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on Corporate Finance |
| By: | Fernando Broner; Juan J. Cortina; Sergio L. Schmukler; Tomas Williams |
| Abstract: | This paper examines how shifts in investor demand influence firm financing and investment decisions. For identification, the paper exploits a large-scale MSCI methodological reform that mechanically redefined the stock weights in major international equity benchmark indexes, changing the portfolio allocation of 2, 508 firms across 49 countries. Because benchmark-tracking investors closely follow these indexes, the rebalancing constituted a clean shock to equity demand. The results show that portfolio rebalancing by benchmark-tracking investors generated significant capital inflows and outflows at the firm level. Firms experiencing larger inflows increased equity issuance, even more so debt financing, and real investment. The paper complements the empirical analysis with a simple model of firm financing in which a decline in the cost of equity increases the value of equity and relaxes borrowing constraints. Higher equity valuations allow firms to expand borrowing even without issuing substantial new equity, so debt financing responds more strongly than equity issuance. |
| Keywords: | Asset managers, benchmark indexes, corporate debt, equity, investment, institutional investors, issuance activity |
| JEL: | F33 G00 G01 G15 G21 G23 G31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1938 |
| By: | Traversa, Marina |
| Abstract: | Can a recession have a positive, long-term impact on firm innovation? A downturn represents an opportunity for firms to learn from their peers and try to understand the main drivers of resilience. If they deem R&D capital one of them, they may raise innovation in the following years, in order to be better shielded from future crisis. In this paper, I provide evidence of this effect in the aftermath of the Great Recession. I do so by assuming that firms learned from their best peers and by examining the characteristics of these companies. I first look at their level of R&D capital and find that firms with high-R&D best peers raised intangible investment 5 percent more than others after 2008. I then examine the top competitors' type of R&D capital and show that companies raised innovation only in the case of high-productivity (as opposed to high-product differentiation) best peers. Using alternative tests, I find a positive (negative) relationship between productivity (product differentiation) and company performance during the crisis, which supports the fact that companies learned from their peers and raised innovation only when they deemed it a source of resilience to the downturn. Finally, I examine whether the increase in innovation improved firm resilience and show that it did: companies raised sales growth, profitability and international recognition and were less likely to fail. |
| Keywords: | Corporate Finance, Innovation, Learning, Resilience, Productivity, Product Differentiation |
| JEL: | G30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:336815 |
| By: | Konrad Adler; Sebastian Doerr; Sonya Zhu |
| Abstract: | Over the past decades, index funds have amassed substantial ownership stakes in publicly traded firms. Index funds' rapid growth raises questions about their influence on governance and monitoring, as well as the consequences for other stakeholders. This paper examines how banks adjust their loan pricing when firms have a higher share of passive index fund investors as shareholders. Using syndicated loan data, we find that loan spreads increase with passive ownership and provide evidence consistent with higher loan spreads reflecting increased risk due to reduced shareholder oversight. Supporting this interpretation, we find stronger effects among firms in which shareholder oversight has more impact. However, the increase in loan spreads is not fully accounted for by changes in firm risk. Suggestive evidence points towards banks increasing their monitoring efforts in response to changes in shareholder composition, which is costly and reflected in loan spreads. |
| Keywords: | passive ownership, institutional investors, bank monitoring, syndicated loans |
| JEL: | G21 G23 G32 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1330 |
| By: | Bartzokas, Anthony |
| Abstract: | Emerging economies confront unprecedented challenges mobilizing finance for green industrial transitions while maintaining development trajectories. This paper examines implementation effectiveness across India, South Africa, Brazil, and Indonesia-major economies representing diverse political systems, economic structures, and policy approaches- documenting systematic gaps between stated climate commitments and realized outcomes ranging from 33% to 77% of stated targets. Through comparative analysis of policy frameworks, financing architectures, and sectoral dynamics spanning renewable energy, industrial decarbonization, sustainable agriculture, and just transitions, we reveal that aggregate capital availability constitutes only partial explanation. Firm-level financial constraints systematically structure which technologies firms can adopt constrained firms pursue incrementally cleaner but emission-intensive options, while only unconstrained firms access frontier low-emission technologies. This "pecking order" mechanism-predicted by recent theoretical work and validated across four diverse country contexts-generates three fundamental policy challenges. Three critical implications emerge. First, green credit must target frontier technologies precisely, yet such targeting creates politically challenging coverage gaps and exceeds institutional capacity. Second, blended finance exhibits fundamental tension between leverage maximization and genuine additionality. Third, just transition programs systematically underserve workers dependent on constrained firms unable to finance transitions. Looking forward, financing effectiveness will depend increasingly on institutional autonomy rather than merely capital costs: capacity to navigate fragmented global financial architectures, preserve infrastructure control, and maintain policy space as geopolitical competition intensifies and debt burdens rise. |
| Keywords: | green industrial policy, development finance, blended finance, financial constraints, just transitions, emerging economies |
| JEL: | O38 L52 O16 G28 Q58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iedlwp:336698 |
| By: | Mani, Sunil |
| Abstract: | This paper analyses the role of loan guarantees in supporting the internationalisation of Indian firms through outward foreign direct investment (OFDI) since the mid-2000s. Despite a persistent domestic savings-investment gap and recurrent current account deficits, Indian OFDI has expanded significantly, raising questions about its underlying financing mechanisms. The paper argues that regulatory liberalisation and the growing use of loan guarantees have been central to this expansion. Using balance-of-payments analysis and a stylised framework that distinguishes between private and guaranteed financing channels, the study documents a shift in OFDI financing from equity dominance towards a more diversified structure that includes reinvested earnings, intercompany loans, external commercial borrowings, and guaranteed debt. While guarantee issuance has increased markedly, invocation rates remain low, indicating that guarantees primarily serve as credit-enhancement tools rather than realised fiscal liabilities. The paper concludes that India's predominantly private-risk approach has enabled corporate internationalisation while limiting direct sovereign exposure, but also highlights the need for improved transparency and risk monitoring as guarantee volumes continue to rise. |
| Keywords: | loan guarantees, outward FDI, India, corporate internationalisation, financial commitments, policy reforms |
| JEL: | F21 F23 H81 G28 F34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iedlwp:336699 |
| By: | White, Tim |
| Abstract: | Adam Neumann surely ranks among the most disgraced corporate leaders of our time. The former WeWork founder and CEO, who was ousted from the company in 2019, became emblematic of the corporate excesses and hollow boosterism of post-dotcom Silicon Valley. In the public imagination his name is synonymous with failure and fraud. But to the outrage of many he is back on the scene, securing unprecedented backing from venture capital titan Andreessen Horowitz for his new real estate venture Flow. This essay unpacks the non-death of Adam Neumann, interrogating why someone seemingly so untouchable is being funded at the highest level by one of Silicon Valley’s most infamous VCs. I argue that, through his atypical ‘exiting’ of WeWork, whereby he extracted billions from the company without initial public offering or acquisition, Neumann attained a level of wealth and power that made him ripe for reinvestment. The case challenges the liberal ‘fake-it-till-you-make-it’ myth of Silicon Valley meritocracy. US tech today increasingly takes the form of billionaire VCs funding already-powerful, deceptive and ruthless repeat founders. It is this increasingly consolidated and cynical system that enables Adam Neumann to ‘fail up’; rewarded rather than punished for his extreme misdemeanors. |
| Keywords: | venture capital; founder; Silicon Valley; real estate; US finance |
| JEL: | R14 J01 F3 G3 |
| Date: | 2026–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137184 |
| By: | Frayman, David |
| Abstract: | We examine the impact of a major lending programme of the European Investment Bank (EIB) on firm investment. Using a difference-in-differences design applied to a unique dataset of loan recipients, we find that EIB loans led to substantial additional growth in recipients’ fixed assets. This provides the first causal evidence on the additionality of large state investment bank loans made directly to firms. The findings highlight the potential for strategic public lending to advance policy agendas for sustainable economic growth. |
| Keywords: | state investment banks; European Investment Bank (EIB); financial constraints; difference-in-differences |
| JEL: | H81 G28 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130858 |
| By: | Achraf Khallouli (University of La Manouba); Rim Mouelhi (University of La Manouba) |
| Abstract: | The objective of this study is to investigate the impact of intrinsic characteristics of startups, mainly, founders' characteristics (such as education, professional experience, and network) and business-related characteristics (such as product category and industry), on their performance. The study uses data from a portfolio of 51 startups belonging to a Tunisian Venture Capital firm to analyze the aforementioned impact. Performance is measured by revenue, raised funds, survival, and the firm's team assessment. The study deploys Multiple Linear Regression, Binary Logistic Regression, and Proportional Odds Logistic Regression to analyze the data. The findings contribute to the development of a framework for evidence-based investment decisions within the Venture Capital industry. The results highlight the importance of factors such as the quality of the university attended by founders, the repeat entrepreneur status, and the founder’s being full-time on the startup in predicting performance. |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1812 |
| By: | Hasan Murat ErtuÄŸrul (Anadolu University); Ömer Tugsal Doruk (Adana Alparslan TürkeÅŸ Science and Technology University); Ömer Faruk Tekdogan (University of Ankara) |
| Abstract: | This study investigates the impact of the informal sector on firm performance for over 10.000 nonfinancial firms operating in the 8 MENA countries covering 1997-2020 periods. Using a Panel Dynamic Generalized Method of Moments (GMM), we find that the effect of the informal sector on firm performance is negative. These estimates seem strong according to robustness check. We also do the analysis for SMEs and non-SMEs and find that SMEs are more sensitive to the informal sector. In terms of its findings, the study sheds new light on the MENA region by analyzing the relationship between informal economy and firm performance in a highly heterogeneous manner. |
| Date: | 2025–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1814 |
| By: | Peters, Nils |
| Abstract: | High startup valuations are commonly perceived as expressions of venture capitalists’ (VCs) power. This study complicates this view and argues that the valuation process is a struggle for ownership, deepening inequalities within the venture capital sector. Drawing on interviews with 19 early-stage VCs in London, I show that VC funds’ ability to obtain ownership stakes has changed in the low interest, expansive monetary policy environment of the 2010s. Late-stage VC funds moved into early-stage investing, increasing competition and upsetting previous alignments. Valuation practices centred on obtaining ownership and led to an antagonistic relationship between early and late-stage VCs. Following this, only a small group of elite funds delivered outsized returns while most funds failed to deliver promised returns. By foregrounding material limitations and conflict in the making of valuations, this study suggests that the business model of many VC funds became increasingly embattled during the 2010s tech boom. |
| Keywords: | competition; conflict; finance; political economy; United Kingdom; valuation |
| JEL: | P10 |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130947 |
| By: | Jennie Bai; Murillo Campello; Pradeep Muthukrishnan |
| Abstract: | Leveraging regulatory data on fund flows within bank holding companies (BHCs), we characterize internal loans as a critical funding source for commercial banks. Although recorded as bank liabilities, parent-to-bank internal loans function as contingent support that resembles capital. We show that internal-loan funded banks do not hoard liquidity; instead, they originate larger and longer-maturity loans at lower spreads, initiate more relationships with marginal borrowers, and retain larger shares in syndicated deals. Internal-loan-funded lending is followed by higher short-run profits but higher future nonperforming loan ratios. We further show that organizational structure shapes internal lending: in BHCs with both bank and nonbank operations, nonbank affiliates crowd out internal lending to banks and discipline banks’ use of internal funds, and these BHCs exhibit higher overall performance. To identify our tests, we exploit the passage of the Gramm–Leach–Bliley Act and the announcement of the Basel III Accord, using instrumental variables and discontinuity-design approaches. Our findings highlight an equity-like internal debt channel that shapes monetary policy transmission, risk-taking, and the role of organizational structure in banking. |
| JEL: | G21 G23 G28 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34801 |
| By: | Iqbal, Muhammad Adil; Ali, Amjad; Audi, Marc |
| Abstract: | This study investigates the influence of venture capital investments and their proportion relative to gross domestic product on two key macroeconomic variables: gross domestic product growth rate and unemployment rate. By analyzing data from 13 countries over the period 2014 to 2021, the research seeks to clarify the impact of venture capital metrics using a range of statistical techniques, including descriptive statistics, correlation and covariance assessments, panel ordinary least squares, and panel generalized method of moments. The results from the panel ordinary least squares regression indicate that both dependent variables, gross domestic product growth rate and unemployment rate, exhibit limited explanatory power concerning the impact of venture capital metrics. Even after controlling for heteroskedasticity and autocorrelation, and incorporating dynamic specifications and endogeneity adjustments, the results remain largely unchanged. The empirical findings further indicate that gross domestic product growth rates are non-stationary, while unemployment rates are stationary, underscoring the greater importance of structural and policy-driven factors in shaping economic performance. The only notable result from this analysis is the significant persistence of gross domestic product growth rates through their own lagged values, which emphasizes the primacy of historical economic trends over external capital inflows. Overall, the results reveal that venture capital metrics do not have a statistically significant or economically meaningful effect on either gross domestic product growth rate or unemployment rate. These findings challenge the commonly held assumption that venture capital metrics directly influence or enhance key macroeconomic indicators. Consequently, policymakers should view venture capital investments as secondary rather than primary drivers of economic growth and employment, and should instead prioritize comprehensive strategies focused on education, labor market reforms, and institutional development to achieve sustained macroeconomic progress. |
| Keywords: | Venture Capital, Artificial Intelligence, Research and Development, Economic Growth, Employment |
| JEL: | O3 O4 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127492 |