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on Corporate Finance |
| By: | Güçeri, Irem; Hou, Xipei; Xing, Jing |
| Abstract: | We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds. |
| Keywords: | Venture capital; Tax incentives |
| JEL: | G24 G32 H25 L26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19199 |
| By: | Cho, Rachel; Görtz, Christoph; McGowan, Danny; Schröder, Max |
| Abstract: | We propose a new approach to identify firm-level financial constraints by applying artificial intelligence to text of 10-K filings by U.S. public firms from 1993 to 2021. Leveraging transformer-based natural language processing, our model captures contextual and semantic nuances often missed by traditional text classification techniques, enabling more accurate detection of financial constraints. A key contribution is to differentiate between constraints that affect firms presently and those anticipated in the future. These two types of constraints are associated with distinctly different financial profiles: while firms expecting future constraints tend to accumulate cash preemptively, currently constrained firms exhibit reduced liquidity and higher leverage. We show that only firms anticipating financial constraints exhibit significant cash flow sensitivity of cash, whereas currently constrained and unconstrained firms do not. This calls for a narrower interpretation of this widely used cash-based constraints measure, as it may conflate distinct firm types – unconstrained and currently constrained – and fail to capture all financially constrained firms. Our findings underscore the critical role of constraint timing in shaping corporate financial behavior. |
| Keywords: | Financial Constraints; Artificial Intelligence; Expectations; Cash; Cash Flow; Corporate Finance Behavior |
| JEL: | D92 G31 G32 |
| Date: | 2025–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:eoe:escoed:escoe-dp-2025-11 |
| By: | Zhiguo He; Peter M. DeMarzo; Qiping Xu |
| Abstract: | This paper revisits the empirical evidence on capital structure adjustment and the prevalence of financing “inaction.” We show that the conclusion of infrequent leverage adjustment is sensitive to two methodological choices: high adjustment thresholds and reliance on net balance-sheet changes. Using lower thresholds and gross flows from cash-flow statements, we find adjustment is far more frequent than previously documented, and the pattern reveals pronounced size-based heterogeneity. Smaller firms exhibit considerable inertia consistent with fixed costs; the largest firms (e.g., top 1% by assets) behave as if frictions are negligible. Frictionless recapitalization models thus better describe large-firm leverage dynamics. |
| JEL: | G31 G32 G35 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35593 |
| By: | Kräussl, Roman; Rauh, Joshua; Stefanova, Denitsa |
| Abstract: | We study the effects of market ESG perceptions, as proxied by ESG ratings, on public firms’ security issuance and asset accumulation decisions. As many ratings products use restated or backfilled ratings, we focus on point-in-time (PIT) ratings. Higher ESG scores are associated with increases in equity issuance, and decreases in net debt issuance of similar magnitude, driven completely by the “E†component of ESG. There are no effects of ESG assessments on capital expenditures or non-cash asset accumulation, supporting the hypothesis that ESG perceptions are a sideshow for investment. We document that if using a standard ratings product instead of PIT data, researchers might falsely infer that higher ESG ratings lead to investment and positive asset accumulation, due in particular to the use of ESG scores in standard ratings data products. |
| Keywords: | Capital structure; Equity issues; Debt issues; ESG ratings |
| JEL: | G15 G31 G32 G34 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19282 |
| By: | Zoubir Faical (Ecole Supérieure de Technologie d'Agadir - Université Ibn Zohr = Ibn Zohr University [Agadir]) |
| Abstract: | As the prevailing paradigm in corporate governance, the shareholder model establishes the board of directors as the sentinel of shareholder interests. To safeguard the prerogatives of this "residual claimant, " the board is structured through mechanisms centered on a categorical principle: independence from managerial power. Compelling as it may be, this conception is inspired by a mythical model of the corporation where dispersed ownership incentivizes shareholders to act as free riders. However, contemporary capitalism is characterized by concentrated ownership and the dominance of controlling shareholders who shape oversight bodies, including the board of directors. In this context, the primary challenge is no longer protecting shareholders from managerial opportunism, but rather shielding minority shareholders from the hegemony of controlling blocks. This research contends that traditional board attributes are ineffective in concentrated ownership settings and fail to generate shareholder value. This thesis is empirically tested through four hypotheses using the Generalized Method of Moments (GMM) on a panel of non-financial companies listed on the Casablanca Stock Exchange between 2006 and 2011. The findings confirm the ineffectiveness of shareholder-oriented governance recommendations within the context of ownership concentration. They call for a thorough reform of legislation and corporate governance codes, as their current underpinnings appear disconnected from the realities of joint-stock companies in Morocco. |
| Abstract: | Faisant autorité de loi en gouvernance d'entreprise, le modèle actionnarial érige le conseil d'administration en sentinelle de l'intérêt de l'actionnaire. Pour sanctuariser les intérêts de ce créancier résiduel, le conseil d'administration est ciselé en mécanismes articulés autour d'un principe catégorique : l'indépendance vis-à-vis du pouvoir managérial. Aussi séduisante soit-elle, cette conception s'inspire d'un modèle mythique de la société où la diffusion du capital pousse l'actionnaire à se comporter en passager clandestin. Or, le capitalisme contemporain se caractérise par la concentration du capital et la domination des actionnaires de contrôle qui façonnent les organes de surveillance comme le conseil d'administration. Dans ce contexte, l'enjeu n'est plus tant de protéger les actionnaires contre l'opportunisme des managers que de prémunir les minoritaires contre l'hégémonie des actionnaires de contrôle. Cette recherche soutient que les attributs classiques du conseil d'administration sont inopérants en situation de capital concentré et ne créent pas de valeur actionnariale. Cette thèse est testée empiriquement à travers quatre hypothèses par la méthode des moments généralisés sur un panel de sociétés non financières cotées à la bourse de Casablanca entre 2006 et 2011. Les résultats confirment l'inefficacité des recommandations de la gouvernance actionnariale dans le contexte de concentration de l'actionnariat. Ils appellent à une refonte de la législation et des codes de gouvernance d'entreprise, dont l'inspiration actuelle semble déconnectée des sociétés par actions au Maroc. |
| Keywords: | shareholder governance, shareholder value creation, ownership concentration, Dynamic Panel Data Model, Board of Directors, création de valeur actionnariale, Concentration du capital, modèle dynamique en données de panel Board of Directors, gouvernance actionnariale, Conseil d'administration |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05638855 |
| By: | Fabisik, Kornelia; Ryf, Michael; Schäfer, Larissa; Steffen, Sascha |
| Abstract: | We study whether institutional investors in corporate debt markets respond to environmental, social, and corporate governance (ESG)-related concerns. We exploit changes in firms’ ESG ratings on the cost of debt of U.S. firms using methodology-driven changes of two major ESG rating providers in the secondary corporate loan market. We find that loan spreads of downgraded ESG-rated firms increase by 25 percent compared to non-downgraded firms after the methodology change. This increase is not driven by an increase in firms’ fundamental default risk, but rather by a premium charged by debt investors above the spread for default risk. We further find that debt investors are indeed more likely to sell downgraded firms in the same period, especially when they are more ESG-conscious. Finally, we show that this has implications for the cost of debt of firms in the primary corporate loan market. |
| Keywords: | ESG ratings; Loan spreads |
| JEL: | E44 G20 G24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19293 |
| By: | Besley, Timothy (London School of Economics); Lambert, Peter John (London School of Economics and University of Warwick and CAGE); Michalski-Roland, Isabelle (Bank of England); Van Reenen, John (London School of Economics) |
| Abstract: | This paper examines the impact of credit frictions arising from firm-level default risk on aggregate economic performance. We build a micro-to-macro model with heterogeneous firms and sector-specific production functions, showing that perceived default risk is a sufficient statistic for credit frictions. Using UK administrative data (2004-2019) matched to S&P risk measures, counterfactual estimates reveal that relaxing frictions raises output by 25% and wages by 23%. Ignoring equilibrium wage adjustments overstates output gains, while fixed-capital misallocation approaches understate them. Most gains reflect aggregate capital accumulation. Credit frictions remain above pre-crisis levels, reshape firm size dynamics, increase misallocation across firms, and dampen productivity growth over time. |
| Keywords: | productivity, default risk, credit frictions, misallocation JEL Classification: D24, E32, L11, O47 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:818 |
| By: | Terry Moon; Linda Wu |
| Abstract: | This paper assesses the income and tax consequences of selling ownership stakes in private companies using linked tax records of business owners in Canada. Comparing major shareholders who sell their entire stakes with matched counterparts who sell at a later time, we find large reductions in their overall income and taxes after selling their company, except for an initial spike in capital gains. Furthermore, they reduce their labor supply and wage income on average. We do not find evidence of serial entrepreneurship across ages or sectors, implying that business owners enjoy a "quiet life" after selling instead of starting new firms or remaining active in the labor market. |
| Keywords: | Business ownership; Firm sales; Capital gains taxation; Entrepreneurship; Labor supply |
| JEL: | H24 G34 J22 L26 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26175 |
| By: | Frankl, Andreas; Köppl-Turyna, Monika |
| Abstract: | Introduction: While existing literature suggests that distributed ledger technologies will significantly transform capital markets, research has not yet examined how resulting changes in capital market conditions affect venture capital. Thus, this paper addresses this gap by analyzing the impact of distributed ledger technologies in capital markets on venture capital. Methods: The paper begins with an overview of the theoretical foundations of distributed ledger technologies, capital markets, and venture capital. Additionally, the paper also conducts a specific review on literature connecting these research domains. Building on that, a theoretically grounded conceptual model as described by Jaakkola (2020) is developed. Results: The conceptual model developed proposes a framework that explains the key mechanisms linking distributed ledger technology usage in capital markets to venture capital. It also identifies contradictory mechanisms, core interdependencies, and both mediating and moderating factors shaping the internal relationships between the key constructs. Discussion: While changes in capital market processes, enhanced accessibility and increased liquidity will directly influence the attractiveness for venture capital in a primarily positive way, systemic risk will indirectly influence venture capitalists and have both positive and negative effects. We also derive some propositions for further investigation and provide valuable insights as well as theoretical and practical implications for researchers, entrepreneurs and investors. Conclusion: The findings of our research are both significant and novel. The framework developed represents the first systematic interconnection between distributed ledger technologies, capital markets and venture capital, and lays the foundation for further research. |
| Abstract: | In einem Research Paper legen Monika Köppl-Turyna und Andreas Frankl erstmals ein konzeptionelles Modell vor, das systematisch untersucht, wie Distributed Ledger Technologien (DLT) - darunter Blockchain- und Tokenisierungstechnologien - Kapitalmärkte verändern und welche Auswirkungen diese Veränderungen auf Venture-Capital-Investitionen haben können. Während zahlreiche Studien den Einfluss von DLT auf Finanzmärkte oder Venture Capital jeweils getrennt analysieren, fehlte bislang ein theoretischer Rahmen, der beide Forschungsfelder miteinander verbindet. Das Research Paper schließt diese Forschungslücke und entwickelt ein konzeptionelles Modell, das die zentralen Wirkungsmechanismen zwischen DLT, Kapitalmarktstrukturen und Venture Capital systematisch beschreibt. Die Autoren identifizieren vier zentrale Wirkungsmechanismen: veränderte Kapitalmarktprozesse, systemisches Risiko, Marktzugang und Liquidität. Distributed-Ledger-Technologien können etwa Abwicklungs- und Handelsprozesse beschleunigen, Transaktionskosten senken, neue Formen der Tokenisierung ermöglichen und den Kreis potenzieller Investor:innen erweitern. Für Venture Capital ist das relevant, weil bessere Liquidität, einfacherer Kapitalmarktzugang und zusätzliche Exit-Möglichkeiten die Finanzierung und Verwertung von Beteiligungen verändern können. Das Research Paper basiert auf einer systematischen Auswertung der internationalen Fachliteratur. Ausgehend von mehr als 1.200 wissenschaftlichen Veröffentlichungen entwickelten die Autoren ein theoretisch fundiertes Modell, das als Grundlage für zukünftige empirische Forschung dienen soll. Damit leistet es einen Beitrag zur aktuellen Debatte über die Zukunft digitaler Kapitalmärkte und zeigt auf, welche Rolle technologische Innovationen künftig für Finanzierung, Unternehmertum und Wettbewerbsfähigkeit spielen könnten. |
| Keywords: | distributed ledger technologies, DLT, blockchain, tokenization, capital markets, venturecapital, digital finance, entrepreneurial finance, financial innovation, conceptual model |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ecoarp:342555 |
| By: | Alberto M. G. Saruggia; Sebastien Germano |
| Abstract: | This study shows that textual descriptors alone can predict early-stage startup success, defined as Exit, without relying on contextual, financial, or human capital variables. Using venture capital-curated datasets covering 7, 419 startups over 20 years, the research isolates text-based framing variables and engineers 850 features through startup narrative mapping. Data subsets and vector embeddings are evaluated for statistical significance, followed by supervised machine learning experiments across six models. LightGBM achieved the highest predictive performance (F1 = 0.48), while textual descriptors alone achieved F1 = 0.30, confirming the standalone predictive value of founder narratives. Feature analysis shows that optimized densities of hyping markers, including adjectives, jargon, and buzzwords, are associated with higher Exit probability, whereas excessive statement or name length reduces it. The study also introduces a quantifiable Hyping Score for venture capital applications, demonstrating that startup framing provides measurable signals for predicting Exit under conditions of high information asymmetry. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.00045 |