This study investigates how asymmetric risk preferences and national institutions co-determine how firms are financed across countries. We include prospect theory into the discussion of uncertainty ...avoidance and the institutional envelope in IB, and argue that country-specific bias in the evaluation of downside risks and upside potentials explain variation in how otherwise similar firms raise funds. Exploiting a unique dataset on risk preferences, we show that risk perception in general, and asymmetric risk preferences as predicted by prospect theory in particular, affect corporate capital structure. We also show that the national institutional envelope constrains these effects and discuss implications for international business research beyond capital structure. We test our predictions on a panel of 10,355 firm-year observations.
•Asymmetric risk preferences drive capital structure differences across countries.•Prospect theory helps explain cross-national variation in capital structure.•The institutional envelope constrains how risk preferences influence capital structure.
This article explores the interactive effects of digital finance and environmental, social responsibility, and corporate governance (ESG) performance on corporate financing efficiency using data ...envelopment analysis (DEA) and panel data analysis. Our empirical results demonstrate that higher ESG performance and digital finance enhance corporate financing efficiency at the 1% significance level, and digital finance alleviates the positive marginal effect of ESG performance on corporate financing efficiency.
This study investigates the impact of China's Green Finance Innovation and Reform Pilot Zones on corporate financing. I view the "Green Finance Innovation and Reform Pilot Zones" piloted in certain ...provinces in China as a quasi-natural experiment and use a Difference-in-Differences (DID) approach to explore the impact of this pilot policy on corporate debt financing costs and financing scale. The goal is to evaluate the implementation effect of this policy. The results show that the green finance pilot zone policy increases the financing scale of green enterprises and reduces that of polluting enterprises, but it does not significantly impact financing costs. The policy provides more apparent financial support for non-state-owned, small, and less profitable green enterprises, while imposing stricter constraints on the financing scale of large and less profitable heavy polluting enterprises. Additionally, the policy's "incentive effect" on green innovation in green enterprises is not significant. However, its "compelling effect" on green innovation in polluting enterprises is quite noticeable.
•The Green Financial Reform Experimental Zone policy has increased the financing scale of green enterprises and reduced that of polluting enterprises, yet it has no significant impact on the cost of financing.•The policy provides more noticeable financial support for non-state-owned, small-scale, and less profitable green enterprises, while it imposes stricter restrictions on the financing scale of large-scale, less profitable heavily polluting enterprises.•The Green Financial Reform Experimental Zone policy significantly promotes the green transformation of polluting enterprises, but its effectiveness in promoting green innovation in green enterprises needs to be improved.
Token-based platform finance Cong, Lin William; Li, Ye; Wang, Neng
Journal of financial economics,
June 2022, 2022-06-00, 20220601, Volume:
144, Issue:
3
Journal Article
Peer reviewed
Open access
We develop a dynamic model of a platform economy where tokens serve as a means of payment among platform users and are issued to finance investment in platform productivity. Tokens are optimally ...rewarded to platform owners when token supply (normalized by productivity) is low and burnt to boost franchise value when the normalized supply is high. Although token price is determined in a liquid market, the platform’s financial constraint generates an endogenous token issuance cost that causes underinvestment through the conflict of interest between insiders (owners) and outsiders (users). Blockchain technology mitigates underinvestment by addressing the owners’ time inconsistency problem.
•We examine the empirical nexus between green innovation corporate financing.•Green innovation has a positive effect on corporate debt financing.•Green innovation has a positive effect on corporate ...debt financing.•RBV theory and stakeholder theory were found valid in current analysis.•Green innovation has a dual benefit in the shape of environmental sustainability and access to corporate financing.
Enterprises are increasingly adopting green innovation strategies to reduce their environmental footprint and enhance their competitive positioning. However, how this shift towards sustainability influences corporate financing is less known in the literature. Therefore, this study aims to investigate the impact of green innovation on corporate financing in BRICS countries. Using data from 2010 to 2022 and system GMM for analysis, it finds that green innovation positively influences corporate financing. This highlights the growing importance of sustainable practices in shaping financial decisions. The study adds to the literature on the link between environmental sustainability and corporate finance, emphasizing sustainability's role in corporate financial strategies.
The study examines whether cultural values shape the impact of Environmental, Social, and Governance (ESG) undertakings on a firm's financing decisions. Analyzing 24,202 firm-year observations drawn ...from 41 countries, for the period from 2007 to 2016, we find robust evidence that corporate ESG activities are inversely associated with a firm's use of debt financing. More specifically, a one standard deviation increase in a firm's ESG score is associated with 0.075 standard deviation decrease in its book leverage ratio. We also find that the inverse association between the two variables weakens among firms in cultures that are stronger on individualism, long-term orientation, masculinity, and uncertainty avoidance; the association becomes positive as the strength of these cultural dimensions crosses certain thresholds. On the other hand, the inverse effect of corporate ESG performance on a firm's use of debt financing is reinforced in more power distant societies. Our findings suggest a firm's ability to enhance its reputation, information environment, and/or reduce agency and transaction costs by intensifying ESG engagements—and thus gain better access to equity capital—decreases in cultures that are stronger on individualism, long-term orientation, masculinity, and uncertainty avoidance, while it increases in more power distant societies. Our study contributes to the literature by showing the culturally embedded nature of the interplay between corporate ESG undertakings and financing decisions.
Green finance is increasingly important in both academia and industry, yet the relationship between green bonds and bank loans remains largely understudied. In this study, we conduct an empirical ...investigation into the impact of the credit spreads of green bonds on the structure of debt financing. Our findings suggest that companies with larger credit spreads on green bonds in the secondary market tend to experience a higher growth rate in new bank loans. The presence of such credit spreads in the secondary market exacerbates corporate financing constraints and information asymmetry. This dynamic fosters implicit collusion between enterprises and banks, enhancing the firms' ability to secure bank loans. This research sheds light on the economic implications of the credit spreads of green bonds from the banks' perspective and offers valuable insights for optimizing credit strategies and detecting greenwashing behavior among banks and investors.
•We examine the impact of green bond spreads on firm-level bank loans in China.•Firms with larger green bond spreads tend to have higher growth rates of new bank loans.•Large credit spreads exacerbate firms' financing constraints and information asymmetry.•These effects depend on the corporate ownership and holding structure.
•This paper explores the financing effect of environmental regulation.•The Carbon Emission Trading System (ETS) pilots are the main focus.•The introduction of ETS significantly increases a firm's ...cost of debt.•The implementation of ETS could be harmful to creditors.
This paper explores the financing effect of environmental regulation in view of the cost of debt. Using a sample of Chinese A-share listed firms from 2010 to 2016, we document that the introduction of the Carbon Emission Trading System (ETS) pilots significantly increases a firm's cost of debt by 0.140 percentage points on average. This effect is exacerbated for firms with higher external finance dependence, facing higher external pressures, and operating in a more competitive product market, and is weakened for firms with higher mortgage capacity. Overall, we show that the implementation of ETS may incentivize risky investments, which may be value enhancing in the long run to some extent, but also increase the distress risk, and increase the risk premium requirements of creditors who pay more attention to downside risks.
Focusing on quarterly data of China’s publicly-listed firms from 2013Q1-2017Q3, this paper presents an exploratory analysis of the causes of corporate financing behavior through the channels of ...firm-level characteristics, country-level factors, and policy-related risks. The analysis uses multidimensional measures of policy-related risks, including economic policy uncertainty, geopolitical risk, and political risk. In addition, we assess whether the correlations between policy-related risks and financing activities vary under different financing strategies such as debt financing and equity financing. We also examine how financial constraints and industry differences influence firm financing. The empirical findings indicate policy-related risks can negatively affect corporate financing decisions. The effect of policy-related risk is larger on debt financing than on equity financing. Evidence also reveals that both firm- and country-level factors are essential determinants that guide corporate financing decisions. Finally, the inhibitory influence of policy-related risk is larger for the two separate subsamples of financially constrained firms and manufacturing firms. Knowledge of these impacts can help managers and policymakers to formulate more efficient strategies aimed at improving their economic performance.
•We examine the impact of policy-related risks on corporate financing behavior.•Policy uncertainty, geopolitical risk, and political risk are used in the analysis.•Results show that corporate financing decreases with the policy-related risks.•Policy-related risk has larger influence on debt financing than equity financing.•The adverse effect is larger for financially constrained and manufacturing firms.
Environmental innovation is an important way for firms to achieve sustainable development and acquire resources. Based on the stakeholder, resource dependence, and signal transmission theories, this ...study divided environmental innovation into substantive and strategic eco‐innovation and constructed a relationship model among environmental innovation, advertising expenditures, and corporate financing. Selecting 162 Chinese manufacturing listed companies from 2012 to 2017 as the research sample and adopting the multiple regression analysis method, the study found that substantive eco‐innovation had a positive effect on corporate financing, but strategic eco‐innovation had a significant negative effect on corporate financing. Further, advertising expenditures played a positive moderating role between substantive eco‐innovation, strategic eco‐innovation, and corporate financing. The robustness test further confirmed these results.
