1,720,972 research outputs found
Asset Specificity and the Secondary Market for Productive Assets
No full textThe aim of this paper is to explore how debt contracts are affected by investment in asset specialization and by the dynamics of the secondary market for collateralized productive assets. Before applying for a loan, financially constrained firms face a specificity trade-off: asset specialization increases firms' project returns, but decreases the liquidation value of assets in the secondary market if the firm is in financial distress. To study this trade-off, the paper uses a theoretical model in which the choice of asset specificity and the outcome of the secondary market for distressed firms' assets are endogenous. High redeployability costs and a small number of participants in the secondary market are associated to low recovery values and to a high cost of debt. The paper shows the conditions under which financial constraints reduce firms' incentive to invest in asset specificity
ESG performance, institutional factors, and the cost of debt
No full textInstitutional factors play a critical role in shaping the relationship between companies’ environmental, social, and governance (ESG) practices and their financial performance. This paper investigates how institutional factors influence the relationship between ESG practices and the cost of debt for non-financial firms globally, focusing on seven dimensions of governance quality and environmental resilience. Findings show that companies with superior ESG ratings operating in countries with high institutional quality benefit from a reduction in their cost of debt. Conversely, firms in countries with lower institutional quality do not experience the same advantage, underscoring the importance of effective governance and environmental resilience in fostering sustainable business practices. Results are robust to tests addressing endogeneity concerns and possible confounding factors, such as the COVID-19 pandemic. These findings provide insights for practitioners, financial institutions, and policymakers, highlighting the need to consider the institutional context when assessing the impact of ESG factors on financial outcomes
Il ruolo delle performance Esg nella valutazione della rischiosità aziendale
No full textQuesto studio approfondisce la relazione tra pratiche ambientali, sociali e di governance (Esg) e il costo del debito per le aziende non finanziarie. Utilizzando un dataset che copre 16 anni e circa 4.800 aziende in tutto il mondo, il nostro studio rivela una relazione negativa tra performance Esg e costo del debito, confermata sia attraverso regressioni panel sia con l’utilizzo di modelli con variabili strumentali (2Sls). Questi risultati sono particolarmente rilevanti a seguito del Paris Agreement ed evidenziano l’effetto significativo nei paesi con maggiori emissioni di CO2 pro-capite e minor allineamento agli Sdg. Il nostro studio sottolinea l’importanza strategica dell’integrazione dei principi Esg nelle strategie aziendali e fornisce implicazioni pratiche per le istituzioni finanziarie, evidenziando la necessità di incorporare i fattori Esg in una valutazione olistica del rischio
How can SMEs signal their quality and growth orientation to the market? An analysis of the cost of Italian corporate mini‐bonds
No full textWe examine how small and medium-sized enterprises (SMEs) may signal their quality and growth orientation to the market and the effect on the cost of bond funding, which is often high for unlisted firms and SMEs mainly because of their information opacity and higher riskiness. The paper contributes to the growing European debate on market innovations aimed at facilitating funding for smaller and nonlisted firms, breaking from the prior main focus on the cost for large and listed companies of accessing liquid bond markets. We analyze 220 mini-bonds listed in Italy between 2013 and 2017 to examine determinants of yield spreads. Our explanatory variables are size, age, and tangible assets-all indicators of the firm's information opacity-together with the issuer's growth opportunities, rating availability, and the presence of a guarantee. The findings suggest that tangible assets can ease the asymmetric information and associated monitoring costs for investors, thus reducing the bond yield spread. More significantly, the yield spread depends on the type of investment project financed: risky growth projects are associated with a higher cost of funding than other types of projects. Under such circumstances, the rating represents an informative instrument for the market in assessing issuers' growth orientation
ESSAYS ON CORPORATE FINANCE AND INDUSTRIAL ORGANIZATION
No full textIl presente lavoro di tesi analizza da un punto di vista teorico i contratti di debito con collaterale e la scelta di specializzazione degli asset produttivi. Le imprese soggette a vincoli finanziari danno in pegno i loro asset come collaterale per migliorare l’accesso al credito. Tuttavia, i prenditori di fondi trovano spesso difficoltà nel finanziare progetti con asset eccessivamente specializzati perché il loro valore di liquidazione è basso (asset troppo specializzati hanno un valore di riutilizzo limitato) anche quando i progetti hanno un rendimento atteso elevato. In questo contesto, questa tesi vuole rispondere alle seguenti domande di ricerca: in quale modo la scelta di specializzare un asset produttivo influisce sui contratti finanziari? Quali sono gli effetti delle diverse scelte di specificità su quantità e condizioni del credito? E sulla competizione nel mercato del prodotto? La tesi tratta sia temi di finanza aziendale che temi di organizzazione industriale, e, utilizzando un nuovo approccio teorico, analizza congiuntamente il grado di specificità degli asset e il loro valore di liquidazione. La specializzazione degli asset aumenta il ritorno dei progetti ma diminuisce il valore di liquidazione degli asset stessi. Quando le imprese devono impegnare gli asset come collaterale, questo implica un aumento del costo del debito. Analizzando questo “specificity trade-off”, la tesi dimostra che: nel mercato secondario il valore di liquidazione di un asset dipende dal grado di specificità, dai costi di riutilizzo e dalla presenza di potenziali acquirenti; imprese che devono ricorrere a finanziamenti investono meno in specializzazione degli asset rispetto a imprese che riescono ad auto-finanziarsi; la struttura del mercato e il grado di specializzazione scelto sono influenzati dalle condizioni finanziarie; quando il grado di specificità degli asset produttivi influisce sul grado di differenziazione dei prodotti, il trade-off implica che le imprese che devono finanziarsi attraverso il mercato dei capitali investono meno in specializzazione e, di conseguenza, sono esposte ad un grado di concorrenza maggiore nel mercato del prodotto.My dissertation is about collateral debt contracts and the choice of specializing productive assets, from a theoretical perspective. Financially constrained firms pledge their productive assets as collateral in order to enhance their access to credit. However, firms may find it difficult to finance projects when their collateralized productive assets are too specialized since their liquidation value is low (as a matter of fact redeployability of those assets to alternative uses is scarce) even when their projects have large expected returns. In this context, my dissertation aims to answer the following research questions: how does the choice of asset specialization affect financial contracts? Which are the implications of different degree of asset specificity for the amount of credit and product market competition? This dissertation is at a cross road between industrial organization and corporate finance and uses a novel approach where the choice of asset specialization and the liquidation value of a productive asset are analyzed together. Asset specialization increases firms' project returns, but decreases the liquidation value of productive assets. When firms are credit constrained this implies a higher cost of debt. By examining this specialization trade-off, I am able to prove the following results: in the secondary market the resale value of a productive asset is determined by its degree of asset specificity, redeployability costs and the presence of firms willing to acquire the it; financially constrained firms invest less in asset specialization compared to self-financing firms; market structure and the degree of asset specialization may be influenced by financial choices; when asset specificity affects product market differentiation, the specialization trade-off implies that financially constrained firms invest less in product differentiation, and, as a consequence, face tougher competition compared to non-financially constrained firms
ESG performance, institutional factors, and the cost of debt
No full textInstitutional factors play a critical role in shaping the relationship between companies’ environmental, social, and governance (ESG) practices and their financial performance. This paper investigates how institutional factors influence the relationship between ESG practices and the cost of debt for non-financial firms globally, focusing on seven dimensions of governance quality and environmental resilience. Findings show that companies with superior ESG ratings operating in countries with high institutional quality benefit from a reduction in their cost of debt. Conversely, firms in countries with lower institutional quality do not experience the same advantage, underscoring the importance of effective governance and environmental resilience in fostering sustainable business practices. Results are robust to tests addressing endogeneity concerns and possible confounding factors, such as the COVID-19 pandemic. These findings provide insights for practitioners, financial institutions, and policymakers, highlighting the need to consider the institutional context when assessing the impact of ESG factors on financial outcomes
Financial Fragility and Corporate Bond Funding of SMEs: An Analysis of the Italian Case
No full textThe chapter analyzes the financial policy of corporate bond issuers in the new Italian junior bond market specifically dedicated to unlisted firms and SMEs, using a proprietary firm-level dataset on 127 first-time mini-bond issuers across 2013–2017 years jointly with a control sample of around 5200 Italian private firms that have not issued corporate bonds across the same years. Since SME access to the debt capital market is largely considered a valuable source of debt funding diversification, especially for growth firms with a prominent exposure on bank debt, we test using OLS regressions whether bond issuers are able to reduce their financial vulnerability in comparison with similar nonissuers firms. The aim is to assess the extent to which the financial choices of SMEs regarding nonequity external funding can become a key factor in facing real and financial shocks like those triggered by the current pandemic Covid-19 outbreak. Our findings suggest that the access to the junior bond market is beneficial for the Italian unlisted companies in terms of a pronounced improvement in our financial fragility indicators
European SMEs’ growth: the role of market-based finance and public financial support
No full textThe study investigates the role of market-based finance and public financial support in aiding scaling up by European SMEs. First, we analyse the impact of public loan guarantee schemes on firms’ access to market-based instruments. Second, we study whether firms’ access to market-based finance and the use of public grants boost a firm’s (ex post) growth. The analysis is based on a unique and original dataset of about 31,000 Eurozone firms in the 2009–2020 period. The study finds that firms’ access to market-based finance is (i) driven positively by the previous use of public financial support schemes and (ii) has a positive effect on subsequent growth. In particular, SMEs display relatively higher growth in fixed assets, while for large firms, growth is mainly driven by current assets. Moreover, SME issuers using public grants achieve significantly stronger growth than comparable firms
Multidimensional Spatiotemporal Clustering – An Application to Environmental Sustainability Scores in Europe
No full textThe assessment of corporate sustainability performance is extremely relevant in facilitating the transition to a green and low-carbon intensity economy. However, companies located in different areas may be subject to different sustainability and environmental risks and policies. Henceforth, the main objective of this paper is to investigate the spatial and temporal pattern of the sustainability evaluations of European firms. We leverage a large dataset containing information about companies' sustainability performances, measured by MSCI ESG ratings, and geographical coordinates of firms in Western Europe between 2013 and 2023. By means of a modified version of the Chavent et al. (2018) hierarchical algorithm, we conduct a spatial clustering analysis, combining sustainability and spatial information, and a spatiotemporal clustering analysis, which combines the time dynamics of multiple sustainability features and spatial dissimilarities, to detect groups of firms with homogeneous sustainability performance. We are able to build cross-national and cross-industry clusters with remarkable differences in terms of sustainability scores. Among other results, in the spatio-temporal analysis, we observe a high degree of geographical overlap among clusters, indicating that the temporal dynamics in sustainability assessment are relevant within a multidimensional approach. Our findings help to capture the diversity of ESG ratings across Western Europe and may assist practitioners and policymakers in evaluating companies facing different sustainability-linked risks in different areas
ESG performance and stock market responses to geopolitical turmoil: evidence from the Russia-Ukraine war
No full textIn the wake of the 2015 Paris Agreement, an increasing number of stakeholders have called upon companies to demonstrate a greater level of ethical, environmental, and social responsibility. This movement aims to contribute positively to the planet and society, as well as achieving the minimum required financial returns. However, such practices and investments are being challenged by increased geopolitical risks, such as Russia’s invasion of Ukraine. This is because political events can significantly impact the financial markets and responsible investing practices. In this paper, we analyze stock price reactions to the Ukraine-Russia conflict on a global scale, focusing on differentiating between companies by country, industrial sector, and ESG characteristics. Using an event study methodology on over 17,000 firms, the empirical analysis shows that, on average, the stock market reacted negatively in the days surrounding the event. However, distinct patterns of stock market reaction are evident, most of which were country- and sector-specific. Furthermore, the results suggest that ESG performance acts as a moderating factor: firms with higher sector-adjusted ESG scores exhibit less negative CAR
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