Taxes and the Financial Structure of German Inward FDI

The paper analyses the financial structure of German inward FDI. Intra-company loans granted by the parent should be all the more strongly preferred over equity the lower the tax rate of the parent and the higher the tax rate of the German affiliate. We find that the corporate tax rate of the foreign parent has no significant impact on the financial structure of a German subsidiary. However, among subsidiaries that are directly held by a foreign investor those firms that on average are profitable react more strongly to changes in the German corporate tax rate than this is the case for less profitable firms. This gives support to the frequent concern that high German taxes are partly responsible for the high levels of intra-company loans. Taxation, however, does not fully explain the high levels of intra-company borrowing. Roughly 60 per cent of the cross-border intra-company loans turn out to be held by firms that are running losses. JEL no. F23, H25     

Financial Determinants of Corporate R&D Investment in Korea

This paper investigates the relationship between corporate investment in R&D and finance. By using panel data on Korean manufacturing firms between 1999 and 2008, we find that R&D investment is sensitive to fluctuations in internal cash flow and that debt is more important than equity in financing R&D expenditure. This empirical result supports the traditional theory of financing hierarchy. In relation to equity ownership, the empirical result shows that ownership concentration and foreign ownership positively affect R&D investment, but institutional ownership does not show any significant effect on investment. This study synthetically analyzes the relation between finance and investment by simultaneously considering corporate finance, equity ownership structure, macroeconomic environments and the institutional setting of Korea.     

慈善捐赠行为与企业竞争优势：基于企业社会资本的视角

传统的生产要素对企业竞争力的增强作用显现出了局限性,企业必须寻找新的经济增长点和发展战略。作为承担社会责任的有效方式,企业慈善捐赠逐渐成为获取竞争优势的必然选择。基于企业慈善与竞争优势相关研究,结合企业社会资本各维度的作用,构建出慈善捐赠行为特征-企业社会资本-企业竞争优势概念模型,通过明确慈善捐赠行为特征通过企业社会资本作用于企业竞争优势的各种路径关系,阐明了慈善捐赠行为对企业竞争优势的作用机理,对企业竞争战略的选择具有重要的实践价值和理论意义。     

Financial constraints and foreign direct investment: firm-level evidence

Low productivity is an important barrier to the cross-border expansion of firms. But firms may also need external finance to shoulder the costs of entering foreign markets. We develop a model of multinational firms facing real and financial barriers to foreign direct investment (FDI), and we analyze their impact on the FDI decision. Theoretically, we show that financial constraints can affect highly productive firms more than firms with low productivity because the former are more likely to expand abroad. We provide empirical evidence based on a detailed dataset of German domestic and multinational firms which contains information on parent-level financial constraints as well as on the location the foreign affiliates. We find that financial factors constrain firms’ foreign investment decisions, an effect felt in particular by firms most likely to consider investing abroad. The locational information in our dataset allows exploiting cross-country differences in contract enforcement. Consistent with theory, we find that poor contract enforcement in the host country has a negative impact on FDI decisions.     

Structure and Ownership of East German Enterprises

This paper investigates the process by which East German enterprises have been privatized and their resulting ownership and control structure. A corporate system with a very high level of concentration of ownership has been created. This is particularly closely associated with ownership and direct control by West German companies. The paper argues that this has allowed East German enterprises to gain access to finance, markets, and managerial skills which they might otherwise have been denied. The resulting "insider" system of corporate control will over time allow East German companies to participate in the control of their own and West German companies. The Treuhandanstalt has organized the privatization process to achieve certain industrial and social objectives. It has broken up the large multiplant enterprises to an extent that East German enterprises are now smaller than their West German counterparts. It has used informal liquidations rather than formal bankruptcies to be able to achieve its objectives. Privatizations have not involved the flotation of companies on the stock market. Instead, the Treuhand has arranged share and asset transfers on a scale which is in excess of merger activity commonly observed in the West. J. Japan. Int. Econ., Dec. 1995, 9(4), pp. 426–453. University College London, Wissenschaftszentrum Berlin, and CEPR; Oxford University and CEPR     

Internationalization of Blue-Chip versus Mid-Cap Stock Indices: an Empirical Analysis for France,Germany, and the UK

The paper analyzes the question whether blue-chip stock indices provide a larger degree of internationalization than mid-cap stock indices. Specific focus lies on internationalization of indices in France, Germany, and the UK. Additionally, we analyze whether the degree of internationalization differs between industries. The dataset covers the CAC40, the DAX30 and the 30 largest firms in the FTSE100 as blue-chip indices and the CAC Next 20 and CAC Mid 60, the MDAX and TecDAX, and the remaining 70 companies in the FTSE100 as mid-cap indices. The comparison of blue-chip and mid-cap indices is based on three indicators of internationalization: percentages of employees based outside the firms’ home country, percentages of foreign sales, and percentages of foreign corporate tax payments. Blue-chip and mid-cap indices exhibit high levels of internationalization. Internationalization is stronger in German and UK blue-chip indices than in these countries’ mid-cap indices, whereas internationalization in French mid-cap and blue-chip indices is similar. Blue-chip and mid-cap firms in the energy/materials/utilities and industrials sectors exhibit similar levels of internationalization, whereas blue-chip firms in the consumer and health sectors exhibit higher levels than corresponding mid-cap firms. The research question and results are of particular importance for retail and institutional investors, because investing in indices typically represents a low cost alternative to individual stock picking. The question whether stock index characteristics, such as market capitalization and industry, influence the degree of international diversification within the index is largely unanswered in the literature. The paper addresses this question.     

Does Bank Affiliation Mitigate Liquidity Constraints? Evidence from Germany's Universal Banks in the Pre-World War I Period

This paper compares two similar samples of mining and steel corporations in pre-World War I Germany: one sample consists of corporations that were affiliated to one or more of the German “Universal Banks”, and the second sample consists of companies that had to rely on other sources of finance. Statistical analysis conducted in the framework of a linear fixed effects model indicates that the non-affiliated companies were liquidity constrained. The paper also sets out the corporate control structure as laid down in the trade law reform of 1884 and traces the origins of the current German dual board system, as well as the origins of several other aspects of the institutions that tied the German banking system to industrial concerns.     

Do Corporate Site Visits Impact Stock Prices?

We examine the stock price impact of corporate site visits using a unique data set of site visits to listed firms in China. Our main findings are as follows. First, the market reaction around corporate site visits is statistically and economically significant and is stronger for group visits, visits conducted by mutual fund managers, visits covering accounting and finance topics, visits to firms with poor information environments, and visits to manufacturing firms. Second, the stock returns around site visits are positively associated with firms’ future performance. Third, the changes in visiting funds’ holdings are more predictive of firms’ future performance than those of nonvisiting funds. Overall, this study contributes to the literature by providing evidence that site visits are important venues for investors to collect information about firms and make informed trades.     

Globalizing activities and the rate of survival:: Panel data analysis on Japanese firms

This paper conducts a Cox-type survival analysis of Japanese corporate firms using census-coverage data collected by METI. A study of exiting firms confirmed several characteristics of Japanese firms in the 1990s. First, excessive internalization in the corporate structure and activities is harmful to corporate survival. Having too many establishments and affiliates weakens corporate performance. Efficient concentration on core competences increases the probability of survival. Second, global commitment helps Japanese firms be more competitive and more likely to survive. However, the channels of a firm's global commitment must be carefully selected. Small firms can benefit from exporting activities, though having foreign affiliates or conducting foreign outsourcing might aggravate their performance. Large firms, on the other hand, can conduct foreign direct investment and foreign outsourcing to possibly enhance the probability of their survival. Third, while corporate performance affects the choice of exits for affiliate firms, it does not affect the survival/exit of independent firms; suggesting the possible malfunctioning of the market mechanisms in the exits of independent firms. Fourth, we do not find any statistically significant evidence that firms with foreign shareholders are more likely to exit; there is little evidence of foot-loose behavior among foreign companies. J. Japanese Int. Economies 17 (4) (2003) 538–560.     

The empirical relationship between UK net corporate borrowing and stockbuilding

The literatures on net corporate borrowing and stockbuildingby firms are both based on a simple linear-quadratic (L-Q) model,but they have been developed independently. This paper exploresthe possibility that a firm may jointly optimise its borrowingand stockbuilding decisions, where previous papers have imposed‘decision rule decompositions’. The resulting modelis estimated using UK corporate data and demonstrates that netcorporate borrowing and stockbuilding are indeed used as substitutesin production smoothing.     

民营企业慈善行为中的红色文化因素研究

文章以2007-2016年沪深A股非金融类民营上市公司为样本,从捐赠意愿和捐赠规模两个维度检验红色文化对民营企业慈善捐赠行为的影响。研究发现,相比非革命老区民营企业,老区企业具有更强的捐赠意愿和更大的捐赠规模,该结论在使用"地形起伏度"作为工具变量控制可能的内生性问题后依然成立。拓展检验发现,在产品直接面向消费者、外部市场制度不完善及面临业绩压力的企业,红色文化促进慈善的作用明显较弱。机制检验表明,董事长的老区成长经历能够促进红色文化对慈善捐赠的影响,由此说明,红色文化是通过核心管理者将慈善的"奉献"理念嵌入企业的决策行为。文章从财务学视角探讨红色文化与企业慈善行为间的联系,丰富了中国情境下文化与微观企业决策的研究。     

Tax Incentives and Maturity Mismatch between Investment and Financing: Evidence from China

This paper examines the effects of China's accelerated depreciation policy (ADP) on the maturity mismatch between investment and financing. Using panel data for China's A-share nonfinancial listed companies from 2010 to 2019 and a staggered difference-in-differences approach, we found the following. First, ADP significantly aggravated the degree of corporate maturity mismatch, and this result was robust across multiple checks. Second, due to an insufficient long-term loan supply, firms had to finance the fixed investments induced by ADP with short-term debts, leading to maturity mismatches. Third, the positive policy effects were mainly significant for firms with high policy exposure, high-risk preferences, a high degree of information asymmetry, and firms with weak long-term financing capacity. Finally, maturity mismatch exacerbated corporate financial risks. Our research findings indicate that passive maturity mismatch is prevalent among Chinese companies and emphasize the need to address financial repression in order to mitigate the potential financial risks that may arise from tax incentives.     

How does the development of digital finance affect small business tax compliance? Empirical evidence from China

How will the development of digital finance affect corporate tax compliance? In the digital economic age, this is a crucial issue. Using the 2011–2015 national tax survey database (NTSD) and the Peking University digital finance index, this paper examines the causal relationship between digital finance and small business tax compliance. Our baseline results show that each standard deviation increase in the digital finance index reduces the level of tax noncompliance by 7.5% for small businesses. We exclude the interference of contemporaneous policies, utilize a specification design based on neighboring cities across provincial borders, and employ instrumental variable estimation methods to jointly alleviate concerns about endogeneity. Furthermore, mechanism analysis shows that digital finance impacts small business tax noncompliance by easing corporate financing constraints and capturing tax-related “digital information”. Finally, we analyze the heterogeneous effects of digital finance development. The effects on tax noncompliance are weaker for large firms (placebo group), small businesses supported by the government's industrial policy, and small businesses located in poor credit environment areas.     

On corporate philanthropy of private firms and trade credit financing in China

This paper examines the impact of corporate philanthropy on trade credit financing for listed private firms in China viewed from the heterogeneous perceptions of credit suppliers. A positive relationship is found between corporate philanthropy and trade credit financing, suggesting that in general firms donating more can obtain more trade credits. However, this relationship is significant only for those firms with positive free cash flows and no political connections. It is striking to find that such a relationship does not exist when firms have negative free cash flows or political connections. Moreover, the relationship between corporate philanthropy and trade credits is affected by the local social trust environment. A good social trust environment is amicable for firms to use corporate philanthropy in obtaining trade credits. The research findings have important policy implications. This paper makes valuable contributions to the current literature through highlighting the importance of supplier heterogeneous perceptions towards corporate philanthropy as well as the effect of the local trust environment on the effectiveness of philanthropy in trade credit financing of the Chinese listed private firms.     

The Role of Commercial Non-profit Organizations in the Provision of Public Services

In this paper we discuss the role of commercial non-profit firmsin the provision of public services, referring to three casestudies to illustrate the main issues. We consider problemsof corporate governance, including the role of the board ofmembers and the scope for performance-related pay. We discussthe performance of such non-profit firms in terms of qualityand costs, the particular finance problems of these firms andthe implications for risk taking. We also suggest various aspectsof non-profit behaviour in public service provision that presentinteresting avenues for future research.     

For goodwill or resources? The rationale behind firms' corporate philanthropy in an environment with high economic policy uncertainty

This paper investigates the impact of economic policy uncertainty (EPU) on the corporate philanthropy (CP) behaviors of firms using a dataset from Chinese A-share listed firms. We find that, on average, firms decrease their CP significantly when economic policy uncertainty increases, but the response is heterogeneous for firms with different ownership types. Compared with their counterparts, private firms are willing to contribute more donations in an environment with high economic policy uncertainty. Further analysis shows that private firms take on more other types of corporate social responsibility at the same time, and private firms' additional CP in a high EPU environment is rewarded with more subsidies, indicating that altruistic and political motives may play important roles in driving the CP behaviors of private firms. There is no evidence that private firms selling products directly to consumers are more likely to engage in additional CP. Our findings indicate that the main motivation behind Chinese private firms' additional CP under high economic policy uncertainty is seeking more government resources, instead of keeping consumers loyal by maintaining good reputations during hard periods.     

Comparative European practices in enterprise support: UK, Germany and France

This paper develops issues in enterprise support and research with support agencies discussed in a previous paper (Deakins, 1993). We compare the system of enterprise support in the UK with the role of Chambers of Commerce and local authority support provision in Germany and France through data from interviews in three regions and specific focus on three cities/towns; Birmingham in the West Midlands, Pforzheim in Baden-Wurttemberg and Clermont-Ferrand in the Auvergne. Criticisms of the duplication of support effort and the lack of coordination have led to the establishment of the first Business Links in the UK. To some extent, these are intended to follow the German model of coordination and the re-focusing of support away from start-ups to existing firms that have 20-200 employees. We are critical of the extent to which Business Links can effectively coordinate enterprise support and target growth firms.     

‘Doing-good’ and ‘doing-well’ in Chinese publicly listed firms

Recently, the presumed benefits of corporate social responsibility have become an important issue, especially for China where institutional settings are quite different from other parts of the world. Using an internationally accepted benchmark (OECD's Principles of Corporate Governance, OECD, 2004), this study constructs a corporate social responsibility (CSR) index to measure the quality of the corporate social responsibility practices of the 100 major Chinese listed firms during 2004–2007. This enables us to evaluate the progress of the corporate social responsibility practices of Chinese firms. The results show that Chinese companies have been making progress in their corporate social responsibility practices. The findings also show that market rewards Chinese firms for improving their corporate governance practices which implies ‘doing-good’ leads to ‘doing-well’ in the equity market in China. We also find that overseas-listed and more profitable Chinese firms have better improvement in CSR practice. This study has policy implications in pushing for further CSR initiatives in other emerging markets.     

Looking good by doing good: CEO attractiveness and corporate philanthropy

We investigate the effect of male corporate managers' physical appearance—classified into unattractive, average-looking, and attractive—on the philanthropic decisions of Chinese listed firms. We find that compared to average-looking managers, those who rated as attractive do not engage more actively in corporate donations. On the contrary, the probability of donating is approximately 5% higher for unattractive managers than for average-looking managers; further, unattractive managers donate 95% more in charitable giving. To explain these findings, we propose a psychological channel through which physical appearance may influence male managers' charitable donations: Because altruistic behaviors may aggrandize individuals, managers conscious of deficits in their own physical attractiveness may engage in prosocial behavior to increase their attractiveness in the eyes of others. We find consistent evidence that the effect of managers' unattractiveness on philanthropic decisions is stronger in firms with weaker corporate governance; further, we find that the positive impact of corporate donation on financial performance observed in firms led by attractive and average-looking managers is substantially weaker in those firms led by unattractive managers.