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on Corporate Finance |
| By: | Cella, Cristina (Research Department, Central Bank of Sweden) |
| Abstract: | Using investors’ trading horizons to capture their incentives to collect information and monitor management’s decisions, this paper shows that an increase in the ownership stake held by long-term institutional investors is associated with a subsequent decrease in real investment precisely in firms that invest too much. In support of the monitoring hypothesis, we show that results are driven by the purchases of long-term investors, while quasi-indexers and short-term investors have no influence on investment. We address the potential problem of endogeneity using the inclusion of a firm to the S&P 500 Index as an exogenous shock to institutional holdings. |
| Keywords: | Institutional ownership; investors’ investment horizons; over-investment; under-investment; management monitoring’ |
| JEL: | B20 G31 G32 |
| Date: | 2019–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0373&r=all |
| By: | Ibrahim Yarba |
| Abstract: | This study analyses the argument that whether Turkish non-financial firms utilize any informal source of alternative funding during economic uncertainties over the last decade. This study is the first to explore the issue and provide some insights regarding how small and medium-sized enterprises do react to the financial constraint problem in such an economic environment. Both trend analysis and dynamic panel model estimations provide supporting evidence that Turkish non-financial firms have some reserves (e.g., owners’, relatives’ and/or friends’ personal wealth) that are utilized during the times of persistent stress and tightening of macroprudential policies. Most strikingly, this is the case for only small and medium-sized enterprises but not for large firms. |
| Keywords: | Hidden reserves, Alternative firm financing channels, SME, Macroprudential policy, Uncertainty, Persistence of uncertainty |
| JEL: | C23 D21 D81 G18 G32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:1936&r=all |
| By: | Paul Pelzl; María Teresa Valderrama |
| Abstract: | Drawdowns on credit commitments by firms reduce a bank's regulatory capital ratio. Using the Austrian Credit Register, we provide novel evidence that during the 2008-09 financial crisis, capital-constrained banks managed this concern by substantially cutting partly or fully unused credit commitments. Controlling for a bank's capital position, we also find that greater liquidity problems induced banks to considerably cut such credit commitments during the crisis. These results suggest that banks actively manage both capital and liquidity risk caused by undrawn credit commitments in periods of financial distress, but thereby reduce liquidity provision to firms exactly when they need it most. |
| Keywords: | Capital Regulations; Credit Commitments; Financial Crisis |
| JEL: | E51 G01 G21 G28 G32 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:661&r=all |
| By: | Pablo de Andrés (Universidad Autónoma de Madrid and ECGI); Ricardo Gimeno (Banco de España); Ruth Mateos de Cabo (Universidad CEU San Pablo) |
| Abstract: | We use a sample of over 80,000 Spanish companies started by a sole entrepreneur between 2004 and 2014, and distinguish between male and female entrepreneurs demand for credit, credit approval ratio, and credit performance. We find that female entrepreneurs who start a business are less likely to ask for a loan. Of the female entrepreneurs requesting a credit, the probability of obtaining one in the founding year is significantly lower than their male peers in the same industry. This lower credit access disappears over the subsequent years, once the company has a track record of profits and losses. We also observe that women-led companies that receive a loan in the founding year are less likely to default as compared to men-led companies. This superior performance disappears for subsequent years, coinciding with the disappearance of the lower credit access. Taking all these results together, we rule out both taste-based discrimination and statistical discrimination in the credit industry, and point to the possible presence of double standards which might be a consequence of implicit (unconscious) discrimination. |
| Keywords: | gender discrimination, credit demand, credit access, credit performance, financing |
| JEL: | G32 J16 L25 M13 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1945&r=all |
| By: | Christian Catalini; Jorge Guzman; Scott Stern |
| Abstract: | The majority of IPOs and acquisitions are achieved without venture capital financing, yet research has focused mostly on VC backed firms. Using founding choices and a predictive analytics approach on virtually all US registered businesses, we shed light into these “missing” growth firms. Founding choices that predict raising venture capital also strongly predict equity exits without VC. Firms with growth potential are similar to each other, irrespective of funding source. Moreover, matching firms that are born with identical observables, but only differ in whether they receive venture capital, suggests an upper bound to the returns to venture capital of 600%. |
| JEL: | G24 L26 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26521&r=all |
| By: | Caballero, Diego (European Central Bank); Lucas, Andr e (Vrije Universiteit Amsterdam and Tinbergen Institute); Schwaab, Bernd (European Central Bank); Zhang, Xin (Research Department, Central Bank of Sweden) |
| Abstract: | To what extent can a central bank influence its own balance sheet credit risks during a financial crisis through unconventional monetary policy operations? To study this question we develop a risk measurement framework to infer the time-variation in portfolio credit risks at a high (weekly) frequency. Focusing on the Eurosystem's experience during the euro area sovereign debt crisis between 2010 and 2012, we find that the announcement and implementation of unconventional monetary policy operations generated beneficial risk spill-overs across policy portfolios. This caused overall risk to be nonlinear in exposures. In some instances the Eurosystem reduced its overall balance sheet credit risk by doing more, in line with Bagehot's well-known assertion that occasionally "only the brave plan is the safe plan." |
| Keywords: | lender-of-last-resort; unconventional monetary policy; portfolio credit risk; longer-term operational framework; central bank communication. |
| JEL: | C33 G21 |
| Date: | 2019–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:rbnkwp:0382&r=all |
| By: | Sudheer Chava; Alexander Oettl; Manpreet Singh |
| Abstract: | Do increases in federal minimum wage impact the financial health of small businesses? Using intertemporal variation in whether a state’s minimum wage is bound by the federal rate and credit-score data for approximately 15.2 million establishments for the period 1989–2013, we find that increases in the federal minimum wage worsen the financial health of small businesses in the affected states. Small, young, labor-intensive, minimum-wage sensitive establishments located in the states bound to the federal minimum wage and those located in competitive and low-income areas experience higher financial stress. Increases in the minimum wage also lead to lower bank credit, higher loan defaults, lower employment, a lower entry and a higher exit rate for small businesses. The results are robust to using nearest-neighbor matching and geographic regression discontinuity design. Our results document some potential costs of a one-size-fits-all nationwide minimum wage, and we highlight how it can have an adverse effect on the financial health of some small businesses. |
| JEL: | G33 G38 J30 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26523&r=all |
| By: | António Afonso; Nuno Verdial |
| Abstract: | The 2007-2008 financial crisis and the European sovereign debt crisis effects rippled through the financial system, banks and sovereign states. We analyze these events, focusing on the Portuguese and Spanish case after providing an insight into the Eurozone. We assessed the pricing of sovereign risk by performing an OLS/2SLS fixed effects panel analysis on a pool of Eurozone countries and a SUR regression with Portugal and Spain covering the period 1999:11 until 2019:6. Our results show that the pricing of sovereign risk changed with the crisis and the “whatever it takes” speech of Mario Draghi. Specifically, market pricing of the Eurozone credit risk, liquidity risk and the risk appetite increased after the crisis and it relaxed afterwards. We did not find evidence of specific pricing regime changes after the speech in the Portuguese and Spanish case. |
| Keywords: | Sovereign debt, Yield spreads, Crises, Unconventional Monetary Policy, Portugal, Spain |
| JEL: | C23 E44 E52 G01 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01122019&r=all |
| By: | Sophie Pommet (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS - Centre National de la Recherche Scientifique - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur); Jean-François Sattin (Prism - PRISM - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Panthéon-Sorbonne, Université Paris 1 Panthéon-Sorbonne - [-]) |
| Abstract: | The duration of the VC incubation period is an important parameter for the profitability of venture capital (VC) firms. This paper uses a new database of VC-backed initial public offerings (IPOs) that are listed on French financial markets in order to highlight the importance of chief executive officer (CEO) human capital on the duration of the VC incubation period prior to the IPO. By using a duration model (Weibull model) we find that while CEOs' previous academic, technical and managerial experiences seem not to affect the timing of an IPO, the CEOs' entrepreneurial background is strongly negatively correlated to the duration of VC investment (it increases the hazard ratio by more than 100%) and thus fosters IPO exit. We thank the two anonymous referees for helpful comments on this work. Responsibility for any errors lies solely with the authors. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-02374003&r=all |