided by financial technology (fintech) companies. After eight months, payments through the selected processor are 16% lower for businesses that take financing offers than for observably similar non-takers, due to businesses hiding revenue to avoid repayments (moral hazard) and the tendency for riskier businesses to seek financing more frequently (adverse selection). Two natural experiments suggest that fintech platforms non-lending interactions with small businesses for example, payment processing and inventory management can limit both hiding and selection. By tying repayment to the continued use of non-lending products, fintechs can reduce enforcement and monitoring frictions. Our results help explain the rise of fintech-provided revenue-based financing and provide evidence for policymakers looking to increase financial inclusion and boost the growth of firms, particularly in developing economies. |
| Date: | 2025–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11078 |
| By: | Oehmke, Martin; Opp, Marcus |
| Abstract: | We characterize the conditions under which a socially responsible (SR) fund induces firms to reduce externalities, even when profit-seeking capital is in perfectly elastic supply. Such impact requires that the SR fund’s mandate permits the fund to trade off financial performance against reductions in social costs—relative to the counterfactual in which the fund does not invest in a given firm. Based on such an impact mandate, we derive the social profitability index, an investment criterion that characterizes the optimal ranking of impact investments when SR capital is scarce. If firms face binding financial constraints, the optimal way to achieve impact is by enabling a scale increase for clean production. In this case, SR and profit-seeking capital are complementary: Surplus is higher when both investor types are present. |
| Keywords: | socially responsible investment; sustainable investing; ESG; Social Profitability Index (SPI); fiduciary duty |
| JEL: | G31 G23 D62 Q52 |
| Date: | 2025–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122413 |
| By: | Gabriele di Filippo |
| Abstract: | This paper examines the relationship between captive financial institutions (CFIs, sector S127) and external lenders. The paper focuses on CFIs in Luxembourg that are owned by (resident and non-resident) investment funds specialising in private equity or real estate. Within the holding and acquisition structure set up by the fund sponsors, CFIs are mainly linked to other CFIs resulting in intragroup financial linkages in the form of equity holdings and intragroup loans. This is consistent with the relative importance of holding and intragroup lending companies among Luxembourg CFIs. However, certain types of CFIs have links with external lenders. This is particularly the case for conduits, entities with predominantly non-financial assets, mixed structures and extra-group loan origination companies. At the aggregate level, this means that most CFIs have little exposure to external lenders. Only a small proportion of CFIs have a higher credit exposure. The exposure is mainly to banks whose loans issued to CFIs finance mainly real estate investments (particularly commercial real estate such as office buildings and logistics facilities) located in Western Europe (mainly Germany and the United Kingdom). German banks are the main providers of loans for real estate investments, while US banks are the leading finance providers for private equity investments. The latter are broadly diversified across economic activities, with most targets located in Western Europe. |
| Keywords: | Captive financial institutions and money lenders, Sector S127, investment funds, private equity, real estate, banks, financial linkages |
| JEL: | C80 C81 F23 F30 G23 G32 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bcl:bclwop:bclwp197 |
| By: | Giulia Canzian; Elena Crivellaro; Tomaso Duso; Antonella Rita Ferrara; Alessandro Sasso; Stefano Verzillo |
| Abstract: | The Covid-19 pandemic caused a global economic crisis, leading governments to provide substantial State Aid to support firms. This paper examines the effectiveness of Covid-related financial support in Spain and Italy, focusing on its impact on firm recovery. Using a difference-in-differences (DiD) approach combined with propensity score weighting, it compares outcomes of similar firms receiving aid to those without. The results show significant benefits for micro-firms, including mitigated turnover declines and increased investments in both tangible and intangible assets. The findings highlight the critical role of government support in business survival and recovery, especially for SMEs, during the pandemic. |
| Keywords: | state aid, aid effectiveness, temporary framework, Covid, firm growth, investment, difference-in-differences. |
| JEL: | D04 D22 L25 L52 P43 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11835 |
| By: | Ignacio González; Juan A. Montecino; Joseph E. Stiglitz |
| Abstract: | We study the optimal design of corporate tax policy in a textbook life-cycle model featuring two key deviations: (i) firms are imperfectly competitive and (ii) households save by purchasing equity shares in a stock market. In this simple environment, the financial wealth of savers is equal to the sum of the productive capital owned by firms and a component capturing the NPV of unproductive rents – what we term “market power wealth” (MPW). We show that this novel component has non-trivial macroeconomic effects, with important implications for optimal corporate tax policy. In particular, MPW significantly crowds out productive investment and accordingly can rationalize a high corporate tax rate. The optimal corporate tax code in our setting assigns the statutory corporate tax rate to target the financial value of pure profits while incentivizing capital accumulation with a partial expensing of firm investment costs. |
| JEL: | E20 G12 H21 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33544 |
| By: | Samuel K. Hughes; Joseph B. Nichols |
| Abstract: | As financial intermediaries, banks have a key role in producing information and managing the risks on diverse loan portfolios. An important input into this process is ongoing collection of financial performance from borrowers. Using supervisory data on commercial real estate loans (CRE), this paper studies relationships between the content and timeliness of borrower-reported performance, internal bank risk ratings, and subsequent loan performance. Banks heavily rely on borrower reporting when setting risk ratings, despite the fact that borrowers with stale financials are more likely to default. Although banks can generally be slow to update their ratings as information becomes more stale on average, we find causal evidence that they do monitor more intensively in response to loan, location and portfolio risks. |
| Keywords: | Bank monitoring; Risk management; Commercial real estate mortgages; Financial performance reporting |
| JEL: | G14 G21 G32 R33 |
| Date: | 2025–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-32 |
| By: | Abhishek Bhardwaj; Abhinav Gupta; Sabrina T. Howell; Kyle Zimmerschied |
| Abstract: | Do returns in private equity (PE) rise or fall with fund scale? This question is increasingly urgent amid larger funds and new focus on the retail market. Since better managers can raise larger funds, the causal effect is difficult to identify. We develop an instrument based on gifts to universities, which lead to more capital for managers with preexisting relationships. We show decreasing returns; for example, a 1% size increase reduces net IRR by 0.1 percentage points. Larger funds do larger deals, which perform worse. We find no change in risk, in part because additional deals are more levered. |
| JEL: | G11 G23 G24 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33596 |
| By: | Marzanna Poniatowicz (Faculty of Economics and Finance, University of Bialystok); Agnieszka Piekutowska (Faculty of Economics and Finance, University of Bialystok) |
| Abstract: | Purpose The dynamic development of the alternative finance sector is a characteristic phenomenon of contemporary times. In the literature, the key reasons identified for this phenomenon are: i. Technological advancement: The development of digital technologies, including the Internet, blockchain, and artificial intelligence, has enabled the creation of innovative financial platforms and services that are more accessible and efficient compared to traditional financial institutions (Taherdoost, 2023; Lekhi, 2024). ii. Financial exclusion issues: Many small and medium-sized enterprises, startups, and individuals have limited access to traditional sources of financing, such as bank loans, due to stringent credit requirements. This exclusion manifests as a lack of access to traditional banking services, high costs and demands of traditional financial institutions, lack of flexibility of traditional financial services, limited geographical availability of specific financial services, low financial awareness, and a lack of trust in traditional financial institutions. Alternative finance, through technological innovations and flexible business models, offers solutions that can reduce the problem of financial exclusion and provide access to essential financial services for entities previously excluded from the traditional financial system (Carbó et al., 2005). iii. The search for higher returns: Investors are looking for new investment opportunities that offer higher returns compared to traditional bank deposits or bonds. Alternative forms of investing, such as crowdfunding, attract investors due to potentially higher profits (Freedman and Nutting, 2015). iv. Changes in consumer behavior in the market: The younger generation, known as Millennials and Generation Z, prefers convenient, fast, and online financial services. Young people are more open to using modern financial technologies and are less attached to traditional banks (CAsfera.pl, 2022). v. Changing regulations and government policies aimed at increasing competition in the financial sector: Many governments and regulatory bodies are introducing regulations that support the development of alternative finance. These include not only regulations regarding crowdfunding but also cryptocurrencies and open banking, which promote innovation and competition in the financial sector (World Bank and Cambridge Centre for Alternative Finance, 2019). The aforementioned conditions contribute to the rapid development of the alternative finance sector, which is becoming an increasingly important part of the global financial system. In this context, the dynamic growth of crowdfunding (CF) as a community financing instrument is also observed. CF appears to be a kind of phenomenon. The term was first used in 2006 by the American blogger M. Sullivan, founder of Fundavlog. One of the most comprehensive definitions of CF is proposed by Mollick (2014). According to him, CF “refers to the efforts by entrepreneurial individuals and groups - cultural, social, and for-profit - to fund their ventures by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries” (Mollick, 2014). The research objective set by the authors is to determine the specifics of CF as an alternative financing tool in the Polish context. The authors focus on ten key characteristics of the analyzed instrument, including (1) community financing, (2) accessibility for small and medium-sized enterprises and startups, (3) lower entry barriers compared to traditional financial services, (4) direct interaction with investors, (5) diversity of financing models (e.g., donation-based CF, reward-based CF, royalty-based CF, equity CF, debt CF, etc.), (6) market testing, (7) marketing and promotion, (8) investment risk, (9) administrative support and legal regulations, and (10) community and engagement. Design/methodology/approach The study employed the method of analyzing literature related to the issues of alternative finance and CF, as well as the analysis of legal acts regulating CF for instance Regulation (EU) 2020/1503 of the European Parliament and of the Council of 7 October 2020 on European crowdfunding service providers for business) and the national level (the Act of 7 July 2022 on crowdfunding for business ventures and assistance to borrowers). Additionally, an analysis was conducted on the functioning of selected crowdfunding platforms and entities authorized to provide crowdfunding services, as well as an analysis of examples of investments financed using this instrument. The article also utilized statistical data from the European Securities and Markets Authority database. Findings The conducted research confirmed the research hypothesis, which states that the development of CF as a financial instrument in Poland is driven by technological advancements that enable the creation of innovative financial platforms, as well as by the ability of the instrument to offer greater financial flexibility (compared to traditional financing instruments), faster access to capital, and the potential to build communities around financed projects. It was shown that in Poland, compared to other EU member states (such as France, Italy, Spain, the Netherlands, and even Lithuania), CF is at an early stage of development (European Securities and Markets Authority Database, 2024). However, it has significant growth potential due to the aforementioned attributes. These features make it not only an attractive instrument for entities that face difficulties in obtaining traditional financing but also contribute to reducing financial exclusion in Poland. It was demonstrated that CF is gaining importance primarily as an alternative source of financing for small and medium-sized enterprises, startups, and various social and cultural projects. Originality/value The legal regulations regarding CF in Poland are relatively new, and analyses of the functioning of crowdfunding platforms and investments financed through this source of funding are limited. This analysis fills that gap. The unique economic context of Poland, with its specific economic and social conditions differing from those of other EU countries, is significant in this regard. The analysis of CF in Poland takes into account the specific conditions of the country, such as the level of digitization of society, trust in new technologies, the level of financial exclusion, and the specific financial needs of small and medium-sized enterprises. Moreover, Poland is one of the fastest growing fintech markets in Europe. Analyzing CF in this context allows us to understand how innovative financial technologies impact the development of alternative sources of financing in the country. Poland is at the stage of developing various types of crowdfunding platforms, including donation-based, equity-based, and reward-based platforms. Examining the functioning of these platforms provides valuable information about their effectiveness and attractiveness to different user groups. It is also worth noting that Poland has a strong community culture (e.g., "Solidarity" as a social movement in the 1980s, which played a key role in overthrowing communism in Poland and is one of the most well-known examples of a strong community and solidarity culture in Europe), which can promote the development of CF. Importantly, our research also considers the aspect of financial education, which is crucial for understanding and accepting alternative forms of financing by society. |
| Keywords: | Crowdfunding, Alternative financing, Investment |
| JEL: | G11 G23 G28 |
| Date: | 2024–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:aoh:conpro:2024:i:5:p:248-250 |