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on Corporate Finance |
| By: | Manolov, Mladen; Berrones-Flemmig, Claudia Nelly |
| Abstract: | Given the European Union's commitments of achieving net zero by 2050 and advocating Environmental, Social, and Corporate Governance (ESG) targets, ESG is having an increasingly larger impact on businesses (Alamillos & De Mariz, 2022). Various studies have concluded that if a company has a high ESG score, it typically borrows at a cheaper rate, receives more favorable credit terms and conditions, has higher valuation, achieves better financial performance, as well as other benefits relating to its access to finance (Jang et al., 2020; Srivastava et al., 2022; Albuquerque et al., 2019; Friede et al. 2015). The same studies focus, however, predominantly on large companies in developed economies. On the other hand, the issue of the financing gap in Small and Medium-Sized Enterprises (SMEs) is experienced globally and especially in developing economies (World Bank, 2019; PwC, 2021). Given the positive impact of ESG on companies access to finance as found in existing literature and the presence of the SME finance gap in developing economies, this research investigates the impact of ESG practices on Small and Medium-Sized Enterprises access to finance in the context of Bulgaria. An overview of current and planned ESG-related European Union regulations impacting SMEs is provided. With a focus on Bulgarian SMEs, a total of 27 experts in the fields of banking, venture capital, angel investing, SME ownership or management, and ESG consulting were interviewed. This study adds to the limited body of research pertaining to the impact of ESG on SMEs financing in a developing economy setting. The research concluded that Bulgarian SMEs engaged in ESG have better debt and equity financing terms, more opportunities and dedicated channels for receiving financing, as well as benefits adding to their competitiveness, such as better access to international supply chains, reduced firm risk, tax exemptions, ability to attract and retain top talent, and higher potential for top line growth, among others. |
| Keywords: | ESG, SME access to finance, sustainable finance, SME financing gap, ESG in developing economies |
| JEL: | M Q |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:323240 |
| By: | Daisuke TSURUTA |
| Abstract: | We investigate the differences in firm performance between non-defaulting firms and firms that have defaulted on their bank loan, and factors that determine these differences, using small business data. Many previous studies investigate the determinants of loan payment defaults by small businesses. However, few papers investigate small business activities and performance after they default. Using firm-level data from Japan, we show that bank borrowings, return on assets (ROA), and sales growth are all lower after such defaults. These negative effects last approximately 10 years after default if the firm survives, suggesting that the constraints associated with a default have negative effects on firm performance for extended periods. In addition, firms with weak financial statements before the default are unlikely to survive, but those that survive enjoy a high ROA. Next, asset growth, ROA, sales growth, younger management, and the existence of a successor have positive effects on firm survival after a default. These imply that real factors are important for firm survival after a default. Lastly, additional credit and reduction of interest payments have positive effects on sales growth after a default, but negative effects on ROA. This suggests that financial support from banks has a limited effect on the survival of defaulting small businesses. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25066 |
| By: | Hussinger, Katrin; Issah, Wunnam Basit |
| Abstract: | We investigate whether family ownership is associated with a preference for patents or trade secrets. Using a sample of S&P 500 firms, we show that family ownership is negatively associated with patenting and positively associated with the usage of trade secrets. We further show that both relationships are moderated by firm performance below the aspiration level, i.e. the performance benchmark level that an organization sets. These results can be explained with a mixed gambles behavioral agency framework. When family firms perform below their aspiration level, prospective financial gains become relatively more important as compared to current socioemotional wealth so that patents become more and trade secrets less attractive. |
| Keywords: | Family firms, patents, trade secrets, mixed gambles, aspiration gap |
| JEL: | O34 O32 G32 M14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319899 |
| By: | Jorge Braga Ferreira |
| Abstract: | This study evaluates the impact of the ECB’s Corporate Sector Purchase Programme (CSPP) on corporate bond spreads at issuance, as measured by Option-Adjusted Spreads (OAS), and on subsequent changes in firms' capital structures, as proxied by year-on-year changes in the debt ratio. Using a sample of 1, 275 Eurozone corporate bonds issued between 2015:Q1 and 2018:Q4, we estimate a two-stage empirical model to evaluate. In the first stage, we find that the initial association between CSPP eligibility and lower spreads disappears once firm- and bond-level characteristics are controlled for, suggesting that observed differences reflect issuer and instrument features rather than programme eligibility. While the CSPP’s effect does not vary systematically by firm or bond characteristics, the results indicate broader market effects, likely driven by the programme’s signaling power and perceived credibility, which extended beyond the impact of direct bond purchases. In the second stage, we assess changes in leverage following the issuance of bonds. CSPP eligibility did not seem to affect the debt ratio in the issuance year. However, longer-maturity eligible bonds are associated with delayed increases in leverage, as firms expanded their debt ratios in the year following issuance. This pattern suggests that improved financing conditions under the programme may have encouraged firms to raise additional debt at a later stage. |
| Keywords: | ECB, CSPP, unconventional monetary policy, bond yields, corporate capital structure, corporate financing. |
| JEL: | C23 E52 E58 G12 G32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03902025 |
| By: | Itzhak Ben-David; Alex Chinco |
| Abstract: | To increase a company’s earnings, a project must generate enough income next year to pay for its own financing. Hence, a manager who wants to maximize her EPS (earnings per share) should only invest in accretive projects that have income yields above the firm’s cheapest financing option. This is the max EPS analog to the positive-NPV (net present value) rule. Maximizing EPS ≠ minimizing investment. EPS maximizers use real investment to arbitrage between asset and capital markets. This framework rationalizes the pervasive use of IRRs (internal rates of return) and payback periods. An IRR effectively measures how accretive a project will be. A payback period expresses the project’s income yield as a multiple. Empirically, a simple max EPS model explains M&A payment method and investment-cash flow sensitivity. It also predicts which firms have higher proportions of convertible debt and capitalized |
| JEL: | D03 D21 D22 D92 G02 G31 G32 G34 G35 J33 L21 M41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34061 |
| By: | Koenigsmarck, Markus |
| Abstract: | Sustainability is a paradigm permeating all aspects of business, including financial performance. Startups as innovation drivers are of particular interest in this context. However, our knowledge of how sustainability and performance are connected is limited for startups compared to large corporations. This doctoral dissertation addresses related research gaps with three empirical studies at the intersection of corporate finance and corporate sustainability. The first study examines the relationship between startup sustainability signaling and financing success. The results provide the first large-scale empirical evidence for a U-shaped connection between startup sustainability and funding success: those that signal the most and the least raise the most venture capital. Sustainability signaling is, therefore, not exclusively positive or negative for startups but rather part of their strategic differentiation. The second study explores how investors and startups select each other based on sustainability preferences, how investors influence the sustainability efforts of their startup investments, and the consequences for startup valuation. It provides empirical evidence that startups and investors prefer partners with a similar view on sustainability. As a result, investors are willing to pay a premium for an investment in a similar-minded firm. Moreover, it shows that startup sustainability communication increases after a green investor joins as an investor, while there is no change after a brown investor does so. Overall, the study contributes to a more nuanced understanding of treatment and selection mechanisms between investors and startups. The last study delves into how the maturity of a startup’s business model influences the founding team’s exit options. It identifies that startups pioneering a new business model are the least likely to perform an initial public offering. However, they are also the most likely to exit via an acquisition. This study contributes to a more nuanced understanding of how firstmoving and business models affect founder’s exit prospects. |
| Date: | 2025–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:156012 |
| By: | Torben Klarl; Alexander S. Kritikos; Knarik Poghosyan |
| Abstract: | While Equity Crowdfunding (ECF) platforms are a virtual space for raising funds, geography remains relevant. To determine how location matters for entrepreneurs using equity crowdfunding (ECF), we analyze the spatial distribution of successful ECF campaigns and the spatial relationship between ECF campaigns and traditional investors, such as banks and venture capitalists (VCs). Using data from the two leading German platforms – Companisto and Seedmacht – we employ spatial eigenvalue filtering and negative binomial estimations. In addition, we introduce an event study based on the implementation of the Small Investor Protection Act in Germany allowing us to obtain causal evidence. Our combined analysis reveals a significant geographic concentration of successful ECF campaigns in some, but not all, dense areas. ECF campaigns tend to cluster in dense areas with VC activity, while they are less prevalent in dense areas with high banking activity, and are rarely found in rural areas. Thus, rather than closing the so-called regional funding gap, our results suggest that, from a spatial perspective, ECF fills the gap when firms in dense areas seek external financing below the minimum equity threshold offered by VCs and when there are few banks offering loans. |
| Keywords: | Crowdfunding, Finance Geography, Entrepreneurial Finance, Venture Capital (VC) Proximity |
| JEL: | G30 L26 M13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2134 |
| By: | Lin Li |
| Abstract: | Using an intangible intensity factor that is orthogonal to the Fama--French factors, we compare the role of intangible investment in predicting stock returns over the periods 1963--1992 and 1993--2022. For 1963--1992, intangible investment is weak in predicting stock returns, but for 1993--2022, the predictive power of intangible investment becomes very strong. Intangible investment has a significant impact not only on the MTB ratio (Fama--French high minus low [HML] factor) but also on operating profitability (OP) (Fama--French robust minus weak [RMW] factor) when forecasting stock returns from 1993 to 2022. For intangible asset-intensive firms, intangible investment is the main predictor of stock returns, rather than MTB ratio and profitability. Our evidence suggests that intangible investment has become an important factor in explaining stock returns over time, independent of other factors such as profitability and MTB ratio. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.16336 |
| By: | Al Mamoon, Abdullah |
| Abstract: | In this work, we systematically analyse the differences and similarities between TradFi (Traditional Finance) and DeFi (Decentralised Finance). Financial technology is rapidly expanding, and large technology firms are making advances in credit markets. The Internet of Value (IOV), with its distributed ledger technology (DLT) as a basis, has developed new types of loan marketplaces. In this paper, we enumerate the prospects & challenges of Traditional Finance (TradFi) lending markets driven by banks and other lending institutes, as well as the opportunities of DeFi lending protocols that may support the resolution of long-standing concerns in the conventional lending landscape. Overall, fintech and big tech credit appear to complement rather than substitute the traditional forms of lending. |
| Keywords: | DeFi, Decentralized Finance, Financial Institution, Banking, Credit, Financing, Investment, TradFi, Traditional finance |
| JEL: | E5 E51 F30 G23 G32 O33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:323252 |