The cash flow–investment relationship: International evidence of limited access to external finance

In efficient and complete financial markets, internal cash flows should have no impact on investment levels; but in inefficient and incomplete markets, the pecking order theory contends that there should be a positive relationship. Further, some studies show that investments of financially constrained firms are more sensitive to internal funds than those of less constrained firms but other studies show the opposite. Using comparable recent data on firms in the four largest industrialized countries (US, UK, Japan, and Germany), this study documents that in all four countries, controlling for the investment opportunity set, investment levels are significantly positively influenced by levels of internal cash flows, indicating that firms face limitation in access to external finance and may operate using a pecking order. Further, international differences in investment level sensitivities to opportunities indicate closer outside monitoring of firms in the bank-centered countries.     

Mustn't Grumble: Immigration,Health and Health Service Use in the UK and Germany*

A rise in population caused by increased immigration is sometimes accompanied by concerns that the increase in population puts additional or differential pressure on welfare services, which might affect the net fiscal contribution of immigrants. The UK and Germany have experienced significant increases in immigration in recent years and this study uses longitudinal data from both countries to examine whether immigrants differ in their use of health services from native-born individuals on arrival and over time. While immigrants to Germany, but not the UK, are more likely to self-report poor health than the native-born population, the samples of immigrants use hospital and GP services at broadly the same rate as the native-born populations in both countries. Controls for observed and unobserved differences between immigrants and native-born sample populations make little difference to these broad findings.     

Stock market short-termism—an international perspective

This study uses a VAR approach with a time-varying risk premium to see if stock market investors are short-term oriented, placing too much weight on current and near cash flows. Using aggregate stock market data for Australia, Germany, Japan, USA and UK markets (1977–1999), we find the degree of persistent under-valuation of future cash flows is far higher in the UK relative to the other countries in our sample, and is market-wide. Also, over the period, US investors appear to have consistently underestimated long horizon cash flows in current stock market valuations relative to a rational valuation model.     

Value Capture: A Valid Means of Funding PPPs?

This paper considers the use of value capture (VC) as a means of financing public‐private partnerships (PPPs) in the United Kingdom (UK). Although some VC techniques are used in the UK, they are employed more widely in the United States of America. After considering the traditional approach to financing UK PPPs, this paper describes the main VC finance instruments. The findings of a series of case studies are then presented and conclusions drawn. While VC financing may prove unpopular with those bearing the cost of infrastructure improvements, it is recommended that such instruments are considered by UK policy makers.     

Access to private equity and real firm activity: Evidence from PIPEs

We study how access to private equity financing affects real firm activities using a broad panel of publicly traded U.S. firms that raise external equity through private placements (PIPEs) between 1995 and 2008. The public firms relying on PIPEs are generally small, high-tech firms that cannot finance investment internally and likely face severe external financing constraints; PIPEs are by far the most important source of finance for these firms. We show that firms use PIPE inflows to maintain extremely high R&D investment ratios and to build substantial cash reserves. We also use GMM techniques that control for firm-specific effects and the endogeneity of the decision to raise private equity and find that PIPE funding has a substantial impact on corporate investment in cash reserves and R&D, and a smaller but significant impact on investment in non-cash working capital, but little impact on fixed investment or acquisitions. Our estimates indicate that R&D investment initially increases by $0.20–$0.25 for each dollar of private equity flowing into the firm, and that PIPE funds initially invested in cash ultimately go to R&D. These findings offer direct evidence that access to private equity finance has an important effect on the key input that drives innovation at the firm- and economy-wide levels.     

Taking its toll: The private financing of roads in Spain

The article analyses the cost of using private finance to build, finance and maintain toll roads in Spain. Spain is the primary exponent of private finance for roads in Europe, where the case rested on the lack of public finance, in contrast to the UK that has stressed value for money. The evidence shows that more than half of the toll charge represents the cost of finance; the cost of private finance is nearly double the cost of public finance; and financing is underpinned by various forms of public support creating risks for the taxpayers.     

法国金融制度:由非典型的银行主导型向市场主导型演进

本文首先从量性分析角度通过对近二三十年来法国非金融企业融资结构和美国、英国、德国与日本的比较,发现了其演变趋势和特征,然后结合对企业同银行与金融市场的关系变化的质性研究,展示了法国金融制度从非典型的银行主导型向市场主导型演进的趋势和脉络,并试图探索这种正在进行的渐进式金融制度变迁的原因。     

Sectorial differences in corporate financial behavior: an international survey

This survey-based research deals with sectorial differences in terms of three main corporate finance policies: investment, financing and dividend. We used a multinational survey that was distributed to the chief financial officers in five countries: the US, the UK, Germany, Canada and Japan. We found statistically significant differences between the nine sectors examined in terms of all the three major financial policies. These differences may be due to the following: (1) the unique financial needs and operating conditions of each sector and (2) the imitation effect according to which firms imitate the financial behavior of other firms in their sector. We found that the use of established investment appraisal techniques is most common in the construction sector and least common in the technology sector. The IRR is the most frequently used investment appraisal technique for the entire survey sample, especially in the communication sector; however, it is rarely used in the technology sector. The technology sector has the lowest level of financial leveraging, while the finance sector has the highest level. A constant sum per share is the most common dividend policy in the following sectors: retail and wholesale, services, manufacturing and transport. On the other hand, construction, energy, communication and technology sectors are characterized by a high percentage of firms that do not pay dividends at all.     

基于信号传递博弈的融资租赁市场均衡分析

融资租赁作为一种新的金融工具,已被诸多经济发达的国家普遍采用,并成为其金融市场的重要组成部分。在我国中小企业融资难的情况下,融资租赁也不失为中小企业融资的一种可供选择的方式。本文借鉴斯宾塞劳动力市场信号传递模型,构建一个符合我国中小企业融资市场实际状况的融资租赁市场调控模型。研究结果表明:融资租赁市场的均衡既取决于承租方的装裱成本,也取决于不同类型承租方的租金差异、低营运能力承租方的项目投入的成功率及低营运能力承租方的信用程度(即履约率)。     

Individual savings accounts for social insurance: rationale and alternative designs

Using Danish data, we find that about three-fourths of the taxes levied to finance public transfers actually finance benefits that redistribute income over the life cycle of individual taxpayers rather than redistribute resources across people. This finding and similar results for other countries provide a rationale for financing part of social insurance via mandatory individual savings accounts. We discuss the advantages and disadvantages of mandatory individual savings accounts for social insurance and survey some recent alternative proposals for such accounts.      

Entrepreneurship,College, and Credit: The Golden Triangle

We develop a model to evaluate the aggregate impact of college finance in an environment with entrepreneurship. The calibrated model captures the stylized fact that entrepreneurs with college are more common and more profitable in the United States. The calibration indicates this is mainly because higher labor earnings allow college‐educated agents to ameliorate credit constraints if and when they eventually become entrepreneurs. Changes in financing constraints on entrepreneurs can thus affect college attendance, and changes in financing constraints on college can affect entrepreneurship rates as well.     

失业保险与公司财务杠杆

我国劳动力市场化程度日益加深导致劳动者职业转换愈加频繁,失业保险的作用日益突出。本文探究了失业保险金水平对企业财务杠杆的影响。运用2009—2019年上市公司数据进行实证分析,结果发现失业保险金上升会导致公司财务杠杆下降。渠道检验显示,提高失业保险金可以降低员工失业风险溢酬,公司劳动力成本下降,公司有更多自由现金流和盈利进行内源融资和偿还债务,公司财务杠杆下降。进一步分析发现,失业保险金的作用在失业率高的地区更加显著。主要结果在分别运用《社会保险法》和《关于调整失业保险金标准的指导意见》构造双重差分模型和工具变量解决内生性问题、更改模型设置、排除投资水平影响、删除特殊省份、更换样本期间后,依然成立。本文结果说明加大失业保险保障力度有助于降低企业财务风险。     

Financing patterns around the world: Are small firms different?

Using a firm-level survey database covering 48 countries, we investigate how financial and institutional development affects financing of large and small firms. Our database is not limited to large firms but includes small and medium-size firms and data on a broad spectrum of financing sources, including leasing, supplier, development, and informal finance. Small firms and firms in countries with poor institutions use less external finance, especially bank finance. Protection of property rights increases external financing of small firms significantly more than of large firms, mainly due to its effect on bank finance. Small firms do not use disproportionately more leasing or trade finance compared with larger firms, so these financing sources do not compensate for lower access to bank financing of small firms. We also find that larger firms more easily expand external financing when they are constrained than small firms. Finally, we find suggestive evidence that the pecking order holds across countries.     

ALTERNATIVE FORMS OF EXTERNAL FINANCE: A SURVEY

For many developing countries, alternative forms of externalfinance—all forms of finance that are not guaranteed byor mediated through the public sector—have become increasinglyimportant as traditional financing to the public sector hasebbed. Yet a survey of the literature reveals few recent analyticalinsights about alternative financing, which includes foreigndirect investment, project lending, portfolio investment, closed-endequity funds, private nonguaranteed debt, licensing, joint ventures,quasi-equity contracts, and other forms of private, nonrecourselending to private borrowers. The literature offers little solidguidance for distinguishing between alternative and traditionalfinancing with respect to country risk, for establishing themost appropriate and efficient incentive structures and restrictionsin the host country, or for identifying the optimal financingmodes for international firms investing in developing countries.This gap in the analytical literature has important implicationsfor policy formulation. It is not always clear whether a countryis developing incentives and establishing safeguards (for ensuringadherence to project performance requirements) that are mosteffective in attracting alternative forms of finance.      

Forecasting the PSBR Outside Government: The IFS Perspective

Expectations regarding the future state of the public finances are vital for public policy formation. The UK experience has been that forecast of the PSBR have been beset with problems since the mid-1980s. Independent assessments of the accuracy and plausibility of public finance forecasts are an important check on government forecasts and serve to increase public debate over government finance issues. We examine the success of various possible methods available to those outside government. JEL classification: E6, H1, H6.     

Delineating social finance

This paper reviews social finance. Venture philanthropy, microfinance, crowdfunding and social impact bonds are financial and social innovations that reshape capital markets, the production of public goods, entrepreneurship and the fundamental principles of financial analysis. In this context, the pursuit of social and environmental impact is assessed alongside the tradeoff between risk and expected return. The market for impact investments consists of suppliers of capital, recipients of capital, the institutional framework and financing flows. This paper describes the financial market for the pursuit of impact and highlights principal challenges, such as the small scale and long horizon of social ventures, the lack of standardized reporting and financial measures for social outcomes, as well as the elusive causality between impact investments and social change.     

On the consequences of demographic change for rates of returns to capital, and the distribution of wealth and welfare

This paper employs a multi-country large-scale Overlapping Generations model with uninsurable labor productivity and mortality risk to quantify the impact of the demographic transition towards an older population in industrialized countries on world-wide rates of return, international capital flows and the distribution of wealth and welfare in the OECD. We find that for the U.S. as an open economy, rates of return are predicted to decline by 86 basis points between 2005 and 2080 and wages increase by about 4.1%. If the U.S. were a closed economy, rates of return would decline and wages increase by less. This is due to the fact that other regions in the OECD will age even more rapidly; therefore the U.S. is “importing” the more severe demographic transition from the rest of the OECD in the form of larger factor price changes. In terms of welfare, our model suggests that young agents with little assets and currently low labor productivity gain, up to 1% in consumption, from higher wages associated with population aging. Older, asset-rich households tend to lose, because of the predicted decline in real returns to capital.     

Investment dynamics with fixed capital adjustment cost and capital market imperfections

This paper examines the implications of financing frictions on capital stocks and on capital accumulation in the presence of non-convex costs of adjusting the capital stock. In this setup finance has an influence on both, the level of capital and the timing of investment. Finance and productivity are complements and finance influences investment the strongest when firms wish to significantly adjust capital for fundamental reasons. These theoretical considerations are confronted with UK data. While finance is mostly irrelevant for long-term capital decision, the short-run investment function shows a significant impact of finance, which is also strongest for strong fundamental investment incentives.     

Financing constraints, cash-flow risk, and corporate investment

Using an analytically tractable two-period model of a financially constrained firm, we derive an investment threshold that is U-shaped in cash holdings. We show analytically the relevant trade-offs leading to the U-shape: the firm balances financing costs for present and future investment, respectively. Our main argument is that financing costs today are more important than the risk of future financing costs. The empirically testable implications are that low-cash firms facing financing costs today are more reluctant to invest if they have less cash, or if their future cash flows are more risky. On the other hand, cash-rich firms facing no financing costs today invest in less favorable projects (i.e., forgo their real option to wait) if they have less cash, or if their future cash flows are more risky. The magnitude of these effects is amplified by the degree of market frictions that the firms are facing.     

Accounting diversity and firm valuation

We examine accounting numbers and stock prices across three countries: Germany, Norway, and the United Kingdom (UK). The accounting systems in the three countries differ in faithfulness to clean surplus accounting and in conservatism. We address three questions. First, are there systematic differences across countries in the value relevance of accounting? Second, are there systematic differences in the incremental and relative value relevance of book values and earnings per shape (EPS) across the countries? Third, do future earnings realizations (proxies for expected earnings) explain current stock prices? We find that accounting book value and EPS are significantly related to current stock prices across all three countries. German accounting numbers have the lowest relation with stock prices (R² ≈ 40%) and UK accounting numbers the highest (R² ≈ 70%), while Norwegian accounting numbers are in between (R² ≈ 60%). Second, the incremental and relative explanatory power of book value and of EPS differs across time and across countries. Book values explain more than earnings in Germany and Norway, but less in the UK. Finally, future income realization explain little about market prices not already explained by current book value and EPS.