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on Corporate Finance |
| By: | Goel, Tirupam; Telegdy, Álmos; Banai, Ádám; Takáts, Előd |
| Abstract: | Subsidies should target firms with profitable opportunities and insufficient funding, but this is difficult due to information asymmetry between firms and the government. We study how credit history of firms can help design more efficient subsidies. To this end, we combine data on non-repayable firm subsidies and the credit registry from Hungary. Using subsidy winners and losers as treated and control groups and leveraging variation in access to loans, we identify the differential impact of subsidies. While subsidies lead to an incremental impact on assets of loan-deprived as compared to loan-acquiring firms, the impact is transitory and fades after a few years. The impact on profitability follows a similar pattern despite the higher expected marginal value of capital for loan-deprived firms. Thus, loan deprivation is likely caused by borrower shortcomings instead of credit rationing by banks. In such cases, subsidies need not target loan-deprived firms. |
| Keywords: | credit constraints; credit registry; Hungary; SME subsidies |
| JEL: | H25 H32 G38 G21 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123735 |
| By: | Young Soo Jang; Dasol Kim; Amir Sufi |
| Abstract: | We compare the lending technology of direct lenders, banks, and finance companies using a unique data set on secured borrowing by the universe of U.S.-based private middle market firms. The borrowers of direct lenders are distinct relative to those of traditional lenders; they are younger, more likely to be in intangible capital industries, and more likely to be located in the biggest cities in the United States. These differences reflect the focus of direct lenders on private equity-owned firms; direct lenders have negligible impact in industries and cities with low private equity presence. The lending technology of direct lenders is distinct from banks: they have almost no branch network, they are geographically distant from borrowers, they write collateral claims more focused on the continuation value of firms after a default, and they have a higher degree of specialization in certain industries. Direct lenders and private equity sponsors match on industry specialization more strongly than geographic proximity. The findings suggest that direct lenders are not a general substitute for traditional lenders in middle market business lending, but they are instead specialized lenders focused on a particular segment of the U.S. economy with a distinct lending technology. |
| JEL: | G00 G20 G30 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34500 |
| By: | Kolodziej, Ewa; Botsari, Antonia; Lang, Frank; Schein, Victoria |
| Abstract: | European companies and investors are faced with exceptional market conditions, characterised by unprecedented uncertainty and heightened volatility. The regular EIF Equity Survey aims at helping to navigate through that, providing support to venture capital (VC) and private equity (PE) market players, policy makers and interested audiences on their search for information about European equity markets. This report presents the results of the latest survey wave, covering the current market situation, challenges, and expectations for the near future. By gauging fund managers' perspectives across key indicators - including fundraising, exits, valuations, new investments, and deal flow - the survey offers a comprehensive view of current market dynamics and forward-looking expectations. Moreover, this edition features an in-depth focus topic: A comparison of the market framework conditions and investment dynamics in the EU and the US. In this context, the report covers also structural issues in European equity markets. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:333403 |
| By: | Dustin L. Swonder; Damián Vergara |
| Abstract: | This paper characterizes the equity–efficiency tradeoff of corporate taxation using a stylized model that draws on the corporate investment and tax incidence literatures. We derive optimal corporate tax formulas in terms of estimable reduced-form elasticities and welfare weights on workers and firm owners. While much empirical work emphasizes investment responses, these elasticities do not feature in optimal tax formulas. The elasticity of taxable profits is a sufficient statistic for the efficiency costs of the corporate tax. Higher corporate tax rates are desirable when firm owners have low welfare weights, and less desirable when taxing profits reduces wages. These empirical objects remain central across extensions, including heterogeneous production technologies, tax sheltering, international capital mobility, monopsony, and linear labor income taxes. We survey the empirical literature and find that existing estimates can support a wide range of optimal tax rates. An inverse-optimum analysis provides combinations of welfare weights of workers and firm owners that would rationalize the post-2017 US corporate tax cut as optimal. |
| JEL: | H0 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34517 |
| By: | Eduardo M. Azevedo; Florian Scheuer; Kent Smetters; Min Yang |
| Abstract: | Recent proposals to tax unrealized capital gains or wealth have sparked a debate about their impact on entrepreneurship. We show that accrual-based taxation creates two opposing effects: successful founders face greater dilution from advance tax payments, whereas unsuccessful founders receive tax credits that effectively provide insurance. Using comprehensive new data on U.S. venture capital deals, we find that founder returns remain extremely skewed, with 84% receiving zero exit value while the top 2% capture 80% of total value. Moving from current realization-based to accrual-based taxation would reduce founder ownership at exit by 25% on average but would also increase the fraction receiving positive payoffs from 16% to 47% when tax credits are refunded. Embedding these distributions in a dynamic career choice model, we find that founders with no or moderate risk aversion prefer the current realization-based tax system, while more risk-averse founders prefer accrual-based taxation. We estimate that a 2% annual wealth tax has a similar impact on dilution as taxing unrealized capital gains but produces no risk-sharing benefits due to the absence of tax credits in case of down rounds. |
| JEL: | D86 H2 H3 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34512 |
| By: | Zifeng Feng; Xun Bian; Ryan Chacon; Ran Lu-Andrews |
| Abstract: | We investigate how climate risk impacts ESG performance. Publicly listed real estate firms (real estate investment trusts, REITs) are an ideal setting to examine this relation because we can observe ESG performance at the firm level and climate risk at the property level. Using a sample of Equity REITs from 2007-2022, we document a positive relation between abnormal temperatures and ESG scores. The environmental pillar of ESG is the dominant driver of the relation between abnormal temperatures and ESG. Managers of property portfolios experiencing abnormal temperature changes respond by investing more in ESG. |
| Keywords: | abnormal temperature; Climate Risk; Esg; REIT |
| JEL: | R3 |
| Date: | 2025–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2025_212 |
| By: | Caroline Flammer; Thomas Giroux; Geoffrey Heal; Marcella Lucchetta |
| Abstract: | Does ambiguity (Knightian uncertainty) or risk provide a greater discouragement to investment? There is general agreement in the financial press that uncertainty discourages investment, with uncertainty here meaning any situation where important future policy variables (such as tariffs or tax rates) are not known. And it seems intuitively plausible that situations of ambiguity are “more uncertain” than those of risk: under risk, although the outcome is not known, its expected value is, whereas under ambiguity we have a distribution of possible expected values. In this paper we show that under quite general circumstances it is the case that ambiguity deters investment more than an equivalent risk. An equivalent risk is one characterized by a compound lottery reflecting the ambiguous situation, but without ambiguity aversion. We show that there will always be investments opportunities that are rejected when characterized by ambiguity but are accepted when characterized by risk with an equivalent compound lottery, and that the converse is not true: there are no investments that would be made under ambiguity that would not be made under equivalent risk. We develop the analysis in the context of the emerging field of green finance. |
| JEL: | D81 G11 H23 Q57 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34516 |
| By: | Savunen, Tapio; Töyli, Juuso; Mähönen, Petri |
| Abstract: | This study examines the business aspects of mobile network operators (MNOs) in public safety mobile broadband projects using MNOs' 4G/5G networks. It compares incremental and waterfall project management approaches to assess their impact on MNO profitability, public funding requirements, and the management of investment uncertainty through real options. A discounted cash flow model was used to evaluate both approaches from the perspectives of MNOs and government authorities (GAs). The findings show that the incremental project management approach outperforms the waterfall approach for both MNOs and GAs, improving MNO profitability and reducing public funding needs through phased service introduction and user adoption. The choice between project management approaches depends on project goals – whether to prioritise rapid technology replacement or added value for public safety users. This study supports MNOs in optimising financial outcomes in public safety projects, provides strategic guidance for GAs in designing effective public safety procurement processes, and offers policy recommendations for regulation. |
| Keywords: | mobile network operator, public safety, public funding, incremental project management, real options |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:itse25:331305 |