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on Corporate Finance |
| By: | Tobias König |
| Abstract: | I examine how financial constraints shape the transmission of aggregate external equity financing shocks to firms' equity issuance, outstanding debt, and investment. I construct a novel instrument for aggregate equity financing shocks from firm-level data using the Granular Instrumental Variable (GIV) strategy. I find that financially unconstrained firms--characterized by high cash holdings and dividend-paying status--increase equity issuance by 1.8–2.0 percentage points, substitute equity for debt, and boost investment when capital market conditions improve. Highly leveraged firms, in contrast, refuse both to issue new equity and to reduce outstanding debt, consistent with the leverage ratchet effect. The debt overhang of highly leveraged firms results in 1.9 percentage points lower investment rates compared to the average firm. These results emphasize the crucial role of financial constraints in external equity financing and highlight the broader macroeconomic implications of debt overhang. |
| Keywords: | Capital Markets, External Equity Financing, Granular Instrumental Variable, Financial Constraints |
| JEL: | E22 E44 G30 G32 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_675 |
| By: | Rouvinen, Petri; Ylhäinen, Ilkka |
| Abstract: | Abstract Finnish businesses face fewer financial challenges than their European peers. To the extent financial challenges do exist, they disproportionately affect young, small, innovative, internationally focused, and growth-seeking companies. Our findings are based on extensive firm-level data. The data and our approach dictate that the results should be interpreted from the point of view of a representative firm and from a long-term, structural perspective, with a focus on debt financing. Finland’s financing challenges stem primarily from equity, not debt. The nation’s bank-centric financial system inadequately supports growth driven by intangible assets. Moreover, the growth ambitions and abilities of company owners, boards, and executives leave something to be desired. We posit that Finland’s fundamental issue is demand, not supply, of financing. Capital availability is sufficient. The core problem is insufficient initiative in identifying, capitalizing on, and scaling new ideas. |
| Keywords: | Business finance, Financial constraints, Debt finance, Economic growth |
| JEL: | E22 G30 G32 O16 |
| Date: | 2025–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:rif:report:161 |
| By: | Tao Chen; Shuwen Pi; Qing Sophie Wang (University of Canterbury) |
| Abstract: | This study examines the impact of artificial intelligence (AI) on corporate investment efficiency. Our analysis of recruitment data from Chinese listed companies reveals a positive correlation between AI and investment efficiency, primarily driven by a reduction in over-investment. Specifically, a one-standard-deviation increase in AI hiring is associated with a 3.1% improvement in investment efficiency. This improvement results from better investment decisions (e.g., greater responsiveness to growth opportunities and fewer value-destroying mergers and acquisitions), and more effective internal capital allocation (e.g., improvements in innovation and operational efficiency). The positive impact of AI is stronger in firms with less government intervention, flatter organizational structures, technically experienced boards, poorer information environments, and traditional and lowly competitive industries. Overall, our findings highlight the importance of AI skills in shaping corporate investment decisions. |
| Keywords: | Artificial intelligence, AI hiring, investment efficiency |
| JEL: | O14 O33 G31 G34 |
| Date: | 2025–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:cbt:econwp:25/05 |
| By: | Botsari, Antonia; Gvetadze, Salome; Lang, Frank |
| Abstract: | This working paper provides an updated overview of the key markets the EIF focuses on, highlighting the challenges and opportunities in SME financing during these uncertain times. It reviews the overall market environment, explores developments in SME equity, guarantees, securitisation, and inclusive finance markets, and discusses how these areas are shaping the support available to SMEs. The paper reflects the EIF's commitment to addressing financing gaps and fostering sustainable growth across Europe. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:313620 |
| By: | Md Lutfur Rahman (University of Newcastle); Sudipta Bose (University of Newcastle) |
| Abstract: | This study examines the association between firm-level climate change risk exposure and corporate risk-taking using a sample of 50, 782 firm-year observations from 2003 to 2021 across 58 countries worldwide. Using a time-varying measure of firm-level climate change risk exposure derived from corporate conference call transcripts, we find a negative relationship between firm-level climate change risk exposure and corporate risk-taking. We also find that the negative association is more pronounced for firms with higher environmental innovation and firms domiciled in countries with stakeholder-oriented business cultures and stronger governance. Our key finding is robust under several alternative corporate risk-taking and climate change risk exposure proxies. The findings of this study could be used by policymakers to enact regulations limiting risky investments in climate-vulnerable sectors or to provide economic safety nets for businesses impacted by climate change. |
| Keywords: | Climate change exposure; corporate risk-taking; Asia Pacific countries |
| JEL: | G32 Q54 |
| Date: | 2025–03–04 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2024-36 |
| By: | Charles M. Kahn; Anderson Caputo Silva; Gonzalo Martinez Torres |
| Keywords: | Finance and Financial Sector Development-Access to Finance Finance and Financial Sector Development-Financial Structures Macroeconomics and Economic Growth-Investment and Investment Climate |
| Date: | 2023–08 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wboper:40273 |