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on Corporate Finance |
| By: | Elona Dushku (Bank of Albania) |
| Abstract: | Small and medium-sized enterprises (SMEs) are vital to Albania’s economy but face significant financing challenges amid monetary tightening. Utilizing firm-level data from 2022–2023, this study documents that the abrupt interest rate increases in 2022 prompted a rise in alternative financing use, particularly among younger and smaller firms, alongside greater reliance on internal funds as an immediate coping mechanism. In contrast, the more gradual tightening in 2023 led to a broad-based decline in both alternative and internal financing, indicative of constrained liquidity and persistent financial pressures across firms. Notably, heterogeneity in internal financing adjustments was limited, with younger firms showing no statistically significant difference from older firms, except for those experiencing tighter bank credit conditions, who further curtailed internal funding. These findings underscore the varied responses of SMEs to phased monetary tightening and emphasize the need for targeted policy measures to support firm resilience over time. |
| Keywords: | SMEs; Access to Finance; Monetary Tightening; Firm Characteristics |
| JEL: | E52 G21 G32 L25 |
| Date: | 2025–07–04 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp09-2025 |
| By: | Roberta De Luca (Bank of Italy); Rosalia Greco (Bank of Italy and Bocconi Baffi Center.); Giovanni Immordino (University of Naples Federico II and CSEF; University of Naples Federico II, CSEF, Mofir and Cefes) |
| Abstract: | We examine how government-mandated Covid-19 business closures impacted on the ownership structure of Italian private companies and investigate the mechanisms whereby the mafia infiltrates the legal economy during crises. Using a novel dataset tracking monthly shareholder changes, we show that an increase in the days of closure reduced the number of firms undergoing ownership changes, although significantly less so in provinces with strong mafia presence. This is especially true in the sectors that are historically prone to mafia infiltration and those more severely affected by the Covid-19 liquidity crisis, and in micro-firms, which tend to be more financially vulnerable. |
| Keywords: | Mafia Infiltration, Covid-19, Firm ownership |
| JEL: | D22 G32 K42 |
| Date: | 2025–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:750 |
| By: | Nicos Koussis; Francesco Menoncin; Paolo M. Panteghini; Paolo Panteghini |
| Abstract: | We extend Trade-Off Theory (TOT) by assuming that EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), rather than EBIT (Earnings Before Interest and Taxes), follows a Geometric Brownian Motion (GBM), and we thus consider the role of tax depreciation allowances (TDA) in firms’ leverage decisions. Our model also accounts for the possibility of a sudden stop in a firm’s operations and thus incorporates the impact of finite firm and depreciation tax allowances on leverage. We show that TDA act as a complement to debt leverage, generating a negative leverage-profitability relationship over a wide range of plausible parameters, consistent with empirical evidence. However, our model also predicts that this relationship may weaken in low-tax environments or at moderate levels of volatility, and may even turn positive under very high volatility. The model retains the standard TOT predictions regarding the sensitivity of leverage to volatility, taxes, growth, and bankruptcy costs, while incorporating the effects of TDA and a finite firm horizon. Furthermore, our analysis highlights that policymakers can influence corporate capital structure through both tax rates and TDA. To implement effective policy, they should also account for the volatility of the business environment. |
| Keywords: | capital structure, contingent claims, corporate taxation, profitability, trade-off model |
| JEL: | G32 H25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11937 |
| By: | Camille Hebert; Emmanuel Yimfor; Heather Tookes |
| Abstract: | What is the role of gender in the serial founding of VC-backed startups? Despite robust evidence linking serial entrepreneurship to startup success, women comprise 13.3% of VC-backed founders but only 4% of those founding three or more startups. Using a novel design comparing men and women cofounders of the same startup, we estimate substantial gender gaps in subsequent funding outcomes on average and following failure or success of the current startup. We find these at both the extensive and intensive margins. For example, following failure, women are 22.5% less likely to found another VC-backed startup compared to their cofounders who are men. Among those who do found another VC-backed firm, women raise 53.3% less capital following failure of the current venture and 24.6% less capital following success. These gaps contribute to the well-documented gender gap in VC funding. Lower interest of women in founding new firms can only partially explain our findings. We find no evidence of gender differences in founder quality or of statistical updating by investors. Instead, consistent with unequal treatment of women, we find that women serial founders are penalized with smaller VC deals following failures of their prior startups but they are not rewarded with larger deal sizes following past successes. By contrast, men are rewarded for their prior experiences as founders, regardless of whether their startups were failures or successes. In line with theories of stereotyping and confirmation bias, we also find striking negative spillovers from unrelated women-founded failures within investors’ portfolios (and no positive spillovers from their successes). |
| JEL: | G0 G24 G30 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33943 |
| By: | Anna Maria C. Menichini (Università di Salerno and CSEF); Peter Simmons (University of York) |
| Abstract: | We propose a rationale for the joint financing of two independent projects based on the reduction in audit costs resulting from endogenous sequential verification. This cost reduction occurs not only when joint financing offers coinsurance benefits, but, remarkably, also in the presence of contagion losses -where the failure of one project negatively impacts the other. This is because the benefits from endogenous verification - namely, the cost saving from audits optimally decreasing in the reported outcome - may offset the additional cost arising from contagion, specifically, the potential need to audit a successful project due to the failure of the other. We provide a detailed characterisation of the optimal contract, showing that under certain conditions it may take the form of standard debt. Furthermore, we conduct a comparative static analysis relating the optimality of joint financing to the quality of accounting information. Importantly, we find that with fully transparent accounting information, joint financing always dominates single financing even under contagion. The results remain robust across scenarios involving simultaneous audits and multiple projects. |
| Keywords: | financial contracts, auditing, joint financing, project finance, conglomerates. |
| JEL: | D82 D86 G32 G34 |
| Date: | 2024–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:742 |
| By: | Bortolan, Leonardo; Dey, Atreya; Taschini, Luca |
| Abstract: | We establish the financial materiality of temperature variability by demonstrating its impact on US firms and investors. A long-short strategy that sorts firms based on exposure earns a market-adjusted alpha of 39 basis points per month. This variability metric is related to aggregate decreases in firm profitability, with asymmetric effects across industries. These outcomes are driven by reductions in consumer demand and labor productivity coupled with changes in media and investor attention. The geographically scalable statistical framework provides a reference for assessing the quantitative effects of climate-related physical risks, offering a metric for improving the disclosure of material climate risks. |
| Keywords: | corporate climate reporting; climate attention; temperature variability; stock returns; firm performance |
| JEL: | C21 C23 G12 G32 Q54 |
| Date: | 2024–12–06 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128521 |
| By: | Arti Grover (The World Bank Group); Mariana Viollaz (CEDLAS-IIE-FCE-UNLP) |
| Abstract: | This paper provides evidence on the nature of financial constraints faced by women entrepreneurs, especially in contexts of stringent social norms. Using micro-data from the World Bank Enterprise Surveys for 61 countries, the analysis shows that formal firms managed by women do not face credit constraints on the extensive margin. They are equally likely to apply for credit as their male counterparts and experience lower rates of credit rejection, with a higher likelihood of opening credit lines. However, on the intensive margin, firms managed by women receive lower credit amounts, indicating signs of credit constraints. This disparity in access to credit cannot be explained by gender differences in risk profiles, profitability, or productivity. However, firms managed by women have lower sales per worker, suggesting challenges in accessing product and labor markets. The paper finds suggestive evidence of capital misallocation based on gender, particularly in countries with more restrictive gender and cultural norms. Firms managed by women demonstrate a 15 percent higher average return on capital compared to firms managed by men, indicating the potential benefits of increased access to credit for women-led businesses. These findings emphasize the importance of addressing gender-specific constraints to accessing finance and promoting gender-inclusive policies to enhance firm growth and reduce capital misallocation. |
| JEL: | D22 D24 J16 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:dls:wpaper:0352 |
| By: | Kalantzis, Fotios; Revoltella, Debora; Gatti, Matteo |
| Abstract: | Leveraging data from the European Investment Survey (EIBIS) spanning 2019-2022, encompassing the pandemic crisis and the 2022 energy price shocks, our study investigates how uncertainty influence firms' climate action investment decisions in Europe at a time of one of the largest energy shocks in recent history. Our results offer insights into firms' investment behaviors across various dimensions including country, sector, and firm size. We find that increasing energy prices drove European firms to invest in both energy efficiency and climate action investments to maintain competitiveness, albeit with a more pronounced effect on the former. By contrast, uncertainty deters firms from investing in climate action and reaching their potential, making them prioritize short-term challenges over long-term climate concerns. Additionally, we observe that firm characteristics, notably energy intensity, play a significant role in shaping investment decisions, with firms operating in energyintensive sectors demonstrating a greater likelihood to invest in climate action regardless of uncertainty levels. Our results reveal the challenges and trade-offs that firms face when investing in climate action under uncertainty and high energy prices and emphasize the need for consistent and supportive policies to foster a green transition. |
| Keywords: | European Investment Bank Investment Survey, Uncertainty, Energy efficiency, Corporate investments, Energy costs, Climate Action |
| JEL: | D22 P28 Q5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:319634 |
| By: | Dylan Hogg; Hossein Jebeli |
| Abstract: | Assessing insolvency dynamics is essential for evaluating the financial health of non-financial corporations and mitigating macroeconomic and financial stability risks. This study leverages a newly created Statistics Canada dataset linking insolvency records with firm-level financial data to develop a robust framework for monitoring insolvency risk. We employ two complementary approaches: a univariate threshold method that establishes critical financial ratio benchmarks and a multivariate econometric model that accounts for interactions among financial indicators. These methods produce debt-at-risk measures that enhance risk assessment by combining simplicity with analytical depth. Finally, we apply these metrics to timely firm-level data, enabling continual monitoring of financial vulnerabilities. |
| Keywords: | Credit and credit aggregates; Econometric and statistical methods; Financial stability; Firm dynamics |
| JEL: | G33 L20 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocadp:25-010 |
| By: | Aurore Burietz; Kim Oosterlinck; Ariane Szafarz |
| Abstract: | A relationship-based hold-up effect is a phenomenon in which lenders offer unfavorable credit terms to their loyal customers. The present study focuses on the syndicated loan market. While all syndicate members benefit from the loan, only the lead lenders incur the reputational costs associated with a hold-up. It is hypothesized that, in contrast to the case with a single lender, hold-ups in the syndicated loan market more frequently impact high-quality borrowers. This is attributed to the fact that the advantages associated with lending to these borrowers outweigh the potential credit and reputational risks. Utilizing LPC Dealscan data on 24, 972 syndicated loans from 1998 to 2023, the empirical study validates the hypothesis that high-quality borrowers encounter hold-ups. Our results are robust to multiple tests and suggest that the manifestation of a hold-up effect is contingent on the configuration of the lending side of the transaction. |
| Keywords: | Lending relationship; Hold-up effect; Syndicated loans; Lender’s reputation; Credit risk |
| JEL: | D82 E43 G21 G24 |
| Date: | 2025–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:sol:wpaper:2013/391874 |
| By: | Yohei KOBAYASHI; Yasuo BAMBA; Motohiro SATO |
| Abstract: | Many countries have reduced their statutory tax rates (STRs) on corporate income while broadening their tax bases. Japan presents an intriguing case study in this context. It has reduced its STR while expanding its pro forma standard tax primarily based on companies' value-added. This study analyzes the impact of Japan's corporate tax reforms since the mid-2010s on firm dynamics using forward-looking effective tax rates (ETRs) that incorporate pro forma standard taxation. Our observations indicate that these corporate tax reforms lowered the ETR and narrowed the disparities between companies. Although the reduction in ETRs stimulated increased investment and employment, the positive impacts were partially offset for large firms owing to the expansion of pro forma standard taxation, which effectively increased the labor costs. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25062 |