|
on Corporate Finance |
| By: | Filomeni, Stefano; Modina, Michele; Tabacco, Elena |
| Abstract: | By exploiting a unique and proprietary panel dataset comprising 18,682 Italian SMEs operating with 99 cooperative banks over the period 2008-2014, we investigate the influence of the trade credit channel on firm investment decisions in the Italian market, distinguished by a considerable presence of relationship cooperative banks’ branches with a heterogeneous geographical distribution. Firstly, our findings confirm a significant influence of the trade credit channel on firm investment decisions. Secondly, we document that those SMEs located in those Italian provinces with an abundance of cooperative banks’ branches rely less on trade credit to finance investments. Lastly, we show that longer firm-bank relationships decrease firm dependence on trade credit to boost investments. Our study is of particular relevance because it strengthens the effectiveness of the commercial credit channel for SMEs in spurring corporate investments. Indeed, fostering a deep understanding of the real effects of firm financing sources is paramount to encourage investment by SMEs and to allow them to preserve their positioning in the market. Moreover, we exploit the Italian market, well-suited to perform such an analysis, since it is characterized by more inter-personal financing relationships as compared to other countries. |
| Keywords: | SMEs, trade credit, investment, relationship lending, soft information, cooperative bank |
| Date: | 2021–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:esy:uefcwp:30149&r=all |
| By: | Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic& Institute of Information Theory and Automation, Prague & CESifo, Munich & IOS, Regensburg); Ichiro Iwasaki (Institute of Economic Research, Hitotsubashi University, Tokyo, Japan) |
| Abstract: | Bank survival is essential to economic growth and development because banks mediate the financing of the economy. A bank’s overall condition is often assessed by a supervisory rating system called CAMELS, an acronym for the components Capital adequacy, Asset quality, Management quality, Earnings, Liquidity, and Sensitivity to market risk. Estimates of the impact of CAMELS components on bank survival vary widely. We perform a meta-synthesis and meta-regression analysis (MRA) using 2120 estimates collected from 50 studies. In the MRA, we account for uncertainty in moderator selection by employing Bayesian model averaging. The results of the synthesis indicate an economically negligible impact of CAMELS variables on bank survival; in addition, the effect of bank-specific, (macro)economic, and market factors is virtually absent. The MRA and a test for publication selection bias produce findings consistent with the synthesis results. Moreover, best practice estimates show a small economic impact of CAMELS components and no impact of other factors. The study concludes that caution should be exercised when using CAMELS rating to predict bank survival or failure. |
| Keywords: | bank survival, bank failure, CAMELS, meta-analysis, publication selection bias |
| JEL: | C12 D22 G21 G33 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_09&r=all |
| By: | William Connell Garcia; Victor Ho |
| Abstract: | This analysis uses the most recent cross-section of financial statements of French companies from the ORBIS database only as an illustration in order to evaluate their capacity to cushion the COVID-19 shock on sales through previously accumulated cash reserves, operational flexibility and policy intervention. This paper has two main objectives. The first one being to investigate the extent to which the ability to cushion the economic shock is linked to specific company characteristics. The second objective is to evaluate how variation in the parameterisation of the economic shock, i.e. policy intervention and duration of the economic shock, affects the likelihood that specific types of companies become illiquid. We find evidence that both more productive companies and firms with a higher solvency ratio (profits/liabilities) are less likely to become illiquid. This result is robust to the parameterisation of the economic shock. Policy intervention, modelled as additional operational flexibility, alleviates the risk of facing a liquidity shortfall across the board, but does not eliminate it. Finally, using sectoral data from Eurostat, this analysis connects the risk of liquidity shortfalls to specific characteristics of the labour force, finding that the relatively vulnerable sectors are those that rely the most on labour, and whose workforce is relatively young and low-skilled. |
| JEL: | C25 C54 D22 D24 G30 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:136&r=all |
| By: | Merike Kukk; Natalia Levenko |
| Abstract: | The paper investigates how much alternative options for corporate financing have affected the quality of domestic corporate bank loans in Estonia. We use quarterly data from 2004Q1–2019Q3 and three different methods to detect the relationship between the non-performing corporate loans of domestic banks and alternative sources of financing for firms. We find that a rise in intra-group borrowing from parent companies is associated with an increase in overdue corporate loans. There is also some evidence that foreign bank loans and trade credit might be positively related to non-performing corporate loans. The results suggest that a broader set of sources of corporate financing beyond domestic bank loans should be considered when assessing the dynamics of the overdue corporate loans of the domestic banking sector. |
| Keywords: | corporate debt, non-performing loans, alternative financing, Bayesian model averaging, local projection method |
| JEL: | G32 G34 C11 C14 |
| Date: | 2021–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2020-6&r=all |
| By: | Hoang, Daniel; Silbereis, Fabian; Stengel, Raphael |
| Abstract: | Recent empirical evidence suggests that US industrial firms invest heavily in noncash, risky financial assets. Using hand-collected data on financial portfolios of German firms, we show that risky asset holdings are not an anomaly unique to the US. We find that industrial firms in Germany invest 11.6% of their financial assets in noncash and risky assets. Value-weighted, this percentage increases to 25.4%. While the equally-weighted average is substantial, it is clearly lower (5 percentage points or 30% in relative terms) than that in the US. After accounting for cross-country compositional differences (especially the dominance of large firms in the US technology sector), this difference in risky financial asset holdings decreases but remains at 3 percentage points. The remaining difference is driven by institutional differences that affect the relationship between firm characteristics and risky financial asset holdings in the two countries. In contrast to the US, German firms largely follow the precautionary savings motive and do not seem to misappropriate their funds when shifting them towards riskier asset allocations. Our results have implications for how asset management by nonfinancial firms should be regulated. |
| Keywords: | Cash Policy,Financial Portfolio,Precautionary Savings,Liquidity Management |
| JEL: | G31 G32 G34 G38 G11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kitwps:149&r=all |
| By: | Bartel, Ann P. (Columbia University); Rossin-Slater, Maya (Stanford University); Ruhm, Christopher J. (University of Virginia); Slopen, Meredith (Columbia University); Waldfogel, Jane (Columbia University) |
| Abstract: | We designed and fielded a survey of New York and Pennsylvania firms to study the impacts of New York's 2018 Paid Family Leave policy on employer outcomes. We match each NY firm to a comparable PA firm and use difference-in-difference models to analyze within-match-pair changes in outcomes. We find that PFL leads to an improvement in employers' rating of their ease of handling long employee absences, concentrated in the first policy year and among firms with 50–99 employees. We also find an increase in employee leave-taking in the second policy year, driven by smaller firms. |
| Keywords: | paid family leave, employers, worker absences |
| JEL: | J21 J23 J32 I38 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14262&r=all |
| By: | Agosto, Arianna; Ahelegbey, Daniel Felix; Giudici, Paolo |
| Abstract: | We propose a two-layered tree network model that decomposes financial contagion into a global component, composed of inter-country contagion effects, and a local component, made up of inter-institutional contagion channels. The model is effectively applied to a database containing time series of daily CDS spreads of major European financial institutions (banks and insurance companies), and reveals the importance of monitoring both channels to assess financial contagion. Our empirical application reveals evidence of a high inter-country and inter-institutional vulnerability at the onset of the global financial crisis in 2008 and during the sovereign crisis in 2011. The results identify France as central to the inter-country contagion in the Euro area during the financial crisis, while Italy dominates during the sovereign crisis. The application of the model to detect contagion between sectors of the European economy reveals similar findings, and identifies the manufacturing sector as the most central, while, at the company level, financial institutions dominate during the 2008 crisis. |
| Keywords: | Financial crisis; Graphical Lasso; Inter-country contagion; Inter-sector contagion; Inter-institutional contagion; Sovereign crisis; Sparse covariance selection |
| JEL: | C58 E02 G32 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107066&r=all |
| By: | Zarina Adilkhanova (NAC Analytica, Nazarbayev University); Aruzhan Nurlankul (Department of Economics and Finance, EIEF and LUISS); Aizat Token (Department of Economics, Nazarbayev University); Berk Yavuzoglu (Department of Economics, Nazarbayev University) |
| Abstract: | This paper studies the trade credit and delinquency behavior in Kazakhstan paying attention to the effects of two recent crises using a unique dataset of large firms and SMEs from the year 2009 to 2016. Our estimates suggest that the relationship between trade credit and bank loans is mainly substitutional except that it was complementary for large firms following the year 2014-5 crisis. This new piece of evidence might provide more insight into the mixed findings in the literature. We also discern that trade credit demand is more prevalent among capital-intensive firms. Kazakhstani firms pass a sizeable portion of their delinquent receivable to their trade credit suppliers. The transmission of trade credit delinquency, additionally, is amplified during the year 2014-5 economic crisis but the year 2009 global financial crisis. |
| Keywords: | Trade Credit; Delinquency; Financial Crisis; Large Enterprises; SMEs |
| JEL: | D22 G01 G20 G32 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:ajx:wpaper:15&r=all |
| By: | Asongu, Simplice; Odhiambo, Nicholas |
| Abstract: | In this study, we assess the relevance of decreasing information asymmetry on life and non-life insurance consumption, by using data from 48 African countries during the period 2004-2014. Reduced information asymmetry is proxied by information sharing offices, namely: public credit registries and private credit bureaus. The empirical evidence is based on the Generalised Method of Moments. The findings show that information sharing offices increase insurance consumption with a comparatively higher magnitude in life insurance penetration, relative to non-life insurance penetration. Practical and theoretical implications are discussed. |
| Keywords: | Insurance; Information Asymmetry |
| JEL: | G20 G22 I30 O16 O55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107136&r=all |
| By: | Jorge M. Uribe (Faculty of Economics and Business (Universitat Oberta de Catalunya); Riskcenter (Universitat de Barcelona); Esade Business School (Universittat Ramon Llull).); Jose E. Gomez-Gonzalez (Escuela Internacional de Ciencias Económicas y Administrativas, Universidad de La Sabana, Chia. Colombia.); Jorge Hirs-Garzón (Inter-American Development Bank, Washington, D.C., USA.) |
| Abstract: | This study shows that capital structure choices of US corporations are interdependent across time. We follow a two-step estimation approach. First, using a large cross-section of firms we estimate year-by-year average capital structure choices, i.e., the average firm’s percentage of new funding that is secured through debt, its term composition, and the percentage of new equity represented by retained earnings. Second, these time series are included in a Factor Augmented Vector Autoregressive model in which three factors representing real economic activity, expected future funding conditions, and prices, are included. We test for the interdependence between optimal capital structure decisions and for the influence exerted by macroeconomic conditions on these decisions. Results show there is a hierarchical order in which firms make capital structure decisions. They first decide on the share of debt out of total new funding they will hire. Conditional on this they decide on the term of their debt and on their earnings retention policy. Of outmost importance, macroeconomic factors are key for making capital structure decisions. |
| Keywords: | Firms’ capital structure, Financing hierarchy, Macroeconomic factors, FAVAR model. JEL classification: D25, G30, L16. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202107&r=all |
| By: | Kuang-Liang Chang (National Sun Yat-sen University); Charles Ka Yui Leung (City University of Hong Kong) |
| Abstract: | The Global Financial Crisis (GFC) changes the relative economic riskiness and risk-adjusted- performance of different asset markets. While the empirical distribution for stock return shifted to the right and became more concentrated around the mean after the GFC, the real estate market counterparts moved to the left and became more spread out. The economic risk of the OFHEO and Case-Shiller housing indices was smaller than the counterpart of the equity REIT (EREITs) market before the financial crisis, it substantially increased. Also, the economic performance of the OFHEO and Case-Shiller housing indices decreased after the financial crisis. They are below the performance indices of the stock and EREITs markets. The ex-post real estate premium vanishes. If we presume the "best model" to be the same before and after the GFC, we could severely misestimate the risk after the GFC. |
| Keywords: | economic index of riskiness, risk-adjusted-performance index, real estate markets, stock markets |
| JEL: | C50 G32 R30 |
| Date: | 2021–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2021_004&r=all |