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on Corporate Finance |
| By: | Fabrizio Adriani; Luca G. Deidda; Silvia Sonderegger |
| Abstract: | We consider a model of Initial Public Offerings (IPOs) where issuing firms of better quality are more reluctant to go public. IPOs either generate or destroy value depending on the type of the issuing firm, which is only observed by the issuer. We show that, when the issuer directly offers the shares to the investors, market breakdown occurs. This is caused by the issuer's attempts to signal his type through the offering price. Things change if we introduce a financial intermediary which: 1) acts as an underwriter,2) influences the offering price. Underwriting creates a wedge between the interests of the intermediary and those of the issuer. This allows trade with outside investors to be restored. A by-product of the conict of interest between issuer and intermediary is that trade is characterized by underpricing. In the benchmark case where her profits are zero, the intermediary acts as a screening device: she underwrites the shares only upon receiving positive information about the issuer. |
| Keywords: | IPO, Signaling, Financial Intermediary, Underwriting, Underpricing. |
| JEL: | G24 G32 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:200714&r=cfn |
| By: | Wolfgang Härdle; Yuh-Jye Lee; Dorothea Schäfer; Yi-Ren Yeh |
| Abstract: | In the era of Basel II a powerful tool for bankruptcy prognosis is vital for banks. The tool must be precise but also easily adaptable to the bank's objections regarding the relation of false acceptances (Type I error) and false rejections (Type II error). We explore the suitability of Smooth Support Vector Machines (SSVM), and investigate how important factors such as selection of appropriate accounting ratios (predictors), length of training period and structure of the training sample influence the precision of prediction. Furthermore we showthat oversampling can be employed to gear the tradeoff between error types. Finally, we illustrate graphically how different variants of SSVM can be used jointly to support the decision task of loan officers. |
| Keywords: | Insolvency Prognosis, SVMs, Statistical Learning Theory, Non-parametric Classification |
| JEL: | G30 C14 G33 C45 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp757&r=cfn |
| By: | Patrick Musso (University of Nice-Sophia Antipolis); Stefano Schiavo (Observatoire Français des Conjonctures Économiques) |
| Abstract: | We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996-2004 period, we find that (i) financial constraints significantly increase the probability of exiting the market, (ii) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (iii) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets. |
| Keywords: | Financial constraints; Firm growth; Firm survival |
| JEL: | E44 G32 L25 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0737&r=cfn |
| By: | Elisabetta Gualandri; Valeria Venturelli |
| Abstract: | This paper sets out to critically review the different approaches developed for the assessment and measurement of the equity gap for innovative firms, mainly SMEs, extending the quantitative approaches for equity gap developing a demand-side model that allows to predict the future demand for equity in precise terms. Through the application of an original model to a sample of Italian firms, we find that, the amount of equity needed, expressed in absolute terms, is on average tiny (147.3 K euro). Moreover, the size of the additional equity requirement is clearly influenced by the role of the current debt. The results of the cluster analysis confirm that the degree of innovation cannot be considered the main discriminating factor when it comes to the differences in equity requirement per unit of marginal sale; while the regression analysis reveals the pivotal role played by the enterprise’s year of foundation. |
| Keywords: | Finance; Equity gap; Innovative SMEs |
| JEL: | G24 M13 O16 O38 R58 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:mod:wcefin:08011&r=cfn |
| By: | Luintel, Kul B (Cardiff Business School); Khan, Mosahid; Arestis, Philip; Theodoridis, Konstantinos (Cardiff Business School) |
| Abstract: | Recent empirical work on financial structure and economic growth analyzes multicountry dataset in panel and/or cross-section frameworks and conclude that financial structure is irrelevant. We highlight their shortcomings and re-examine this issue utilizing a time series and a dynamic heterogeneous panel methods. Our sample consists of fourteen countries. Tests reveal that cross-country data cannot be pooled. Financial structure significantly explains output levels in most countries. The results are rigorously scrutinized through bootstrap exercises and they are robust to extensive sensitivity tests. We also test for several hypotheses about the prospective role of financial structure and financial development on economic growth. |
| Keywords: | Financial Structure; Economic Growth; Co-integration; Bootstrap; Dynamic Heterogeneous Panels |
| JEL: | O16 G18 G28 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2008/3&r=cfn |
| By: | Paun, Cristian; Musetescu, Radu; Lupu, Radu |
| Abstract: | When companies go public to gather financial resources, the stocks they sell in an initial public offering (IPO) tends to be underpriced, resulting in a substantial price jump on the first day of trading. Underpricing of IPO has attracted important researching efforts in the last time. The existence of underpricing in IPOs is significant to different models used in their measurement. However, there is a lack of consensus on what can explain underpricing among different researchers. It is well known that IPOs are underpriced in virtually all countries and that the number of companies going public and the extent of underpricing fluctuate over time. There is a large body of theoretical work explaining IPO underpricing, and most theories have been subjected to rigorous empirical testing. This paper is a review of the principal theories that have been proposed to explain IPO underpricing and discusses the main empirical models used to measure it. |
| Keywords: | IPO; asymmetric information; underpricing |
| JEL: | G24 G21 |
| Date: | 2006–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:6801&r=cfn |