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on Corporate Finance |
| By: | Grakolet Gourene (Economic Commission for Africa); Zuzana Brixiova Schwidrowski (Economic Commission for Africa); Jiri Balcar (VSB - Technical University of Ostrava); Lenka Johnson Filipova (VSB - Technical University of Ostrava) |
| Abstract: | Family-owned firms account for majority of small and medium-sized enterprises (SMEs) in Arab countries, but evidence on the impact of this ownership type on access to credit in the region is scarce. Yet the issue is key for understanding barriers to the emergence of dynamic private sector and growth acceleration. To reduce this knowledge gap, our paper examines links between family ownership and credit constraints faced by SMEs in Egypt, Jordan, Morocco, and Tunisia, utilizing the World Bank Enterprise Surveys. We find that while family-owned firms have a higher need for credit than nonfamily-owned firms, they are more likely to be discouraged from applying for it. Due to this self-selection out of credit markets, they are more credit constrained than nonfamily firms, even though their credit application rejection rates are lower. Stronger firm governance, including presence of formal business strategies and improved managerial practices, can encourage family-owned SMEs to apply for credit more often and ease their access to finance. |
| Keywords: | Family-owned SMEs, access to bank credit, firm governance, Arab Countries |
| JEL: | D22 G21 G32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:9 |
| By: | Bo Becker; Efraim Benmelech; Joao Monteiro |
| Abstract: | In 2008, the aggregate market value of U.S.-listed firms was roughly one-third higher than that of European-listed firms. By 2023, it was more than 300% higher, a difference of $34 trillion. The valuation gap is broad-based, rather than concentrated among a few superstar firms, and is driven by differences in firm values, not in the number of listed firms. Across sectors, the gap is larger in R&D-intensive industries and in industries with high returns to scale. European firms’ size is strongly correlated with home-country GDP, whereas U.S. firms’ size is unrelated to home-state GDP. Smaller European firms also face a particularly large cost-of-capital gap and do not appear able to substitute debt for limited access to equity financing, including venture capital. Taken together, these facts suggest that financial and product-market frictions constrain European firms’ ability to scale. |
| JEL: | G12 G15 G32 O36 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35577 |
| By: | Reyes Ortega, Santiago; Freeman, Kianna Rachael; Hernando Kaminsky, Pablo Daniel; Huber, Jeremias Luca; Mauro, Paolo |
| Abstract: | Venture capital is widely viewed as financing knowledge-intensive, R&D-driven startups, but owing to data constraints, this view has been based largely on high-income economies. By taking a global perspective, this paper documents that what venture capital finances differs systematically across economies, varying with institutional and business conditions rather than following a single model. Using a new cross-country dataset that harmonizes firm-level venture capital records with equity issuance data for more than 150 economies, the data shows that VC markets differ across countries not only in scale but in kind. Outside high-income countries, rather than being concentrated in knowledge intangibles, venture capital tilts–at both the sector and firm levels–toward organizational intangibles such as distribution, logistics, and payments. Highlighting the unique features of venture capital, this pattern is absent from public equity markets, where sectoral composition is far more similar across income levels. An accounting decomposition separates venture capital depth into the rate at which firms enter the market and the funding each entrant attracts, and entry accounts for the largest cross-country gaps. Moreover, the business environment is associated with VC primarily through entry, linked both to the size of the market and to the composition of what venture capital finances, the latter through entry into knowledge-intensive sectors in particular. |
| Date: | 2026–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11438 |
| By: | Hennings, Christian Hermann |
| Abstract: | Venture capital (VC) plays a central role in financing entrepreneurial ventures. Despite its importance, the relationship between risk and return remains difficult to explain by standard financial theory. Standard asset pricing theory conceptualizes risk as an ex-ante, observable characteristic that is compensated by expected returns through a stable, separable relationship. However, in VC markets illiquidity, staged financing, information asymmetries, and highly skewed payoff distributions violate these assumptions. Risk and return are jointly determined by financing dynamics, investor heterogeneity, and market conditions, so that realized returns reflect a combination of technological, financing, timing, and macroeconomic risks. This dissertation advances the argument that the risk-return relationship in VC is not a stable trade-off but varies systematically with financing conditions and investor composition. The seven empirical chapters collectively examine how staged financing, capital supply dynamics, and regional and organizational heterogeneity across investor types influence observed performance patterns. The findings show that risk and return in VC are shaped by market conditions, investor structure, and regional environments. Expansionary periods increase venture survival and delay the realization of downside risk. In contrast, contractionary periods reduce capital supply and accelerate selection. Consequently, identical underlying venture risk may result in different observed performance outcomes, depending on the prevailing market regime, the type of investor providing capital, and the institutional and financial depth of the regional ecosystem. Differences in investor resources, organizational form, and regional institutional frameworks systematically affect funding continuity, exit timing, and the distribution of realized returns. Overall, this dissertation contributes a unified framework that integrates insights from asset pricing, entrepreneurial finance, behavioral finance, and macro finance. It demonstrates that deviations from classical risk-return logic in VC arise systematically from the interaction of staged financing, investor heterogeneity, and regime-dependent capital supply, implying that observed performance patterns reflect structural market dynamics rather than stable risk premia. |
| Date: | 2026–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:161940 |
| By: | Robert Prilmeier; René M. Stulz |
| Abstract: | Following the global financial crisis (GFC), regulators made it harder for banks to retain leveraged loan exposure. We conjecture their actions increased the share of leveraged loan issuances with no maintenance covenants (cov-lite loans) because such loans are easier to sell. We find that, post-GFC, the share of cov-lite loan issuance increased more for banks facing stricter regulation, failing to pass a stress test outright, or exhibiting greater vulnerability to the severely adverse stress test scenario. We show that, as expected from theory, cov-lite loans have a liquidity advantage that lowers their credit spread and is higher for private firms. |
| JEL: | D82 G18 G23 G32 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35617 |
| By: | Moritz Heiß (TU Darmstadt - Technische Universität Darmstadt - Technical University of Darmstadt [Darmstadt]); Lukas Müller (TU Darmstadt - Technische Universität Darmstadt - Technical University of Darmstadt [Darmstadt]); Marc Ringel (SDCT - European Chair for Sustainable Development and Climate Transition (Sciences Po) - Sciences Po - Sciences Po) |
| Abstract: | This policy brief summarizes new evidence on how stock markets react to environmental, social and governance (ESG) performance when listed firms raise fresh equity capital. The underlying study examines 872 seasoned equity offering (SEO) announcements by 408 U.S. manufacturing firms between 2016 and 2023. Because SEO announcements are typically unexpected and efficiently priced by financial markets, they provide a useful setting for assessing investor responses while reducing reverse-causality concerns that often affect ESG-performance studies. The core finding is that there is no simple linear "more ESG is always better" relationship. Instead, the study documents an inverted U-shaped association for the overall ESG score and, more clearly, for the social pillar in the post-2020 period. Firms with moderate social scores receive the most favorable short-term market reactions, while both lower and higher scores are associated with lower announcement returns. By contrast, environmental scores are negatively associated with short-term market reactions after 2020. The study finds no link between ESG performance and longer-horizon buy-and-hold abnormal returns or SEO underpricing. For policymakers and finance actors, the main message is one of caution. Aggregate ESG scores can hide materially different pillar effects; non-linear patterns matter; and evidence from earlier periods may not travel well to today's market environment. ESG information appears most useful when it is material, credible and interpreted in context rather than treated as a monotonic signal of lower financing risk. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05721354 |
| By: | Negar Mohammadi Jazi (London School of Economics); Felipe Netto (Bank of England) |
| Abstract: | We analyse how risk-based capital requirements shape competition and credit allocation in the UK unsecured Small and Medium-sized Enterprises (SME) lending market using confidential loan-level data. Motivated by empirical patterns, we develop and estimate a structural model with screening, asymmetric information, and imperfect competition, in which banks and non-bank lenders differ in regulatory treatment. We estimate lender-specific costs and screening precision, and show how these features jointly account for the observed lender market shares across borrower risk and loan size segments. Our results indicate that regulation interacts with heterogeneity in information processing and costs to shape equilibrium pricing and credit allocation, with non-bank lending reflecting not only regulatory differences but also comparative advantages in screening technology. Our model provides a quantitative framework for evaluating regulatory policy in markets with both regulated and non-regulated intermediaries. |
| Keywords: | Small business lending;asymmetric information;non-bank financial intermediaries;screening;capital regulation |
| JEL: | G20 G21 G23 G28 |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023313 |
| By: | Aurélien Espic |
| Abstract: | This paper examines how heterogeneous capital pledgeability shapes capital allocation. I first document, using French firm-level data, that firms holding more pledgeable capital are structurally more leveraged and display greater sensitivity of investment to credit supply shocks. I then incorporate heterogeneous capital pledgeability into a general equilibrium model with collateral constraints. This feature creates sectoral capital misallocation: high-pledgeability capital is less costly to accumulate and thus yields lower expected returns than low-pledgeability capital, both in steady state and in response to credit supply shocks. I estimate the model based on a simple distinction between commercial real estate and other types of capital goods, the former being more pledgeable. I then show that capital misallocation is substantial over the credit cycle. Because these capital goods are imperfect substitutes and firms face a unique interest rate, redistributive credit policies taxing debt issued by high-pledgeability firms while subsidizing that of less pledgeable firms raise welfare, particularly when implemented during a credit expansion. |
| Keywords: | Capital Pledgeability, Capital Misallocation, Credit Policies |
| JEL: | E44 E58 E61 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1058 |
| By: | SHINKAI, Takahide |
| Abstract: | Using a large panel (2001–2021) of Japanese listed and unlisted firms from Teikoku Databank, Ltd., we examine how ownership structure shapes cost adjustment in general operating firms—outside the capital-adequacy regulation that constrains the banking setting of prior work. We find that listed firms maintain more elastic cost structures than unlisted firms (Hypothesis 1). Their ex post adjustment, however, is state-dependent. In temporary sales declines (a prior-period increase followed by a current-period decrease), listed firms exhibit stronger cost stickiness and suppress cost reductions (Hypothesis 2a); under persistent declines spanning two consecutive periods, they instead cut costs more aggressively than unlisted firms (Hypothesis 2b). Ownership thus conditions a state-dependent, nonlinear pattern in which market discipline switches between resource retention and reduction according to the persistence of the demand decline. The results are robust to Heckman self-selection correction and to propensity-score matching, inverse-probability weighting, and entropy balancing. |
| Keywords: | Cost Behavior, Cost Stickiness, Cost Elasticity, Ownership Structure, Unlisted Firms, Listed Firms, Self-selection Bias, State Dependence |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2026-01 |
| By: | Kräussl, Roman; Oladiran, Tobi; Stefanova, Denitsa |
| Abstract: | We examine whether the uncertainty related to environmental, social, and governance (ESG) regulation developments is reflected in asset prices. We proxy the sensitivity of firms to ESG regulation uncertainty by the disparity across the components of their ESG ratings. Firms with high ESG disparity have a higher option-implied cost of protection against downside tail risk. The impact of the misalignment across the different dimensions of the ESG score is distinct from that of the ESG score level itself. Aggregate downside risk bears a negative price for firms with low ESG disparity. |
| JEL: | G12 G18 G32 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19292 |
| By: | Marianne J. Rodriguez (Bangko Sentral ng Pilipinas); John Paolo R. Rivera (Bangko Sentral ng Pilipinas); Ivan Cenon V. Bernardo (Bangko Sentral ng Pilipinas); Ramona Maria L. Miral (Philippine Institute for Development Studies); Mark Gerald C. Ruiz (BSP Research Academy) |
| Abstract: | In the Philippines, the COVID-19 pandemic resulted in an unprecedented contraction in gross domestic product—the largest decline across Southeast Asian nations. Beginning in March 2020, the government implemented a series of strict lockdowns to mitigate the spread of the virus. However, these measures led to prolonged disruptions in economic activity and, at the corporate level, declines in revenues, establishment closures, and mass layoffs. We analyzed the impact of the pandemic on corporate performance and employment using a unique dataset for the Philippines that combines firm-level financial data, establishment‑level employment data, and business restrictions data defined for each industry‑province‑year combination. We constructed a panel of around 2, 500 firms and 3, 900 establishments covering the period 2018–2022. Using firm fixed-effects regression, we found that mandatory business closures had a large negative impact on corporate revenues, with a full‑year closure resulting in a 65.0‑percent reduction in annual revenues, or a 5.4‑percent reduction for each month of closure. For liquidity‑constrained firms, the decline is larger in magnitude, suggesting that the lack of liquidity impairs a firm’s ability to cope with the crisis and withstand business closures. While revenues began to recover in 2022, lingering adverse effects on profitability and employment remain. Finally, we found that the pandemic had a limited adverse impact on firms’ financial positions. |
| JEL: | D22 E65 G32 L25 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bhd:dpaper:202513 |