Financial Firms Research Articles

Do Public Financial Statements Influence Private Equity and Venture Capital Financing?

ABSTRACT We study whether the availability of public audited financial statements influences the probability of private firms receiving private firm equity financing. Using a setting in the EU with plausibly exogenous variability in the extent to which private firms issue public financial reports, we find that private firms subject to public reporting requirements have a higher probability of obtaining private equity (PE) financing. In addition, we show that the increase in PE financing occurs in industries in which PE funds have prior experience. Last, we show that our findings also extend to other forms of private firm financing such as private firm acquisitions and venture capital. Our evidence highlights the importance of public financial statements in the decision-making of PE investors, an important and understudied segment of the private firm financing market. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M2; G24; G34.

Bank Fintech and firm leverage adjustment speed: Evidence from China

The recent development of Fintech has greatly changed the operation and loan management of commercial banks, which has had a significant impact on firm financing and governance. This paper analyzes the impact of the rising use of bank Fintech on leverage adjustment speed. The results show that bank Fintech accelerates firm leverage adjustment speed. This effect is more pronounced for under-leveraged firms, high-growth firms, non-state-owned firms and firms located in regions with more developed institutions. Transmission channel tests show that bank Fintech can accelerate leverage adjustment speed by alleviating firm-level financial constraints and agency problems. Finally, bank Fintech improves firm performance by accelerating leverage adjustment speed. Our work extends the literature on Fintech and dynamic trade-off theory and has implications for banking regulations and Fintech development.

Impact of the regional financial reform on corporate financialization: Evidence from China

This study employs the data of Chinese A–share listed companies from 2007 to 2022, considers the implementation of the regional financial reform pilot zone policy as a quasi-natural experiment, and tests the impact of this reform on the financial asset holdings of nonfinancial firms by using a difference-in-difference model. Based on the findings, the regional financial reform restrains the financialization of nonfinancial firms through two paths: 1) promoting profit equalization, which reduces the return gap between real and financial investments; and 2) balancing the allocation of credit resources, which curbs corporate participation in shadow banking. Further analysis showed that the governance effect of the regional financial reform is especially prominent for firms in regions with lower administrative, market development, and financial development levels, especially in the central and western regions. In the economic consequences test, we found that the dampening effect of the regional financial reform on corporate financialization can promote real investments, especially innovation investments. These findings not only enrich the research on the determinants of corporate financialization and the economic consequences of the regional financial reform, but they also provide insights for financial reforms in other emerging economies.

A Financing Constraints Paradox? Internal Finance and Capital Structure Link for Tourism Firms: Asian Emerging Market evidence

The aim of the study is to investigate the relationship between the internal financial and capital structure of an organization in the travel and tourism sector. The study shows how financial constraints on tourism companies affect their ability to finance themselves. The study also shows a relationship between tax shielding and financial leverage. This study analyzes panel data collected over a 21 year period, from 1998 to 2019, from over 100 publicly traded tourism companies in three Asian countries. A panel data methodology and the generalized method of moments estimation (GMM) were used in this empirical study. To support our hypothesis, using a generic method to evaluate parameter estimation will be our most effective method to improve the literature. Overall, the results show that financially stressed tourism firms use their option of debt-free tax avoidance to increase leverage. There is also a positive correlation between tax haven and leverage for firms with limited resources. The correlations between financial leverage and corporate debt supported by the results theoretically support the pecking order. By providing useful insights into the tax shielding of non-debt, which is significantly correlated with leverage for firms operating in tourism, this study closes the gap in firms’ capital structure decisions regarding access to finance. JEL Classification: G0, G01, L25

Effect of Ownership Structure on Performance of Quoted Financial Firms in Nigeria

This study investigates the relationship between ownership structure and firm performance of quoted Nigerian financial firms in Nigeria. This study employs an Ex post facto research design, utilizing data extracted from annual reports of the financial firms listed on the Nigerian Exchange Group (NGX) between the years 2014 to 2023. The population of interest consists of 48 listed financial firms. Secondary data from the firms' annual reports were collected and analyzed using fixed effect panel regression analysis as specified by Hausman test. The findings reveal significant positive effects of managerial ownership, institutional ownership, and ownership concentration on firm performance. These results align with established theories such as agency theory and stewardship theory, as well as previous empirical studies in the field of corporate governance and ownership structure. The study concludes that increasing managerial ownership can align the interests of managers with shareholders, leading to improved firm performance. Attracting institutional investors who bring expertise, monitoring capabilities, and long-term investment perspectives can also contribute to enhanced firm performance. Furthermore, careful management of ownership concentration can enhance monitoring and decision-making efficiency, align shareholder interests, and reduce agency costs. However, the study finds no significant impact of foreign ownership on firm performance in the Nigerian context. This suggests the need for further research to better understand the specific dynamics and potential implications of foreign ownership in the Nigerian financial industry, considering factors such as regulatory restrictions, cultural differences, and information asymmetry.

Impact of Digital Economy Development on Financialization of Firms: Empirical Evidence from PVAR Model

In this paper, we select several indicators to measure the level of the digital economy in cities, the index of digital inclusive finance in cities and the degree of financialization of enterprises, we apply variables mentioned above to analyze the complex relationship between multiple variables based on the PVAR model, we firstly suppose a unique order and use impulse response function(IRF) and variance decomposition measures to predict the impact of the relationship between variables, so as to provide a reference for policy making and risk prevention. and use impulse response and variance decomposition methods to predict the future direction of the relationship between variables, so as to provide certain reference significance for policy making and risk prevention.

Nexus Among Administrative Environmental Innovation and Firm Financial Performance

This paper explores the effect of administrative environmental innovation (AEI) on firm financial performance (FFP) by considering the dynamic capability theory and resource-based view. Specifically, this study tests the linkages between administrative environmental innovation (AEI) and firm financial performance (FFP)by using worldwide data from 685 companies from 42 countries for the period 2004 to 2020. In the final sample, we have 4368 year-annual observations. In this study, AEI is segregated into internal AEI and external AEI. The findings of this study show that Internal AEI and external AEI both enhance FFP under a dynamic capability approach. In this way, this study provides some managerial implications such as the implementation of AEI helps in green innovation strategy that can raise firm profitability in the long run period.

Book Value Forecast Quality: Financial Versus Nonfinancial Firms

ABSTRACTThis study investigates the quality and usefulness of analysts’ book value forecasts for financial firms relative to nonfinancial firms. We examine whether forecast properties (accuracy, bias, and dispersion) of book value forecasts and the market reaction to unexpected book value surprises differ between financial and nonfinancial firms. We find that book value forecasts are more accurate, less biased, and less dispersed for financial firms compared to nonfinancial firms. In addition, we show that these results are not simply a result of differences in earnings per share (EPS) forecast quality. We also provide evidence that book value forecasts are incrementally helpful to analysts in forecasting earnings for financial firms. In addition, we find evidence that the stock price drift following an earnings announcement is more pronounced when book value per share (BPS) surprises are considered in addition to EPS surprises. However, this finding only holds for financial firms. We find that this delayed reaction can form the basis for a profitable trading strategy.

Financialization and Stock Volatility of Low-/High-Tech Manufacturing Firms in China: The Moderating Role of M&A

ABSTRACT In recent years, the degree of financialization of manufacturing firms may be one of the key factors in the “real to virtual” transition of the Chinese economy. Using data on Chinese listed firms in the low-tech manufacturing sector over the period 2013–2018, this paper examines the relationship between financialization and stock market volatility, and how mergers and acquisitions (M&A) play a moderating role in this relationship. The results show that there is a positive relationship between financialization and stock market volatility, while M&A activity has a negative moderating effect on the relationship. The positive effect of financialization on stock volatility is more pronounced for high-tech firms than for low-tech firms, while the negative moderating effect of M&A on stock volatility is more pronounced for low-tech firms than for high-tech firms. The link between the financialization of high-tech firms and their volatility has been strengthened with the implementation of the Made in China 2025 program. The main conclusions are stabilized after fully accounting for multicollinearity and R&D capital investment. For high-tech firms, financialization has a more pronounced impact on the volatility of non-state-owned firms compared to state-owned firms (SOEs).

Unveiling the Influence of Big Data Disclosure on Audit Quality: Evidence from Omani Financial Firms

Unveiling the Influence of Big Data Disclosure on Audit Quality: Evidence from Omani Financial Firms

Impact of bank financial technology on the performance of banks in the European Union

This article examines how financial technology determines bank performance in different EU countries. The answer to that question would allow banks to choose their development policy. The paper focuses on the main and most popular bank services that are linked to financial technology. A SWOT analysis of FinTech is also presented to show the benefits and drawbacks of FinTech. FinTech-based services are very diverse and are provided by financial firms and banks alike. This paper looks at the financial technology provided by banks: internet usage (internet banking), number of ATMs, credit transfers in a country, percentage of the population in a country holding a debit or credit card and whether that population has received or made a digital payment. Using the multi-criteria assessment methods of CRITIC and EDAS, the authors analysed and compared the countries of the European Union and the financial technology used in them. As a result of the application of these methods, the EU countries under consideration were ranked in terms of the use of financial technology. Subsequently, three banks from different countries with different levels of the use of financial technology were selected for the study. For these banks, financial ratios of profitability were calculated to characterise their performance. Correlation and pairwise regression analyses between the banks’ profitability ratios and financial technology were used to assess the relationship and influence between these ratios. The main conclusion of the study focuses on the extent to which financial technology influences the performance of banks in the selected countries. It is likely that further research will try to take into account the size of the country’s population when analysing all financial technologies. Researchers also needed to find out what influence financial technologies have on the such financial indicators as operational efficiency (costs), financial stability, and capital adequacy.

Credit Cycles, Expectations, and Corporate Investment

Abstract We provide a systematic empirical assessment of the Minsky hypothesis that business fluctuations stem from irrational swings in expectations. Using predictable firm-level forecast errors, we build an aggregate index of irrational expectations and use it to provide three sets of results. First, we show that our index predicts aggregate credit cycles. Next, we show that these predictable credit cycles drive cycles in firm-level debt issuance and investment and similar cycles between financially constrained and unconstrained firms, as Minsky predicts. Finally, we show more pronounced cycles in firm-level financing and investment for firms with ex ante more optimistic expectations. (JEL G31, G32, G40, E32, E44)

A Study on Effectiveness of Customer Retention Strategies Factors in Banking Sector

Competition among banks is fierce, and non-banks and other financial firms are also majorrivals. The problem is that it's really simple to replicate a financial product, and in the end, they allessentially do the same thing. Customer retention is a wide and complicated notion, and it is possible thatmany factors contribute to it. This paper study Customer service quality, customer happiness, switchingcosts, customer relationships, trust, and bank pricing were among the few determinants of customerretention that were examined in this study. India has a highly competitive banking sector thanks to theexistence of public, private, and international institutions. banks, faced with an increasingly competitivemarket, are implementing strategies to keep as many of their current clients as possible. Keeping currentcustomers happy is crucial in today's cutthroat business climate. The bank has to go above and beyondits basic functions to provide its clients a satisfying banking experience.

Tax avoidance, CSR performance and CEO characteristics: Evidence from developed and developing countries

We explore the association between tax avoidance, CEO characteristics, and corporate social responsibility based on environmental, social, and corporate governance (ESG) ratings, with a specific focus on financial firms in both developed and developing countries. Despite extensive literature on CSR and tax behavior, there is a gap in understanding how these elements interact within the financial sector across diverse economic environments. Using a dataset comprising 996 financial firms from 51 countries, spanning the period from 2002 to 2021, we find a significant negative association between ESG performance and tax avoidance for firms in developed countries, suggesting that firms in developed countries with higher ESG engagement tend to pay more taxes. The results in developed countries also indicate that governance and the social pillar are the factors contributing to the reduction of tax aggressiveness. On the contrary, our results reveal a significant positive relationship between CEO duality and tax avoidance for firms in developing countries. These results not only fill the existing research gap by providing empirical evidence in the links between ESG, CEO characteristics, and tax avoidance in the financial sector but also underscore the importance of institutional differences between developed and developing countries. Our results remain robust when using alternative estimators that control for heteroskedasticity and endogeneity. Our findings have important implications for policymakers and market participants, highlighting the need of a strong corporate governance and tax regulation that consider both ESG performance and CEO attributes.

CORPORATE GOVERNANCE AND REAL EARNINGS MANAGEMENT IN NIGERIAN LISTED FINANCIAL FIRMS

The focus of the study is the examination of the relationship that exists between corporate governance and real earnings management in Nigerian listed financial firms, with attention on three corporate governance variables (board tenure, board expertise and CEO ownership). The study adopts a longitudinal research design. Descriptive statistics, correlation analysis and panel regression analysis technique, with emphasis on the random effect model, were used for data analysis. A purposive sample of thirty seven (37) firms, out of the Forty nine (49) financial firms listed on the Nigerian Exchange Group, at year end 31st December, 2022 was studied for a period of seven years, 2016 to 2022. Findings from data analysis revealed that board expertise and CEO ownership have insignificant but positive relationships with real earnings management. In addition, board tenure was found to be significantly but negatively related to real earnings management. The correlation analysis revealed that there is a negative correlation between the variables board expertise, CEO ownership and real earnings management. Also, board tenure has a positive correlation with REM. The study recommends that directors of companies should be encouraged to spend longer time on the board as this will serve as incentive to avoid unfavourable earnings management.

코어뱅킹(Core Banking)산업의 진화와 미래: 뱅크웨어글로벌의 사례를 중심으로

The study examines the Korean core banking industry's growth from Bankware Global to the present and its future problems. To this end, in-depth interviews with insiders and various data are analyzed to view the historical development of core banking, focusing on Bankware Global, a leader in 'cloud-based core banking', and its competition and strategic direction. This study will reveal the strategic importance of shifting core banking to the cloud and its consequences for bank and financial institution managers. Bankware Global was founded as banks and financial firms moved their computing infrastructure to the cloud from the fourth to the fifth generation. Based on a cloud-based core system, Bankware Global's core banking solution can easily assemble and grow financial goods and business operations including banks, cards, and capital. Bankware Global's flagship products support the most technologies compared to competitors, and its customized development method gives it a competitive advantage in quality, price, and time saved by more than 30%. These features should help Bankware Global maintain its lead in the limitless financial software market, which has no borders or large and small scale.

Firm financing and the relative demand for labor and capital

Using more than one million firm-year observations of small and medium European firms between 2003 and 2019, this paper introduces new stylized facts on how firms' relative demand for labor and capital evolved as their capital structure adjusted to the events of the 2008 crisis. It also provides micro-level evidence that firms substitute capital for labor when financing costs rise. The empirical evidence lends support to the hypothesis that substitution is driven by an incentive to raise holdings of collateralizable capital. Identification of exogenous variations in firm financing costs relies on the heterogeneous effects of ECB monetary policy surprises on financing costs across the firm distribution.

Influence of Big Data Analytics on Decision-Making Processes in Financial Firms in South Africa

Purpose: The aim of the study was to assess the influence of big data analytics on decision-making processes in financial firms in South Africa. Materials and Methods: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: By harnessing vast volumes of structured and unstructured data, these firms can derive valuable insights into market trends, customer behavior, and risk assessment with unprecedented accuracy and speed. This capability enables more informed and data-driven decision-making across various facets of financial operations, including investment strategies, risk management, and customer relationship management. Moreover, big data analytics facilitates the identification of previously hidden patterns and correlations within financial data, enhancing predictive modeling and forecasting capabilities. This proactive approach allows firms to anticipate market shifts, optimize portfolio performance, and mitigate potential risks effectively. Additionally, the adoption of advanced analytics techniques, such as machine learning and artificial intelligence, further enhances decision-making by automating processes and refining predictive accuracy. Implications to Theory, Practice and Policy: Diffusion of innovation theory, technology acceptance model and resource-based view may be used to anchor future studies on assessing influence of big data analytics on decision-making processes in financial firms in South Africa. In practice, financial firms should establish robust data governance frameworks to ensure data accuracy, privacy, and security. Policymakers should develop and enforce regulatory frameworks that support the ethical and effective use of BDA in financial firms.

The Advent of Generative AI and Financial Industry

Purpose: This paper explores the recent literature on Generative AI applications in the financial industry and delineates its role in the future. Methodology: Our paper follows secondary research analyzing current literature on Generative AI in finance. It is one of the essential tools for understanding background information, identifying research problems, and filling the literature gaps. This paper studies how Generative AI has potential financial benefits and risks, providing unique insights into the financial landscape in the coming years. Findings: The findings unveil that Generative AI can become a strategic tool to redefine financial services and operational effectiveness. It can substantially improve the services by reducing costs, bringing efficiency, and enhancing corporate performance. It has the enormous transformative power to revolutionize client product and service offerings, improving risk management assessments and bringing efficiency to operations. However, our study indicates that the financial service industry can get into practices and decisions that are potentially unethical and financial exclusion due to an embedded bias in its algorithm and design of Generative AI technologies. Since Generative AI continues to evolve, its role and effectiveness in decision-making are expected to shape the financial services landscape significantly. Unique Contribution to Theory, Practice, and Policy: Generative AI can be a game changer for the financial industry, fueling digital transformation across industries. The transformative potential of generative AI can optimize operations, revolutionize customer experiences, and drive innovation seamlessly in finance. Our paper suggests how policymakers can foresee the challenges ahead due to the Generative AI in finance services, which is challenging the existing regulatory landscape. To stay ahead in the competition, financial firms must balance data privacy and algorithmic bias and ensure the responsible use of AI.

Do Investors Value Workforce Gender Diversity?

We examine whether investors value workforce gender diversity. Consistent with the view that investors believe workforce gender diversity can be valuable in major firms, we use event studies to demonstrate that U.S. technology firms and financial firms experience more positive stock price reactions when it is revealed that they have relatively higher (versus lower) workforce gender diversity numbers. For instance, we find that Google’s revelation of relatively low workforce gender diversity numbers triggered a negative stock price reaction, whereas eBay’s revelation of relatively high workforce gender diversity numbers triggered a positive stock price reaction. These stock price reactions are both economically and statistically significant; for example, we estimate that if a technology firm had revealed gender diversity numbers that were one standard deviation higher, its market valuation would have increased by $1.11 billion. Corroborating this plausibly causal field evidence, we also find positive investor reactions to workforce gender diversity in randomized experiments using Prolific participants with investing experience; these reactions seem to be underpinned by investors’ beliefs about potential upsides of diversity for the firm (e.g., reduced legal risks; increased creativity) but not by investors’ beliefs about potential downsides of diversity for the firm (e.g., increased conflict). Our findings highlight the importance of understanding investors’ intuitions or beliefs about major organizational phenomena such as workforce gender diversity. Our results also point toward a new type of business case for diversity, driven by investors: if major firms had more workforce gender diversity, investors may “reward” them with substantially higher valuations. Funding: This research is supported by NUS (National University of Singapore) Startup Grant WBS A-0003900-00-00 to D. P. Daniels.