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on Corporate Finance |
| By: | Francesco Ferrante; Andrea Prestipino; Immo Schott |
| Abstract: | Long-term debt is the main source of firm-financing in the U.S. We show that accounting for debt maturity is crucial for understanding business cycle dynamics. We develop a macroeconomic model with defaultable long-term debt and equity adjustment costs. With long-term debt, firms have an incentive to increase leverage in order to dilute the value of outstanding debt. When equity issuance is costly, this incentive helps firms raise more debt through a debt dilution channel and mitigates the decline in net worth through a balance sheet channel, dampening the decline in investment in response to a negative financial shock. Using firm-level data, we estimate equity issuance costs and incorporate our findings into an estimated medium-scale DSGE model. Accounting for debt maturity and the cost of equity financing implies that credit supply shocks are the primary drivers of business cycle fluctuations. |
| Keywords: | Long-term debt; Financial frictions; Debt overhang; Macroeconomic activity |
| JEL: | E32 E44 E51 |
| Date: | 2025–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1409 |
| By: | Tao Han (EM - EMLyon Business School); Xavier Martin |
| Abstract: | We examine how the value created by technological and marketing intangible assets in foreign direct investment (FDI) varies with board effectiveness conditions. Synthesizing internalization and agency theories, we theorize that a firm can better leverage intangibles and create value through acquisitive FDI if its board setup enables effective monitoring and advising. Empirically, we operationalize the "quad" elements of board effectiveness—independence, expertise, bandwidth, and motivation—and account for multiple selectivity related to disclosure decisions and mode choice. Analyzing 675 cross-border acquisitions by U.S. public firms (1998–2016), we quasi-replicate and extend internalization results linking intangibles with abnormal returns upon FDI announcement. Advancing internalization research through corporate governance insights, our findings show that board effectiveness moderates the value-creating effects of intangibles in multinational enterprises' foreign expansion. |
| Keywords: | board effectiveness, corporate governance, cross-border acquisitions, intangibles, internalization |
| Date: | 2025–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05083051 |
| By: | Jonathan Labb\'e (CEREFIGE, IAE Nancy, UL); Typhaine Leb\`egue (VALLOREM, UT); Abdel Malik Ola (VALLOREM, UT) |
| Abstract: | This research examines the empowerment of women entrepreneurs in the context of entrepreneurial financing in France. It explores the factors that allow some women entrepreneurs to access certain categories of external finance more easily. The theoretical framework used is based on the concept of empowerment, explored through its personal and relational dimensions. The study relies on a quantitative approach, using data from a representative of women entrepreneurs. The results show that the status of a founder affects access to external finance in different ways: it increases the chances of successful fundraising, but reduces the chances of obtaining bank finance. This finding highlights the importance of empowerment dynamics, which vary according to the type of financing. In addition, characteristics such as the presence of a spouse in the business, high income, membership of a professional network and the diversity of this network complete the analysis of inequalities in access. This study, the first of its kind in France, suggests ways of enriching our understanding of the diversity of situations experienced by female founders, thus helping to deconstruct the homogeneous image of women's entrepreneurship. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.10064 |
| By: | Baibing Huang (Macau University of Science and Technology); Shaohua Tian (Macao Polytechnic University); Yang Zhang (University of Macau); Huanhuan Zheng (National University of Singapore) |
| Abstract: | This paper investigates the influence of institutional investors' corporate site visits on the timeliness of financial reporting. Utilizing data from publicly traded firms listed in the Shenzhen Stock Exchange (SZSE) in China, the study reveals that companies that receive a greater number of site visits from institutional investors exhibit shorter delays in the issuance of audit reports. These findings remain robust even after conducting various robustness checks and employing alternative estimation methods to address potential endogeneity concerns. Additionally, supplementary analysis suggests that institutional investors' site visits may enhance financial statement timeliness by facilitating more efficient acquisition of information and promoting enhanced corporate governance practices. Moreover, the study finds that institutional investors' site visits contribute to the timely disclosure of audit reports without compromising their quality. These significant findings hold important implications for firms, investors, and policymakers. |
| Keywords: | Corporate site visits; financial statement timeliness; Audit report lag; Institutional investors; Chinese listed firms |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202533 |
| By: | YANG, ZHANG (Department of Finance and Business Economics, Faculty of Business Administration / Asia-Pacific Academy of Economics and Management, University of Macau); JIANXIONG LIN (QIFU Technology, China); YIHE QIAN (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau); LIANJIE SHU (Faculty of Business Administration , University of Macau) |
| Abstract: | MachiAs a key enabler of poverty alleviation and equitable growth, financial inclusion aims to expand access to credit and financial services for underserved individuals and small businesses. However, the elevated default risk and data scarcity in inclusive lending present major challenges to traditional credit assessment tools. This study evaluates whether machine learning (ML) techniques can improve default prediction for small-business loans, thereby enhancing the effectiveness and fairness of credit allocation. Using proprietary loan-level data from a city commercial bank in China, we compare eight classification models—Logistic Regression, Linear Discriminant Analysis (LDA), K-Nearest Neighbors (KNN), Support Vector Machine (SVM), Decision Tree, Random Forest, XGBoost, and LightGBM—under three sampling strategies to address class imbalance. Our findings reveal that undersampling significantly enhances model performance, and tree-based ML models, particularly XGBoost and Decision Tree, outperform traditional classifiers. Feature importance and misclassification analyses suggest that documentation completeness, demographic traits, and credit utilization are critical predictors of default. By combining robust empirical validation with model interpretability, this study contributes to the growing literature at the intersection of machine learning, credit risk, and financial development. Our findings offer actionable insights for policymakers, financial institutions, and data scientists working to build fairer and more effective credit systems in emerging markets. |
| Keywords: | machine learning, financial inclusion, small business, China, credit risk assessment |
| JEL: | G21 G32 C53 O16 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202532 |
| By: | Pia Stoczek (Paderborn University); Alexander Liss (KU Leuven); Boaz Noiman (The Hebrew University of Jerusalem) |
| Abstract: | We examine risk-taking by lending syndicates as a response to central banks’ corporate quantitative easing (QE) targeting non-financial firms, specifically within the European Central Bank’s Corporate Sector Purchase Programme (CSPP). This setting allows us to investigate how syndicates adjust to decreased credit demand from CSPP-eligible borrowers in environments characterized by higher risk and lower returns. Our analysis reveals that these syndicates engage in “controlled” risk-taking by directing capital towards first-time and non-relationship borrowers, especially in the leveraged loan sector, while implementing mechanisms to manage increased risk. Our study explores controlled risk-taking across four dimensions. Firstly, we observe adjustments in loan contracting terms, such as stricter collateral requirements and cross-default clauses, coupled with reductions in loan sizes and maturities. Secondly, our findings indicate that syndicate size and the intensity of relationships within syndicates increase. Thirdly, we highlight the influence of the borrower country’s debt enforcement regime on lending decisions. Lastly, we report no significant changes in loan spreads. These results suggest that following corporate QE, syndicates actively utilize risk mitigation mechanisms, demonstrating a cautious approach to managing elevated risks rather than excessive risk-taking. |
| Keywords: | Loan contracting, Relationship lending, Unconventional monetary policy, Quantitative easing |
| JEL: | E52 E60 G12 G21 G28 G30 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pdn:dispap:142 |
| By: | Philippe Aghion; Antonin Bergeaud; Mathias Dewatripont; Johannes Matt |
| Abstract: | We develop a model of endogenous growth and firm dynamics with soft budget constraints, where firms differ in their innovation speed and slower firms need additional financing in order to eventually innovate. As creditors cannot anticipate refinancing needs in advance nor credibly commit to withholding future refinancing, a Soft Budget Constraint Syndrome emerges, causing excessive entry by slow firms and crowding out potentially more efficient innovators. The resulting trade-off between the positive effects of budget constraint softening on innovation by incumbents and slow-type entrants and its negative effects on entry by fast innovators, generates a hump-shaped relationship between refinancing costs and aggregate growth. Calibrating the model to French firm-level data, we show that the budget constraint softening associated with the decline in interest rates in the aftermath of the Global Financial Crisis accounts for 54% of the observed drop in the aggregate growth rates post-crisis. Although the softening in budget constraints has had a positive effect on incumbent innovation, this was more than offset by the resulting decrease in the entry rates of good firms (by 61% relative to the pre-crisis steady state). |
| Keywords: | firm dynamics, credit growth, soft budget constraint |
| Date: | 2025–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2091 |
| By: | Pajarinen, Mika; Rouvinen, Petri |
| Abstract: | Abstract This working paper investigates intangible investments in Finnish firms from 2014 to 2019, utilizing comprehensive, register-based data from Statistics Finland. We analyze seven categories of internal intangible investments and observe that these investments are highly concentrated, with the top 10% of investors accounting for approximately two-thirds of the total. However, this concentration is comparable to that of employment, value added, and tangible investments. Firms that invest in intangibles generally exhibit higher productivity levels. Specifically, organizational capital and new financial products demonstrate a positive and statistically significant correlation with labor productivity. These findings highlight the significance of intangible investments for firm performance and offer insights into their distribution patterns within the Finnish business sector. |
| Keywords: | Intangible investments, Finnish firms, Labor productivity, Concentration |
| JEL: | D22 L25 O32 O34 |
| Date: | 2025–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:129 |
| By: | Sara Biancini; David Ettinger |
| Abstract: | We consider a framework in which both a principal and an agent care about a social mission, such as addressing social or environmental concerns. The agent requires financing and must satisfy a budget constraint. Under incomplete information, in addition to the usual quantity distortions for inefficient agents, the principal also distorts the mission upward for efficient agents and downward for inefficient ones. In our context, the existence of hidden types may improve total welfare compared to complete information, as screening incentivizes the principal to propose a contract with a higher mission to reduce the rent of more efficient types. Our results apply to social enterprises and triple bottom line environments, contributing to the theoretical understanding of the impact of non-financial incentives on optimal contracting. |
| Keywords: | impact investment, mission motivation, incentives, social enterprises, corporate social responsibility |
| JEL: | D21 L21 L31 D82 M14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11923 |
| By: | Jean-Baptiste Jacouton; Djedjiga Kachenoura; Jonas David; Ulf Erlandsson |
| Abstract: | The investments needed to achieve the Sustainable Development Goals, particularly in emerging markets and developing economies, require the mobilization of more available capital. Public development banks (PDBs) can play a key role in scaling up sustainable finance and driving transformative investments but need access to affordable, long-term funding.In this context, we assess the suitability of performance-linked debt structures, specifically sustainability-linked bonds, as a source of funding. Combining such bonds with credit enhancements, like guarantees, has the potential to reduce the cost of capital and crowd in investors – both would help to achieve sustainability goals.As an innovative solution, we propose Contingent Resilience-Linked (CORL) bonds with a partial credit enhancement that is activated if performance targets are reached. This novel concept makes it possible to address fundamental issues relating to sustainable bond markets, in particular reconciling lender/borrower incentives. Finally, CORL bonds could help mobilizing additional private capital through development banks. |
| JEL: | Q |
| Date: | 2025–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:avg:wpaper:en18149 |
| By: | Raffaella Sadun; Rachel J. Schuh; Jonathan S. Hartley; John Van Reenen; Nicholas Bloom |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about 20% of the cross-country productivity differences with the US. |
| JEL: | J0 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33765 |
| By: | Rachid Maghniwi (UM5 - Université mohamed 5, Rabat); Mustapha Oukassi (University Mohamed V, Rabat) |
| Abstract: | This study examines the effectiveness of the Asset-Liability Management (ALM) approach in improving the profitability of Moroccan banks during the COVID-19 crisis. Faced with unprecedented challenges posed by the pandemic, the Moroccan banking sector had to adapt quickly to maintain its financial stability and profitability. Our research focuses on the period 2019-2022, encompassing the pre-crisis, acute crisis, and immediate post-crisis phases. Using the Structural Equation Modeling method, we analyzed a comprehensive set of financial and operational data collected from the eight main Moroccan banks, representing over 80% of the national banking market. Our findings suggest that ALM played a crucial role in stabilizing bank profitability during this turbulent period, with a significant positive correlation between ALM implementation effectiveness and several performance indicators, including net interest margin, return on assets (ROA), and return on equity (ROE). Banks that adopted more sophisticated ALM approaches demonstrated a better ability to manage liquidity and interest rate risks, with larger banks benefiting more from their ALM systems. This research contributes to filling both theoretical and empirical gaps in the literature, providing a framework for understanding ALM effectiveness in the context of a global crisis. |
| Abstract: | Cette étude examine l'efficacité de l'approche de gestion actif-passif (ALM) dans l'amélioration de la rentabilité des banques marocaines pendant la crise de la COVID-19. Face aux défis sans précédent posés par la pandémie, le secteur bancaire marocain a dû s'adapter rapidement pour maintenir sa stabilité financière et sa rentabilité. Notre recherche se concentre sur la période 2019-2022, englobant les phases pré-crise, crise aiguë et post-crise immédiate. Utilisant la méthode des équations structurelles, nous avons analysé un ensemble complet de données financières et opérationnelles collectées auprès des huit principales banques marocaines, représentant plus de 80% du marché bancaire national. Nos résultats suggèrent que l'ALM a joué un rôle crucial dans la stabilisation de la rentabilité bancaire durant cette période turbulente, avec une corrélation positive significative entre l'efficacité de l'implémentation de l'ALM et plusieurs indicateurs de performance, notamment la marge nette d'intérêt, le rendement des actifs (ROA) et le rendement des capitaux propres (ROE). Les banques ayant adopté des approches ALM plus sophistiquées ont démontré une meilleure capacité à gérer les risques de liquidité et de taux d'intérêt, les grandes banques ayant particulièrement bénéficié de leurs systèmes ALM. Ces résultats soulignent l'importance de l'ALM dans la gestion des risques et l'optimisation des performances financières, particulièrement en période de crise. |
| Keywords: | ALM, banques marocaines, COVID-19, rentabilité, gestion des risques, performance financière, liquidité, Moroccan banks, profitability, risk management, financial performance, liquidity |
| Date: | 2025–05–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05081332 |
| By: | Takushi Kurozumi; Willem Van Zandweghe |
| Abstract: | Recent research indicates substantial differences in price-setting behavior between small and large firms, as only large firms exhibit strategic complementarities in price setting. Using firm survey data, we present new evidence that the cost-price pass-through decreases with firm size. To examine the implications for inflation dynamics, we develop a DSGE model that features heterogeneous complementarities across firm size. While standard DSGE models with homogeneous firms generate real rigidity in relative prices, there is little such rigidity in our model. Heterogeneity in strategic complementarity by firm size weakens real rigidity because large firms that exhibit strategic complementarities bring their product prices in line with those of small firms that more fully pass through cost changes. Our findings challenge the notion of strategic complementarity as a source of real rigidity in DSGE models. |
| Keywords: | firm heterogeneity; pass-through; monetary non-neutrality |
| JEL: | E31 E52 L11 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:100041 |
| By: | Nicholas Bloom; Jonathan S. Hartley; Raffaella Sadun; Rachel Schuh; John Van Reenen |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings, we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about a fifth of the cross-country productivity differences with the US. |
| Keywords: | management practices, mergers and acquisitions, productivity, competition |
| Date: | 2025–05–06 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2102 |