Global Banking and Firm Financing: A Double Adverse Selection Channel of International Transmission

This paper proposes a "double adverse selection channel" of international transmission. It shows, theoretically and empirically, that financial systems with both global and local banks exhibit double adverse selection in credit allocation across firms. Global (local) banks have a comparative advantage in extracting information on global (local) risk, and this double information asymmetry creates a segmented credit market where each bank lends to the worst firms in terms of the unobserved risk factor. Given a bank funding (e.g., monetary policy) shock, double adverse selection affects firm financing at the extensive and price margins, generating spillover and amplification effects across countries.

Cognitive financial constraints and firm growth

This study distinguishes entrepreneurs’ cognitive financial constraints from financial supply constraints and assesses their relative importance to small business growth. Drawing from the literature on cognitive styles and institutional theory, we argue that small businesses’ financial constraints derive not only from financial market failures but also from the cognitive factors of entrepreneurs. Analysing a comprehensive dataset of more than 200,000 small businesses in Vietnam, we show that both financial supply and cognitive financial constraints impede firm growth. Given this significantly deleterious effect, the cognitive financial constraints originating from the demand side of firm financing deserve more attention.

Capital Structure and Financial Returns: Longitudinal Panel Evidence from NReits

The study is an investigation of the nexus between capital structure and financial returns. The investigation was conducted on a panel data of all real estate investment trusts in Nigeria (N-REITs) listed in the Nigerian Stock Exchange during 2009 to 2020. The independent variable was capital structure indicators of short-term debt, long-term debt and total debt. The dependent variable was proxied using 3 accounting measures of return on asset, return on equity and earnings per share. Data was sourced from secondary sources, specifically from the annual records and financial statements of N-REITs for the period. Upon data analysis with regression, the study found that capital structure had an insignificant relationship with the financial returns of N-REITs. However, for Sky Shelter Fund REIT, the result was contrary due to its statistically significant positive relationship between capital structure and returns. The findings of the study on the means, median and standard deviation of NREIT capital structures shows a compliance with the pecking-order hypothesis of firm financing.

Financial technology in the Finnish banking sector and its impact on stakeholders in the wake of COVID-19

Financial Technology (FinTech, hereafter) has integrated with the banking sector. Despite its fast growth, FinTech is a relatively new and under-explored phenomenon in the academic and corporate spheres. The current study aims to explore, first, the role and relevance of FinTech in the commercial banking sector in Finland; and second, the changing dynamics of stakeholders of the banking industry in the light of FinTech. The above objectives have been studied in the wake of the COVID-19 pandemic. The primary data has been collected through semi-structured interviews. A significant impact of FinTech has been observed in the following aspects of the banking sector: customers, strategy, risk management, investors, operations, competitiveness, and future growth. FinTech adoption has been contributed by the growth in the IT sector and innovations in the field of firm financing including crowdsourcing and peer-to-peer financing. Changing customers’ demands and behaviour have also facilitated FinTech adoption (Lee & Teo, 2015). Banks have been integrating FinTech into insurance services and this feature has become more profound ever since banks increased their cooperation with international insurance companies (Paschen, Wilson, & Ferreira, 2020). Similarly, there has been a significant increase in collaboration between banks and FinTech start-ups. Nonetheless, the unpredictable factors, such as the ongoing COVID-19, can influence the future innovation and adoption of FinTech.

Does it pay to be green? Environmental performance and firm financing during COVID-19 outbreaks

This paper examines the effect of firm environmental performance on firm financing during the COVID-19 outbreak. Crises in multiple forms curtail Micro, Small and Medium Enterprises (MSMEs) stability and the livelihood of hundreds of millions of people who derive their living from these activities. The way in which MSMEs deal with crises and the extent to which environmental performance is beneficial when the market suffers a negative shock is relatively unexplored in the literature. We consider three aspects of financing -- firm level liquidity, bank credit and bankruptcy probabilities -- and argue that it pays for firms to show commitment to environmental responsibilities in a global pandemic. Through an examination of 3,356 MSMEs, we find that firms with better environmental performance reduce their probability of bankruptcies and their liquidities decreasing during the COVID-19 pandemic. Furthermore, analysis shows that the impact of a firm’s environmental performance is more pronounced in sensitive industries (hospitality and retail). The results are robust based on a series of robustness checks, including propensity score matching and the Heckman two-stage sample selection model. Our study suggests that the trust between a firm and its stakeholders, if it is grounded on environmental performance, pays off when the overall level of trust in markets suffers a negative shock. JEL Classification: F64; G01; Q14