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on Corporate Finance |
| By: | Nina Boyarchenko; Leonardo Elias |
| Abstract: | We study the determinants of active debt management through issuance and refinancing decisions for firms around the world. We leverage instrument-level data to create a comprehensive picture of the maturity, currency, and security type composition of firms' debt for a large cross-section of countries. At the instrument level, we estimate a predictive model of prepayment as a function of interest costs savings and maturity lengthening motives. We document that there is substantial heterogeneity in prepayment across bonds and loans and across firms, depending on their reliance on bank lending. While debt prepayment is generally successful at extending average maturities and lowering interest rate costs at the firm level, these benefits appear smaller for issuers in emerging market economies. Tight global credit conditions reduce both the ability to prepay debt early and the effectiveness of debt refinancing in reducing interest costs and rollover risk. Put together, our results show that the impact of global credit conditions on firms' debt structure can be traced back to how instrument-level prepayment incentives change over the global credit cycle. |
| Keywords: | debt structure; active debt management; global credit; prepayment |
| JEL: | G32 G15 F30 F44 |
| Date: | 2024–12–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:99238 |
| By: | Dawid, Herbert (Center for Mathematical Economics, Bielefeld University); Riedel, Frank (Center for Mathematical Economics, Bielefeld University); Steg, Jan-Henrik (Center for Mathematical Economics, Bielefeld University); Wen, Xingang (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | We study endogenous, credit-financed innovation under uncertainty in dynamic con- texts. In our model, a firm with limited cash reserves decides how much to invest in an R&D project, potentially using external financing. Investing more increases the proba- bility of a sooner innovation, but higher repayment obligations also increase bankruptcy risk if the innovation takes longer. We show that the firm reduces its investment dis- continuously if the financing cost is not favorable enough, in order to avoid the need for external financing. This insight implies that policies reducing financing costs can have discontinuous positive effects on investment, innovation rate and welfare. How- ever, policy measures increasing the effectiveness of R&D might reduce the innovation rate and welfare due to a discontinuous reduction of R&D investment. Furthermore, we find that low financing costs can lead to over-investment. The welfare loss from cash constraints is more severe for radical innovations compared to incremental ones. |
| Keywords: | Innovation, R&D investment, Cash constraints, Bankruptcy risk |
| Date: | 2024–12–09 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:699 |
| By: | Florian Horky (National Bank of Slovakia) |
| Abstract: | Our aim in this study is to investigate how SMEs perceive and expect the availability of bank loans, credit lines, and trade credits. Our findings highlight that past experiences and changing demands for financing are significant drivers in shaping both past perceptions and future expectations. Behavioral factors such as loss aversion and rational inattention play a crucial role in influencing managerial decisions. We use data from the semi-annually conducted Survey on the Access to Finance of Enterprises. The data covers the time-period from April 2014 to September 2022. Insights from our findings help explain the persistent low credit dynamics observed since the financial crisis and suggest similar trends may follow the current economic disruptions. Our results underscore the importance of considering behavioral elements and past experiences in designing effective monetary policies to support SMEs’ access to finance. |
| JEL: | D22 E51 F33 G21 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:svk:wpaper:1115 |
| By: | Bauer, Michael; Huber, Daniel; Offner, Eric; Renkel, Marlene; Wilms, Ole |
| Abstract: | We identify corporate commitments for reductions of greenhouse gas emissions - green pledges - from news articles using a large language model. About 8% of publicly traded U.S. companies have made green pledges, and these companies tend to be larger and browner than those without pledges. Announcements of green pledges significantly and persistently raise stock prices, consistent with reductions in the carbon premium. Firms that make green pledges subsequently reduce their CO2 emissions. Our evidence suggests that green pledges are credible, have material new information for investors, and can reduce perceived transition risk. |
| Keywords: | climate finance, decarbonization commitments, text classification, event study, transition risk, carbon premium |
| JEL: | G14 G32 Q54 Q56 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:imfswp:306828 |
| By: | Don Tawanpitak |
| Abstract: | This study examines the effects of increased tuition fees on students’ financing choices, field of study selection, and dropout rates in a context with minimal credit constraints. By leveraging the UK’s institutional setting, a tuition fee reform that tripled tuition fees, and administrative datasets, I find that higher fees (i) significantly increase loan use, (ii) have minimal impact on field of study selection, and (iii) marginally reduce dropout rates. Suggestive evidence indicates that enrollment is also unaffected. These findings encourage policymakers to prioritize addressing credit constraints and use subsidies as a supplementary measure when necessary. |
| Keywords: | Tuition fee; Credit constraint; Student loan; Field of study; Drop out |
| JEL: | I21 I22 I23 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:226 |
| By: | Rabia Bashir (School of Economics, Finance and Banking, Universiti Utara Malaysia, Sintok, Kedah, Malaysia Author-2-Name: Muhammad Ahmad Author-2-Workplace-Name: Accounting and Finance, Management and Science University, Shah Alam, Selangor, Malaysia Author-3-Name: Sultan Rehman Sherif Author-3-Workplace-Name: Business Management and Law, Management and Science University, Shah Alam, Selangor, Malaysia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - The primary aim of this study is to investigate the effect of dynamic working capital (DWC) management on operational efficiency through operating expenses and operating margins across non-financial firms in emerging markets. Methodology/Technique – This study utilized generalized method of moments (GMM) to evaluate a comprehensive dataset of 438 firms from Indonesia, Malaysia and Thailand for the period 2018 to 2023. Findings – DWC is measured study using both cash conversion cycle (CCC) and working capital ratio (WCR). Results show that optimized DWC management reduces operating expenses (OER) and increases operating margins (OMR). These findings highlight the importance of efficient working capital practices and liquidity management in emerging markets. Novelty – This study provides valuable insights for financial managers in emerging countries, advocating focused strategies on working capital cycles to strengthen operational efficiency and profitability. Type of Paper - Empirical" |
| Keywords: | Working capital management, Cash conversion cycle, working capital requirement, Operating efficiency, Emerging countries |
| JEL: | M13 M40 M49 |
| Date: | 2024–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:gtr:gatrjs:jfbr224 |
| By: | Grant Fleming; Zhangxin (Frank) Liu; David Merrett; Simon Ville |
| Abstract: | We build on an evolving international literature by investigating the relationship between ownership and control in a sample of 92 Australian companies in the 1930s. The interwar period was a formative one in Australia for the growth of corporations and share ownership, although investor protections and information lagged. We estimate the ownership share of the Board, separately the CEO/Chairman, and other significant blockholders. Our sources enable us to adopt a new approach that accounts for shares controlled indirectly through family ownership and related entities. This makes an important difference to our results. Board ownership was similar to the US and the UK in the early twentieth century; but taking account of shares controlled through related entities changes the story to one of an insider system where ownership and control had not separated. Dual CEOs also mattered along with blockholders beyond the Board in many companies. We also examine some of the drivers of this structure of ownership and control including company size, the role of family firms, and of preference shares. |
| Keywords: | Ownership and control; Board of Directors; CEO; Blockholder; Australia |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:auu:hpaper:126 |