|
on Corporate Finance |
| By: | Kang, Shulong; Dong, Jianfeng; Yu, Haiyue; Cao, Jin; Dinger, Valeriya |
| Abstract: | This paper investigates how government-led banking liberalization affects credit allocation by banks using as a quasi-natural experiment the establishment of city commercial banks (CCBs) in China. Based on more than three million corporate financial statements spanning over 16 years, we find that the establishment of CCBs led to a 6–14 % drop in debt funding for private firms, as well as a 1–2 % rise in their funding costs. At the same time, private infrastructure firms enjoyed a nearly 6 % increase in debt funding and more than 100-basis-point drop in interest costs despite their inferior credit quality. The debt financing of private firm appears most severely affected in municipalities where officials face high promotional pressures or fiscal constraints. |
| JEL: | D7 G21 G32 G38 P2 |
| Date: | 2021–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:bof:bofitp:2021_004&r=all |
| By: | Ugo Albertazzi (ECB -DG Monetary Policy); Margherita Bottero (Bank of Italy); Leonardo Gambacorta (Bank for International Settlements (BIS); Centre for Economic Policy Research (CEPR)); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Using all loans granted to firms recorded in the Italian credit register, we estimate correlations between risk-transfer and default probabilities to gauge the severity of informational asymmetries in the loan securitization market. First, the analysis confirms the presence of information frictions in the SME loan securitisation market. Second, the unconditional quality of securitized loans remains significantly better than that of non-securitized ones, in line with the notion that markets anticipate the presence of information frictions and lead to a selection of loans which offsets the detrimental effects of asymmetric information. Third, using data for firms that maintain multiple bank relationships, we obtain indications of the relative importance played by two forms of information friction, adverse selection and moral hazard. While the former is widespread, the latter is present in weak relationships only, in line with the notion that such loans are characterised by a limited commitment to exert costly monitoring by the bank. |
| Keywords: | securitization, SME loans, moral hazard, adverse selection |
| JEL: | D82 G21 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2113&r=all |
| By: | Jan Behringer (Macroeconomic Policy Institute (IMK)) |
| Abstract: | The corporate sector has turned from a net borrowing position to a net lending position in many advanced countries over the past decades. This phenomenon is rather unusual as the corporate sector had historically borrowed funds from other sectors in the economy. In this paper, we analyze how changes in the distribution of income between wages and profits have affected corporate net lending in a sample of 40 countries for the period 1990-2016. A consistent finding is that an increase (decrease) in the corporate profit share leads to an increase (decrease) in corporate net lending, controlling for other corporate net lending determinants. We disentangle the effects of the profit share on corporate saving and investment and explore a number of alternative explanations of our results, including changes in the cost of capital, shifts in the composition of industrial sectors, the growing importance of intangible capital, and a temporary crisis phenomenon. We conclude that factor shares are an important driver of macroeconomic trends and that the rise in corporate profits has contributed considerably to the improvement in the corporate net lending positions across countries. |
| Keywords: | Corporate saving, investment, income distribution, cost of capital |
| JEL: | E21 E22 E25 G30 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:imk:fmmpap:53-2020&r=all |
| By: | Pavlova, Elitsa; Signore, Simone |
| Abstract: | We use competing risks methods to investigate the causal link between venture capital (VC) investments supported by the EIF and the exit prospects and patenting activity of young and innovative firms. Using a novel dataset covering European start-ups receiving VC financing in the years 2007 to 2014, we generate a counterfactual group of non-VC-backed young and innovative firms via a combination of exact and propensity score matching. To offset the limited set of observables allowed by our data, we introduce novel measures based on machine learning, network theory, and satellite imagery analysis to estimate treatment propensity. Our estimates indicate that start-ups receiving EIF VC experienced a significant threefold increase in their likelihood to exit via M&A. We find a similarly large effect in the case of IPO, albeit only weakly significant. Moreover, we find that EIF VC contributed to a 13 percentage points higher incidence in patenting activity during the five years following the investment date. Overall, our work provides meaningful evidence towards the positive effects of EIF's VC activity on the exit prospects and innovative capacity of young and innovative businesses in Europe. |
| Keywords: | EIF,venture capital,public intervention,exit strategy,innovation,start-ups,machine learning,geospatial analysis,network theory |
| JEL: | G24 G34 M13 O32 O38 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202170&r=all |
| By: | Christoph Bertsch; Mike Mariathasan |
| Abstract: | We study optimal bank leverage and recapitalization in general equilibrium when the supply of specialized investment capital is imperfectly elastic. Assuming incomplete insurance against capital shortfalls and segmented financial markets, ex-ante leverage is inefficiently high, leading to excessive insolvencies during systemic capital shortfall events. Recapitalizations by equity issuance are individually and socially optimal. Additional frictions can turn asset sales individually but not necessarily socially optimal. Our results hold for different bankruptcy protocols and we offer testable predictions for banks' capital structure management. Our model provides a rationale for macroprudential capital regulation that does not require moral hazard or informational asymmetries. |
| Keywords: | Bank capital, recapitalization, macroprudential regulation, incomplete markets, financial market segmentation, constrained inefficiency |
| JEL: | D5 D6 G21 G28 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:923&r=all |