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on Corporate Finance |
| By: | P.-Y. CABANNES (Insee); V. COTTET (Insee); Y. DUBOIS (Insee); C. LELARGE (Insee); M. SICSIC (Insee) |
| Abstract: | During the 2008/2009 crisis French businesses were hit by a slump in domestic and world demand, while French banks encountered difficulties that may have encouraged them to tighten their credit conditions. This crisis strongly affected the number of business start-ups as well as the initial size of these start-ups; firm growth was also slashed, in particular that of the most promising among them. In 2008 and 2009 subsidiaries of groups experienced a sharper drop in activity than independent enterprises, particularly in the manufacturing industry. The companies that were least likely to be affected by financial constraints were those that most adjusted their short-term output, as well as their employment and investment levels. These elements suggest that in France, unlike in the United States, enterprises suffered more from a demand shock than from a credit shock. |
| Keywords: | Financial crisis, financing constraints, firm growth |
| JEL: | L11 G31 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpdeee:g2013-13&r=cfn |
| By: | Eisert, Tim; Eufinger, Christian |
| Abstract: | This paper presents a theory that explains why it is beneficial for banks to be highly interconnected on the interbank market. Using a simple network structure, it shows that, if there is a non-zero bailout probability, banks can significantly increase the expected repayment of uninsured creditors by entering into cyclical liabilities on the interbank market before investing in loan portfolios. Therefore, banks are better able to attract funds from uninsured creditors. Our results show that implicit government guarantees incentivize banks to have large interbank exposures, to be highly interconnected, and to invest in highly correlated, risky portfolios. -- |
| Keywords: | bailout,cycle flows,cyclical liabilities,interbank network,leverage |
| JEL: | G01 G21 G28 L14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:10&r=cfn |
| By: | Gropp, Reint; Gruendl, Christian; Guettler, Andre |
| Abstract: | This paper empirically examines the role of soft information in the competitive interaction between relationship and transaction banks. Soft information can be interpreted as a private signal about the quality of a firm that is observable to a relationship bank, but not to a transaction bank. We show that borrowers self-select to relationship banks depending on whether their privately observed soft information is positive or negative. Competition affects the investment in learning the private signal from firms by relationship banks and transaction banks asymmetrically. Relationship banks invest more; transaction banks invest less in soft information, exacerbating the selection effect. Finally, we show that firms where soft information was important in the lending decision were no more likely to default compared to firms where only financial information was used. -- |
| Keywords: | soft information,discretionary lending,relationship lending,competition |
| JEL: | G21 G28 G32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:19&r=cfn |
| By: | Adams, Zeno; Füss, Roland; Gropp, Reint |
| Abstract: | In this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). Within a system of quantile regressions for four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions. Using daily data, we can trace out the spillover effects over time in a set of impulse response functions and find that they reach their peak after 10 to 15 days. -- |
| Keywords: | Risk spillovers,state-dependent sensitivity value-at-risk (SDSVaR),quantile regression,financial institutions,hedge funds |
| JEL: | G01 G10 G24 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:20&r=cfn |
| By: | Gill, Andrej; Visnjic, Nikolai |
| Abstract: | We are able to shed light on the black box of restructuring tools private equity investors use to improve the operational performance of their portfolio companies. By building on previous work considering performance evaluation of PE backed companies, we analyze whether private equity improves operating efficiency and which of the typical restructuring tools are the main performance drivers. Using a set of over 300 international leveraged buyout transactions of the last thirty years, we find that while there is vast improvement in operational efficiency, these gains vary considerably. Our top performing transactions are subject to strong equity incentives, frequent asset restructuring and tight control by the investor. Furthermore, investors' experience has a positive influence while financial leverage has no influence on operational performance. -- |
| Keywords: | private equity,leveraged buyouts,active shareholders,corporate restructuring,operational performance |
| JEL: | G23 G24 G32 G34 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:23&r=cfn |
| By: | Gill, Andrej; Visnjic, Nikolai |
| Abstract: | This study investigates the transition from being a listed company with a dispersed ownership structure to being a privately held company with a concentrated ownership structure. We consider a sample of private equity backed portfolio companies to evaluate the consequences of the corporate governance changes on operational performance. Our analysis shows significant positive abnormal growth in several performance ratios for the private period of our sample companies relative to comparable public companies. These performance differences come from the increase in ownership concentration after the leveraged buyout transaction. -- |
| Keywords: | private equity,leveraged buyouts,active shareholders,ownership concentration,corporate governance |
| JEL: | G23 G24 G32 G34 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:24&r=cfn |
| By: | Kraft, Holger; Schmidt, Alexander |
| Abstract: | In this paper, we propose a novel approach on how to estimate systemic risk and identify its key determinants. For all US financial companies with publicly traded equity options, we extract their option-implied value-at-risks (VaRs) and measure the spillover effects between individual company VaRs and the option-implied VaR of an US financial index. First, we study the spillover effect of increasing company risks on the financial sector. Second, we analyze which companies are most affected if the tail risk of the financial sector increases. We find that key accounting and market valuation metrics such as size, leverage, balance sheet composition, market-to-book ratio and earnings have a significant influence on the systemic risk profile of a financial institution. In contrast to earlier studies, the employed panel vector autoregression (PVAR) estimator allows for a causal interpretation of the results. -- |
| Keywords: | Systemic risk,Value-at-risk,Equity options,Implied volatility |
| JEL: | G01 G28 G32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:25&r=cfn |
| By: | Brennan, Michael J.; Kraft, Holger |
| Abstract: | In this paper we provide new evidence that corporate financing decisions are associated with managerial incentives to report high equity earnings. Managers rely most heavily on debt to finance their asset growth when their future earnings prospects are poor, when they are under pressure due to past declines in earnings, negative past stock returns, and excessively optimistic analyst earnings forecasts, and when the earnings yield is high relative to bond yields so that from an accounting perspective equity is expensive. Managers of high debt issuing firms are more likely to be newly appointed and also more likely to be replaced in subsequent years. Abnormal returns on portfolios formed on the basis of asset growth and debt issuance are strongly positively associated with the contemporaneous changes in returns on assets and on equity as well as with earnings surprises. This may account for the finding that debt issuance forecasts negative abnormal returns, since debt issuance also forecasts negative changes in returns on assets and on equity and negative earnings surprises. Different mechanisms appear to be at work for firms that retire debt. -- |
| Keywords: | Capital structure,financing policy,managerial incentives |
| JEL: | G12 G14 G32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:26&r=cfn |