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on Corporate Finance |
| By: | Wolski, Marcin |
| Abstract: | We examine the relationship between capital structure and carbon intensity in manufacturing firms using a novel dataset that combines information from the EU Emission Trading System with firm-level financial accounts. Our findings indicate that higher financial leverage is associated with lower emission intensity at the firm level, primarily due to long-term debt, suggesting that improving access to such finance is generally conducive to corporate emissions reductions. However, this effect varies along the carbon intensity distribution. For firms with very high carbon intensity, increased leverage is linked to significant reductions in emissions, suggesting that better access to finance can facilitate the adoption of green technologies. Conversely, for firms that are already relatively carbon efficient, the effect disappears. |
| Keywords: | low-carbon transition, climate change, debt finance, financial leverage, EU ETS |
| JEL: | C58 G32 Q51 Q56 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:310333 |
| By: | Alper, Koray; Baskaya, Soner; Shi, Shuren |
| Abstract: | This study investigates the influence of macroprudential policies (MaPs) on corporate investment, employing firm-bank level microdata from the European Investment Bank Investment Survey (EIBIS) for the period 2015-2022. We initially document that MaP tightening, particularly through supply-based MaPs, leads to a reduction in corporate investment. We then delve into the transmission mechanism of MaPs. Our analysis suggests that MaPs affect corporate investment through bank lending decisions. MaP tightening correlates with greater reliance on internal finance and reduced use of external finance. Further, we find that both bank and firm characteristics significantly contribute to the effect of MaPs on corporate investment. Specifically, we observe that financially weaker banks are more likely to restrict credit in response to MaP tightening. Moreover, firms that are heavily reliant on external finance for investment, as well as those that are financially weaker, appear to be more adversely affected by a reduced credit supply. Lastly, we find that MaPs exert a stronger impact on tangible investments, whereas intangible investments are less sensitive to MaPs. Our finding suggests that the insignificance is due to the lower reliance of intangible investments on external finance, verifying the presence of the bank lending channel of MaP transmission. |
| Keywords: | Macroprudential policies, bank lending, tangible investments, intangible investments, financial stability |
| JEL: | D22 E22 E58 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eibwps:310332 |
| By: | Kaushik, Rituparna; Paul, Sourabh Bikas; Sartorello Spinola, Danilo (RS: UNU-MERIT) |
| Abstract: | This article studies the innovation effort in India through the education of corporate board members obtained from prestigious STEM higher education institutes known as the Indian Institute of Technology (IITs). Our primary aim is to enquire whether firms with director/s having an IIT-Bachelors’ degree in their corporate boards positively impact the firm’s innovation effort. To answer this question, we build a novel dataset merging two micro-level databases: CMIE-Prowess (firm innovation) and NSE-Infobase (board of directors' characteristics). Based on the sample of 6151 Indian firms for 2006-2015, we find that overall, having board members with IIT-Bachelor’s qualifications do enhance innovation efforts to some extent. However, the positive effect on innovation effort becomes more robust when the director has a research degree over their IIT- Bachelors’ degree. The paper highlights that when it comes to innovation efforts, the dominant narrative of relying solely on IIT-STE M elite undergraduate education (IIT-Bachelor’s) is insufficient and should also focus on and prioritize research education. |
| JEL: | O31 G30 I23 |
| Date: | 2023–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2023014 |
| By: | Bambe, Bao-We-Wal |
| Abstract: | Achieving the Sustainable Development Goals (SDGs) will require significant financing and investment, particularly as growing challenges from climate events highlight the insufficiency of public funds to meet the 2030 Agenda (World Economic Forum 2024). Private capital for low- and middle-income countries (LMICs) surged in recent years, with significant commitments from multilateral development banks (MDBs). However, the financing gap to achieve the SDGs remains sizable, highlighting the need for greater effort to mobilise much larger private capital for sustainable development. In recent years, guarantees have emerged as a key leveraging mechanism. They are designed to mitigate high investment risks to support private capital mobilisation in LMICs. However, despite some progress, guarantees are used sparingly, suggesting considerable scope for increasing their scale, as highlighted by the G20 Independent Expert Group (IEG). This Policy Brief examines whether guarantees can serve as an effective leveraging mechanism for small and medium-sized enterprises (SMEs) in low- and middle-income countries (LMICs). This is especially so because SMEs remain largely hampered by poor access to finance, despite their key role in providing jobs for the local population and contributing to economic growth. Moreover, in the face of climate change, SME adaptation requires new investments in climate-resistant technologies and clean energies, highlighting the need for additional financing amid severe constraints on access to capital. Guarantees can complement other leveraging mechanisms, further easing financing constraints for SMEs in LMICs. Guarantees can absorb some of the risks associated with investment, offering financial institutions greater security. This added security can, in turn, help improve access to capital for SMEs. On the other hand, they can also help catalyse private sector investment in LMICs. Recognising both the potential benefits and short-comings of guarantees, this Policy Brief provides the following policy recommendations on how guarantees could be extended efficiently to the SME sector in LMICs. - Guarantees should be directed at financial institu-tions to mitigate portfolio risk and actively promote lending to small projects or SMEs in high-risk sectors, particularly those with the potential to generate substantial economic, environmental, or social benefits. - Complement guarantees with additional measures to improve SMEs' financial management, enhance risk assessment, and strengthen technical capacity through professional training and advisory services. - Implement partial credit guarantees to require financial institutions to retain a share of the risk, thereby reducing moral hazard and promoting rigorous analyses of borrowers' creditworthiness. Complement these guarantees with conditionalities and monitoring criteria, such as regular reporting, to ensure the incrementality and additionality of guaranteed financing. Enhance the harmonisation of guarantees with other leveraging mechanisms, improve coordination among MDBs and DFIs, and streamline guarantee frameworks to achieve greater efficiency. - Recognise that guarantees alone cannot address structural vulnerabilities and institutional weakness in LMICs; a long-term commitment from decision-makers is essential to improve institutional and economic performance. |
| Keywords: | Guarantees, Multilateral Developemnt Banks, Small and Medium-Sized Enterprises, Low- and Middle-income Countries, 2030 Agenda |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:idospb:309600 |
| By: | Federico Huneeus; Joseph P. Kaboski; Mauricio Larrain; Sergio L. Schmukler; Mario Vera |
| Abstract: | This paper studies how credit guarantee and employment protection programs interact in assisting firms during crises times. The paper analyzes how these government programs influence credit allocation, indebtedness, and risk at both the micro and macro levels. The programs provide different incentives for firms. The low interest rate encourages riskier firms to demand government-backed credit, while banks tend to reject those credit applications. The credit demand outweighs this screening supply response, expanding micro-level indebtedness across the extensive and intensive margins among riskier firms. The uptake of the employment program is not associated with risk, as firms internalize the opportunity cost of reduced operations when sending workers home to qualify for assistance. The employment program mitigates the indebtedness expansion of the credit program by supporting firms and enabling banks to screen firms better. Macroeconomic risk of the credit program would increase by a third without the availability of the employment program. |
| Keywords: | banking, credit demand, credit supply, crises, Covid-19, debt, employment protection, firm risk, macroeconomic risk, public credit guarantees |
| JEL: | G21 G28 G32 G33 G38 I18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11652 |
| By: | Gabor Katay (European Commission, Directorate†General for Economic and Financial Affairs); Palma Filep-Mosberger (Magyar Nemzeti Bank (Central Bank of Hungary)); Francesco Tucci (Sapienza Università di Roma) |
| Abstract: | The paper evaluates the impact of the European Commission’s Seventh Framework Programme (FP7) grants on profit†oriented firms’ post†treatment performance. Using a quasi†experimental design and a dataset covering applicants from 46 countries, we find that FP7 grants increase firms’ sales and labour productivity by about 18%. However, there is no significant impact on employment levels, pointing to potential growth barriers that prevent firms from scaling production despite improved productivity. The effectiveness of these grants varies significantly based on factors such as financial constraints, project risk profiles, market structure, and the innovation environment. Smaller, less productive firms with tighter financial constraints in technologyintensive sectors operating in concentrated markets and favourable innovation environments, particularly those undertaking longer and riskier projects, tend to benefit more. |
| Keywords: | EU funds for research and innovation; firm productivity; regression†discontinuity design. |
| JEL: | C31 G28 H57 O31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:mnb:wpaper:2025/1 |
| By: | Nu Nu Win (Australian National University); Jonathan Hambur (Reserve Bank of Australia); Robert Breunig (Crawford School of Public Policy, Australian National University) |
| Abstract: | Using Australian tax and survey data, we exploit discrete eligibility cut-offs to estimate the effect of several business investment tax breaks, including tax credits and instant asset write-offs, implemented over the past 15 years. Policies implemented during the global financial crisis increased investment. Responses are larger for unincorporated businesses, possibly reflecting reduced efficacy of investment stimulus under Australia's dividend imputation system. However, we find mostly no evidence of an effect for other investment policies, including those implemented to address the COVID-19 pandemic. |
| Keywords: | investment; tax incentives |
| JEL: | D21 D22 G31 H25 H32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbardp:rdp2025-01 |