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on Corporate Finance |
| By: | Pursiainen, Vesa; Sun, Hanwen; Wang, Qiong; Yang, Guochao |
| Abstract: | A unique natural experiment in China - the city-level staggered introduction of administrative approval centers (AAC) - reduces bank loan processing times by substantially speeding up the process of registering collateral without affecting credit decisions. Following the establishment of an AAC, firms significantly reduce their cash holdings. State-owned enterprises are less affected. Cash flow sensitivity of cash holdings decreases, as does the cash flow sensitivity of investment. The share of short-term debt increases, while inventory holdings and reliance on trade credit decrease. Defaults also decrease. These results suggest that timely access to credit has important implications for firms' financial management. |
| Keywords: | banking, efficiency, precautionary cash holdings, capital management, corporate loans |
| JEL: | D25 G21 G28 G32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:334520 |
| By: | Nan Chen; Xavier Giroud; Ling Qin; Neng Wang |
| Abstract: | We study the determinants of corporate cash holdings by extending the standard q theory of investment with financing frictions and productivity shocks. While existing models predict a low propensity to hold cash, we show that realistic cash holdings arise only when three ingredients are combined: 1.) costly external financing, 2.) persistent productivity shocks, and 3.) contemporaneous productivity shocks. With costly external financing, persistent productivity shocks generate predictable cash flows and investment opportunities, but yield little need for savings since the internally generated cash flows are aligned with the investment needs. Contemporaneous shocks make internally generated cash flows random, inducing firms to hold cash at levels consistent with those observed empirically. |
| JEL: | C61 D92 G31 G32 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34622 |
| By: | Bao, Yangming; Götz, Martin |
| Abstract: | We examine peer effects in corporate finance by assessing how a firm's investment influences its neighboring peer firms' investment. To uncover the exogenous com- ponent of investment, we exploit time variation in the increases in state corporate income taxes across the United States and utilize heterogeneity in local peer firms' exposure to these tax increases to construct an instrumental variable. We identify a positive and robust causal effect of local peer firms' investment decisions on firm investment. Distinguishing between physical and intangible investment, we find that peer firms' investment in physical (intangible) capital only influences firm investment in the same type of capital, particularly when that capital is central to operations. Further evidence indicates that learning from peers is an important factor, as peer effects are more pronounced for firms with stronger learning motives. |
| Keywords: | Corporate Investment, Peer Firm Effects, Corporate Income Tax, Agglomeration |
| JEL: | G0 G31 G38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:334531 |
| By: | Jose Joaquin Lopez (University of Memphis); Ashantha Ranasinghe (University of Alberta) |
| Abstract: | We analyze micro-scale businesses in Mexico and find large gender gaps in sales, profit, and access to finance. Accounting for differences in education and entrepreneurial commitment, women-owned firms perform worse and receive less financing than comparable men-owned firms. We interpret these patterns in a model economy where individuals with different managerial abilities choose between wage work and entrepreneurship, while women face discrimination in labor and credit markets. The model replicates observed gender differences in occupations and capital use. Equalizing credit access sharply reduces gender gaps in entrepreneurial earnings, but implies only modest aggregate gains on productivity and output. Size-dependent taxes or income subsidies generate smaller impacts or far more costly gains. |
| Keywords: | informality; gender; micro-firms; misallocation; finance |
| JEL: | J16 O10 O40 O50 |
| Date: | 2025–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:021996 |
| By: | Yuji HONJO; Arito ONO; Daisuke TSURUTA |
| Abstract: | This study examines how regional financial development influences new firm creation and growth in Japan. Using prefecture–year panel data from 2007 to 2023, we distinguish between regional equity and debt capital, proxied by the number of investment limited partnerships and bank branches, respectively. We find that regions with greater equity capital have more newly founded firms and initial public offerings, and provide suggestive evidence of stronger sales growth among young firms (firms within five years of establishment), whereas regional debt capital has no significant effect. Moreover, regional equity capital is associated with higher employment shares of medium- and large-sized young firms and lower shares of small ones, implying that regional equity capital promotes a compositional shift in new firm creation toward larger entrants. These findings are robust to potential endogeneity concerns and to alternative measures of financial development. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26005 |
| By: | Galilea, Manuel; Farazi, Subika; Mare, Davide Salvatore |
| Abstract: | Understanding the drivers of credit constraints is essential for fostering private sector development and firm growth. This study examines the channels through which electronic payments influence firm credit constraints across 101 economies. It explores heterogeneity at the firm and aggregate levels to identify key policy and environmental factors that shape this relationship. The findings indicate that payment digitalization plays a critical role in alleviating firm credit constraints, particularly for small firms and in economies with weaker credit infrastructure and lower levels of financial development. These results support the view that electronic payments help reduce information asymmetries between firms and lenders, thereby improving lending opportunities. |
| Date: | 2026–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11287 |
| By: | Iñaki Aldasoro; Sebastian Doerr; Daniel Rees |
| Abstract: | Investment related to artificial intelligence (AI) is surging – both in nominal amounts and as a share of GDP – and currently accounts for a substantial share of economic growth. The size of anticipated investment needs will require firms to shift the source of financing from operating cash flows to debt, with private credit playing a rapidly increasing role. While macroeconomic and financial stability risks from the AI boom appear moderate, the boom's sustainability hinges on AI firms meeting high earnings expectations. The fact that equity prices have run far ahead of debt market pricing underscores this tension. |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:120 |
| By: | Trejo-Pech, Carlos J.O. |
| Abstract: | The goal of this case study is to explore the complexities and relevance of accurately estimating the cost of capital, which serves as a reference for key decisions in corporate finance and equity valuation. A company’s cost of capital is not directly observable and must be estimated. Despite the simplicity of a company’s cost of capital formula, estimating the cost of capital is not simple because it requires a fair amount of judgment. The case, designed for agribusiness finance and financial management courses, is about major firms in the U.S. grocery store sector (including Walmart, Kroger, Albertsons, Costco, and Publix), which is the largest food retail channel. The case summarizes and discusses findings mainly from three studies that surveyed financial managers on their cost of capital estimation practices. This discussion highlights the lack of consensus on several aspects of cost of capital estimation and underscores the importance of making informed judgments based on finance and economics principles. The case study provides enough historical and recent financial statements and market data to estimate the cost of capital of grocery store firms. It also suggests a series of questions aiming to achieve the case’s learning objectives. |
| Keywords: | Agribusiness |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361155 |