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on Corporate Finance |
| By: | Pascal Nguyen (MRM - Montpellier Research in Management - UPVD - Université de Perpignan Via Domitia - UM - Université de Montpellier); Nahid Rahman (Australian National Institute of Management and Commerce); Ruoyun Zhao (UTS - University of Technology Sydney) |
| Abstract: | Perception of social irresponsibility from negative media coverage may affect a firm's payout in two opposite ways. Firms may lower dividends in anticipation of greater financial constraints or pay higher dividends to signal that potential damage to their reputation and future cash flows is expected to be limited. Using data from RepRisk for a sample of US firms, we find compelling evidence supporting the second outcome, i.e., firms perceived as socially irresponsible pay higher dividends. This result remains valid for different payout measures and after controlling for endogeneity using instrumental variables, entropy balancing, and a difference-indifferences approach. Furthermore, the relationship is stronger for high-growth firms, consistent with their greater needs for external finance. The signaling motive is further supported by the stronger valuation effect of dividends for firms perceived as socially irresponsible, as well as the subsequent decrease in the perception of their irresponsibility and higher sales growth. Overall, the results suggest that firms use dividend policy to mitigate the potential damage due to the perception of their social irresponsibility. |
| Keywords: | Corporate social irresponsibility, CSI Public perception, Dividend signaling, Valuation effect, Media coverage, Stakeholders |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05075880 |
| By: | Götz, Martin; Laeven, Luc; Levine, Ross |
| Abstract: | We construct a novel panel dataset on insider ownership for about 600 U.S. bank holding companies from 2003 to 2014 and evaluate whether ownership structure influences banks' equity composition and recapitalization decisions around the Global Financial Crisis (GFC). Before the crisis, banks with higher insider ownership relied less on common stock and more on retained earnings. Throughout the sample period, insider ownership changes little within banks. Following the onset of the GFC, banks with larger insider ownership sold significantly less common stock than comparable peers. This effect is more pronounced where insiders enjoy greater private benefits of control, as proxied by insider lending and earnings opacity. The findings suggest insiders are reluctant to dilute their shares and lose those private benefits. These results hold when employing instrumental variables for insider ownership. Our findings imply that ownership structure affects banks' equity issuances during crises, highlighting the importance of considering ownership when designing and evaluating regulatory reforms. |
| Keywords: | Ownership Structure, Equity Issuances, Banking, Financial Crises, Regulation |
| JEL: | G32 G21 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:320430 |
| 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 percent. 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 U.S. |
| Keywords: | Management practices; mergers and acquisitions; productivity; competition |
| JEL: | L2 M2 O32 O33 |
| Date: | 2025–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:101259 |
| By: | Rachid Maghniwi (Université Mohammed 5 RABAT) |
| Abstract: | This study analyzes the determinants of the trade-off between rating-based assessment and the requirement for real collateral in bank lending to Moroccan SMEs, particularly in a context of deteriorating balance sheet fundamentals. Facing post-pandemic economic challenges and rising non-performing loans, Moroccan banking institutions are confronted with a major dilemma: strengthen their dependence on internal rating systems or favor tangible guarantees. Our research, based on a sample of 237 SMEs and covering the period 2019-2024, demonstrates that the deterioration of SMEs' financial indicators leads to a significant shift in the balance in favor of real guarantees, to the detriment of the rating approach. This evolution, while securing the banking system in the short term, risks exacerbating inequalities in access to financing and hindering the recovery of the Moroccan entrepreneurial fabric. Practical recommendations and policy perspectives are proposed to rebalance this trade-off. |
| Keywords: | Moroccan SMEs, bank credit, rating, real collateral, credit risk, balance sheet ratios |
| Date: | 2025–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05096207 |
| By: | Huiyu Li; Chen Lian; Yueran Ma; Emily Martell |
| Abstract: | We document new facts that link firms’ markups to borrowing constraints: (1) less constrained firms within an industry have higher markups, especially in industries where assets are difficult to borrow against and firms rely more on earnings to borrow; (2) markup dispersion is also higher in industries where firms rely more on earnings to borrow. We explain these relationships using a standard Kimball demand model augmented with borrowing against assets and earnings. The key mechanism is a two-way feedback between markups and borrowing constraints. First, less constrained firms charge higher markups, as looser constraints allow them to attain larger market shares. Second, higher markups relax borrowing constraints when firms rely on earnings to borrow, as those with higher markups have higher earnings. This two-way feedback lowers TFP losses from markup dispersion, particularly when firms rely on earnings to borrow. |
| JEL: | E22 E23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33960 |
| By: | Chao Li (Kyushu University and aiESG, Inc.); Alexander Ryota Keeley (Kyushu University and aiESG, Inc.); Shunsuke Managi (Kyushu University and aiESG, Inc.); Satoru Yamadera (Asian Development Bank) |
| Abstract: | Environmental, social, and governance (ESG) considerations are becoming increasingly vital in corporate decision-making, especially for global companies, and in evaluating corporate performance and investments. This study examines the ESG tendencies of the companies with the largest market values in eight East Asian and Southeast Asian countries through the analysis of 480 corporate reports published in 2023. Our findings reveal that among the various ESG topics, economics and governance risk were the most frequently mentioned in the corporate disclosure reports, though significant variations exist across the region. |
| Keywords: | environmental; social; and governance; corporate report; pre-trained transformer; deep learning; Eas |
| JEL: | G30 M14 O16 Q56 |
| Date: | 2025–07–14 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021404 |
| By: | Gangadharan, Lata (Monash Univ); Rabanal, Jean Paul (University of Stavanger); Riyanto, Eko (Nanyang Technological University;); Rud, Olga (University of Stavanger); Ødegaard, Bernt Arne (University of Stavanger) |
| Abstract: | We examine whether shareholders' responses to risky investment decisions are influenced by the gender of the firm's manager, particularly when these decisions directly affect the fundamental value per share. Our findings indicate that male and female managers make similar investment choices, that shareholder beliefs about the managers' choices are generally accurate, and that market prices do not differ by manager gender. These findings suggest that gender diversity in leadership does not negatively affect shareholder valuation. However, when subjects are explicitly asked to compare the investment of male and female managers, strong gender stereotypes emerge, and most expect male managers to take on more risk. A similar bias is evident in share price comparisons, with male-led firms slightly favored, although the effect is weaker than that observed in the beliefs about investment decisions. This pattern suggests that, while individual judgments may be biased, market mechanisms can partially alleviate such biases. |
| Keywords: | Gender; Risk Aversion; Corporate decisions; Experimental Finance |
| JEL: | C90 D81 G11 G35 G41 G51 |
| Date: | 2025–07–13 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:stavef:2025_002 |
| By: | Jan Bena (Sauder School of Business, University of British Columbia); Andrew Ellul (Indiana University, CSEF, CEPR and ECGI.); Marco Pagano (University of Naples Federico II, CSEF and EIEF.); Valentina Rutigliano (Sauder School of Business, University of British Columbia) |
| Abstract: | Entrepreneurs with more diversified portfolios of private firms provide more insurance against labor income risk: in a sample of over 524, 000 Canadian firms and 858, 000 owners, firms owned by such entrepreneurs offer more stable jobs and earnings to employees. In firms whose owners’ portfolios are one standard deviation more diversified, the passthrough rates of foreign sales shocks to layoffs and labor earnings are 13% and 41% lower, respectively. These entrepreneurs reduce their own compensation and increase firm leverage to fund labor income insurance. Enhanced insurance is associated with better retention of valuable human capital and fewer costly terminations, potentially improving firm performance. |
| Keywords: | labor income risk; portfolio diversification; firm shocks. |
| JEL: | G32 J30 J63 L20 |
| Date: | 2025–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:754 |
| By: | José Luis Peydró; Hernán Rincón-Castro; Miguel Sarmiento-Paipilla; Alejandro Granados |
| Abstract: | We study the financial and real effects of a wealth tax reform in Colombia that included a large share of small and medium-sized enterprises (SMEs) as new taxpayers. The tax was introduced in response to a severe weather shock that affected several regions of the country. We use a unique administrative dataset consisting of business loans from the credit registry, matched with balance sheet data and tax reports from both banks and non-financial firms. We identify a concentration of firms around the new tax threshold confirming anticipation of the tax by some affected firms. The new taxpayer firms exhibit tighter credit conditions compared to non-taxpayers firms. Those firms that anticipated the tax and those with ex-ante higher leverage show even tighter credit conditions. The reallocation of credit is higher among banks with high tax contributions. The tax reform also affected the allocation of trade credit among new taxpayers. Affected firms exhibit substantial negative real effects on investment, productivity, and employment. Our results indicate that taxing the wealth of SMEs affects their capital structure and real activity. *****RESUMEN: Estudiamos los efectos financieros y reales de una reforma del impuesto al patrimonio en Colombia que incluyó a una gran proporción de pequeñas y medianas empresas (PYME) como nuevos contribuyentes. El impuesto se introdujo en respuesta a un grave fenómeno climático que afectó a varias regiones del país. Utilizamos un conjunto único de datos administrativos que consiste en préstamos, emparejados con información de sus estados financieros y tributaria, tanto de los bancos como de las empresas. Identificamos una concentración de empresas en torno al nuevo umbral impositivo, lo que confirma la anticipación del impuesto por parte de algunas de las empresas afectadas por el impuesto. Las nuevas empresas contribuyentes presentan condiciones crediticias más restrictivas en comparación con las empresas no contribuyentes. Las empresas que anticiparon el impuesto y aquellas con un mayor apalancamiento ex ante muestran condiciones crediticias aún más restrictivas. La reasignación del crédito es mayor entre los bancos con altas contribuciones fiscales. La reforma tributaria también afectó la asignación del crédito comercial entre las nuevas empresas contribuyentes. Las empresas afectadas por el nuevo impuesto revelan efectos reales negativos sustanciales sobre la inversión, la productividad y el empleo. Nuestros resultados indican que gravar el patrimonio de las PYME afecta su estructura de capital y su actividad real. |
| Keywords: | Wealth taxes, firms’ capital structure, bank credit, trade credit, real effects, impuesto al patrimonio, estructura de capital de las empresas, crédito bancario, crédito comercial, efectos reales |
| JEL: | G21 G28 F34 E32 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1316 |