type="main"> We find that firms mitigate refinancing risk by increasing their cash holdings and saving cash from cash flows. The maturity of firms’ long-term debt has shortened markedly, and this shortening explains a large fraction of the increase in cash holdings over time. Consistent with the inference that cash reserves are particularly valuable for firms with refinancing risk, we document that the value of these reserves is higher for such firms and that they mitigate underinvestment problems. Our findings imply that refinancing risk is a key determinant of cash holdings and highlight the interdependence of a firm's financial policy decisions.
{"title":"Refinancing Risk and Cash Holdings","authors":"J. Harford, Sandy Klasa, W. Maxwell","doi":"10.2139/ssrn.1810199","DOIUrl":"https://doi.org/10.2139/ssrn.1810199","url":null,"abstract":"type=\"main\"> We find that firms mitigate refinancing risk by increasing their cash holdings and saving cash from cash flows. The maturity of firms’ long-term debt has shortened markedly, and this shortening explains a large fraction of the increase in cash holdings over time. Consistent with the inference that cash reserves are particularly valuable for firms with refinancing risk, we document that the value of these reserves is higher for such firms and that they mitigate underinvestment problems. Our findings imply that refinancing risk is a key determinant of cash holdings and highlight the interdependence of a firm's financial policy decisions.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-05-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121182464","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the value of stable ownership for a large sample of European firms from 2005 to 2010, using the global financial crisis as an exogenous shock and using pre-and post-crisis periods as benchmarks. Controlling for ownership concentration, we find that stable blockholder ownership results in higher stock returns during the crisis, but not before and after the crisis. The positive effect of stable ownership applies to both family blockholders and institutional blockholders. While the beneficial effect of stable ownership generally does not depend on investor protection, stable institutional blockholders are more valuable in countries with weaker investor protection. During the financial crisis, ownership stability is also associated with lower idiosyncratic risk and higher investments.
{"title":"The Value of Stable Ownership During the Global Financial Crisis","authors":"Andy Lardon, C. Beuselinck, M. Deloof","doi":"10.2139/ssrn.2260372","DOIUrl":"https://doi.org/10.2139/ssrn.2260372","url":null,"abstract":"We investigate the value of stable ownership for a large sample of European firms from 2005 to 2010, using the global financial crisis as an exogenous shock and using pre-and post-crisis periods as benchmarks. Controlling for ownership concentration, we find that stable blockholder ownership results in higher stock returns during the crisis, but not before and after the crisis. The positive effect of stable ownership applies to both family blockholders and institutional blockholders. While the beneficial effect of stable ownership generally does not depend on investor protection, stable institutional blockholders are more valuable in countries with weaker investor protection. During the financial crisis, ownership stability is also associated with lower idiosyncratic risk and higher investments.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"36 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-05-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128411865","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). If there are no perfect substitutes for equity finance, payout taxes may therefore have an effect on the investment of firms. High taxes will favor investment by firms who can finance internally. Using an international panel with many changes in payout taxes, we show that this prediction holds well. Payout taxes have a large impact on the dynamics of corporate investment and growth. Investment is “locked in” in profitable firms when payout is heavily taxed. Thus, apart from any level effects, payout taxes change the allocation of capital.
{"title":"Payout Taxes and the Allocation of Investment","authors":"Bo Becker, Marc A. Jacob, M. Jacob","doi":"10.2139/ssrn.1692742","DOIUrl":"https://doi.org/10.2139/ssrn.1692742","url":null,"abstract":"When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). If there are no perfect substitutes for equity finance, payout taxes may therefore have an effect on the investment of firms. High taxes will favor investment by firms who can finance internally. Using an international panel with many changes in payout taxes, we show that this prediction holds well. Payout taxes have a large impact on the dynamics of corporate investment and growth. Investment is “locked in” in profitable firms when payout is heavily taxed. Thus, apart from any level effects, payout taxes change the allocation of capital.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"125 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122898285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper aims to fill one knowledge gap on understanding the issue of capital formation in new co-operatives in developing countries. By doing so, it presents the main findings of capital formation and investment in a small sample of horticulture shareholding co-operatives in rural China, because shareholding co-operatives, as one best example of new multi-stakeholder co-operatives in China, have become a vehicle to mobilize additional resources. To better understand shareholder co-operatives’ stakeholder heterogeneity, two main groups of stakeholders are identified, namely, member stakeholders (investor-members and patron-members) and non-member stakeholders (non-member investors and non-member donors/grant-givers). Following a brief theoretical overview concerning co-operative multi-stakeholdership and capital acquisition and constraints, I then analyze both the rules-in-form and rules-in-use with respect to the co-operative stakeholders’ capital involvement in China. Cases observed indicate a hybridization feature of the co-operative capital base, including member contributions, public subsidies, income from the market sale, institutional capital and social capital. There exist at least four ways to raise equity capital from co-operative members. External capital comes mostly from direct government support in the form of grants and project funding, and indirect financial support through preferential treatment and policies. Different from the situation in the West, debt capital does not appear to be a widely-used traditional financing source. New co-operatives in China have difficulty even in borrowing short-term debt, not to mention receiving long-term loans. Also specialized/non-traditional external capital sources such as those provided by co-operative banks do not suffice. Co-operative banks are not always ready to provide micro-credit to co-operatives. Only when the government plays an active role, this lending process is facilitated. Many innovative financial systems are also observed in the field, which facilitate the mobilization of more external capital for co-operatives.
{"title":"Capital Formation in New Cooperatives in China: Policy and Practice","authors":"Li Zhao","doi":"10.2139/ssrn.1793188","DOIUrl":"https://doi.org/10.2139/ssrn.1793188","url":null,"abstract":"This paper aims to fill one knowledge gap on understanding the issue of capital formation in new co-operatives in developing countries. By doing so, it presents the main findings of capital formation and investment in a small sample of horticulture shareholding co-operatives in rural China, because shareholding co-operatives, as one best example of new multi-stakeholder co-operatives in China, have become a vehicle to mobilize additional resources. To better understand shareholder co-operatives’ stakeholder heterogeneity, two main groups of stakeholders are identified, namely, member stakeholders (investor-members and patron-members) and non-member stakeholders (non-member investors and non-member donors/grant-givers). Following a brief theoretical overview concerning co-operative multi-stakeholdership and capital acquisition and constraints, I then analyze both the rules-in-form and rules-in-use with respect to the co-operative stakeholders’ capital involvement in China. Cases observed indicate a hybridization feature of the co-operative capital base, including member contributions, public subsidies, income from the market sale, institutional capital and social capital. There exist at least four ways to raise equity capital from co-operative members. External capital comes mostly from direct government support in the form of grants and project funding, and indirect financial support through preferential treatment and policies. Different from the situation in the West, debt capital does not appear to be a widely-used traditional financing source. New co-operatives in China have difficulty even in borrowing short-term debt, not to mention receiving long-term loans. Also specialized/non-traditional external capital sources such as those provided by co-operative banks do not suffice. Co-operative banks are not always ready to provide micro-credit to co-operatives. Only when the government plays an active role, this lending process is facilitated. Many innovative financial systems are also observed in the field, which facilitate the mobilization of more external capital for co-operatives.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132767595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Benoît Chevalier-Roignant, C. Flath, Arnd Huchzermeier, L. Trigeorgis
Investment is a central theme in economics, finance, and operational research. Traditionally, the focus of analysis has been either on assessing the value of flexibility (investment under uncertainty) or on describing commitment effects in competitive settings (industrial organization). Research contributions addressing the intersection of investment under uncertainty and industrial organization have become numerous in recent years. In this paper, we provide an overview aimed at categorizing and relating these research streams. We highlight managerial insights concerning the nature of competitive advantage (first- versus second-mover advantage), the manner in which information is revealed, firm heterogeneity, capital increment size, and the number of competing firms.
{"title":"Strategic Investment Under Uncertainty: A Synthesis","authors":"Benoît Chevalier-Roignant, C. Flath, Arnd Huchzermeier, L. Trigeorgis","doi":"10.2139/ssrn.1543763","DOIUrl":"https://doi.org/10.2139/ssrn.1543763","url":null,"abstract":"Investment is a central theme in economics, finance, and operational research. Traditionally, the focus of analysis has been either on assessing the value of flexibility (investment under uncertainty) or on describing commitment effects in competitive settings (industrial organization). Research contributions addressing the intersection of investment under uncertainty and industrial organization have become numerous in recent years. In this paper, we provide an overview aimed at categorizing and relating these research streams. We highlight managerial insights concerning the nature of competitive advantage (first- versus second-mover advantage), the manner in which information is revealed, firm heterogeneity, capital increment size, and the number of competing firms.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124311202","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article is devoted to the research of the functioning of financial and industrial groups on Ukraine’s markets for corporate control and investments. The largest financial and industrial groups of Ukraine -- “Finance & Credit”, “Privat-Invest”, “Ukrsibbank” and “The Industrial Union of Donbass” -- were studied during the research. The research revealed the most important criteria that financial and industrial groups have to meet for the efficient functioning on the Ukrainian markets for corporate control and investments. These are the following criteria: a powerful bank capable of carrying out the function of cash generator within a group; high degree of business diversification; optimum concentration of property; minimal hierarchy of the system of corporate control. The research has studied such criterion as transparency of the structure of property, which is highly valued by the corporate governance in other countries. In Ukraine, the structure of ownership of most of efficiently functioning financial and industrial groups is not transparent, which is paradoxical. This can be explained by the lack of proper legislation for protection of property rights, low activity of small shareholders and reluctance of financial and industrial groups themselves to make transparent the motives of their participation on the market for corporate control.
本文致力于研究金融和工业集团在乌克兰公司控制和投资市场上的运作。乌克兰最大的金融和产业集团“Finance & Credit”、“private - invest”、“Ukrsibbank”和“The industrial Union of Donbass”在研究期间被研究。这项研究揭示了金融和工业集团必须满足的最重要标准，以便在乌克兰公司控制和投资市场上有效运作。这些标准如下:一个强大的银行，能够在一个集团内发挥现金生成器的功能;业务多元化程度高;性能的最佳集中;公司控制体系的最低等级。本研究对国外公司治理高度重视的财产结构透明度等标准进行了研究。在乌克兰，大多数有效运作的金融和工业集团的所有权结构并不透明，这是自相矛盾的。这可以解释为缺乏保护产权的适当立法，小股东的活动很少，金融和工业集团本身不愿使其参与公司控制权市场的动机透明化。
{"title":"Financial-Industrial Groups at the Markets for Corporate Control and Investments: The Case of Ukraine","authors":"A. Kostyuk, Konstantin Tchernyshov, H. Kostyuk","doi":"10.22495/COCV2I2P7","DOIUrl":"https://doi.org/10.22495/COCV2I2P7","url":null,"abstract":"This article is devoted to the research of the functioning of financial and industrial groups on Ukraine’s markets for corporate control and investments. The largest financial and industrial groups of Ukraine -- “Finance & Credit”, “Privat-Invest”, “Ukrsibbank” and “The Industrial Union of Donbass” -- were studied during the research. The research revealed the most important criteria that financial and industrial groups have to meet for the efficient functioning on the Ukrainian markets for corporate control and investments. These are the following criteria: a powerful bank capable of carrying out the function of cash generator within a group; high degree of business diversification; optimum concentration of property; minimal hierarchy of the system of corporate control. The research has studied such criterion as transparency of the structure of property, which is highly valued by the corporate governance in other countries. In Ukraine, the structure of ownership of most of efficiently functioning financial and industrial groups is not transparent, which is paradoxical. This can be explained by the lack of proper legislation for protection of property rights, low activity of small shareholders and reluctance of financial and industrial groups themselves to make transparent the motives of their participation on the market for corporate control.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-12-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131761016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyses the influence of ownership, board of directors, and financial leverage on companies’ performance when these either face, or do not face, profitable growth opportunities. Towards that end we examined a sample of 83 listed Mexican firms during the period 2005-2011. The results confirm the relevance of debt and board of directors in terms of firm market value by showing a negative relationship between performance and both, board of directors and leverage, in the presence of growth opportunities. In contrast, the relationship between debt and performance becomes positive when firms have no profitable investment projects. The results also demonstrate that the relevance of controlling shareholders on firm value is different when firms have or not growth opportunities. Therefore, our results show that ownership structure, composition and size of board and the level of leverage play a dual role on performance (increase or decrease the firm value) and determinewhether the firms have profitable investment projects.
{"title":"Ownership Structure, Firm Value and Investment Opportunities Set: Evidence from Mexican Firms","authors":"Juan Manuel San Martín-Reyna, J. Duran-Encalada","doi":"10.7341/2012833","DOIUrl":"https://doi.org/10.7341/2012833","url":null,"abstract":"This paper analyses the influence of ownership, board of directors, and financial leverage on companies’ performance when these either face, or do not face, profitable growth opportunities. Towards that end we examined a sample of 83 listed Mexican firms during the period 2005-2011. The results confirm the relevance of debt and board of directors in terms of firm market value by showing a negative relationship between performance and both, board of directors and leverage, in the presence of growth opportunities. In contrast, the relationship between debt and performance becomes positive when firms have no profitable investment projects. The results also demonstrate that the relevance of controlling shareholders on firm value is different when firms have or not growth opportunities. Therefore, our results show that ownership structure, composition and size of board and the level of leverage play a dual role on performance (increase or decrease the firm value) and determinewhether the firms have profitable investment projects.","PeriodicalId":397102,"journal":{"name":"CGN: Capital Investment (Topic)","volume":"153 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116701091","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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