The effects of credit risk transfer on bank monitoring and firm financing

This paper examines the efects of the transfer of credit risk associated with bank loans. We are interested in (a) whether the transfer of credit risk has any impact on the intensity with which banks monitor their borrowers and (b) whether credit risk transfer infuences the amount of financing that is provided to firms in an economy. Our model first develops conditions under which bank finance is available to firrms, mainly in the spirit of Holmstrom/Tirole (1997). We then introduce projects with uncorrelated pay-offs and argue that one possible economic rationale for credit risk transfer is diversi¯cation. We analyze whether and how within this scenario the transfer of the credit risk of loans changes a bank's incentives to monitor its debtors. Finally we investigate whether and what kind of impact this may have on the amount of ¯nancing available to firms in an economy. Our results indicate that the monitoring incentives are being eroded indeed and that credit risk transfer can increase the overall amount of obtainable funds in an economy.

Corporate governance and its influence on the investment decision process of equity market's professionals: An inside view of how corporate governance issues influence the decision-making process of sell-side and buy-side professionals when analyzing Brazilian listed companies

Corporate governance has been in the spotlight for the past two decades, being subject of numerous researches all over the world. Governance is pictured as a broad and diverse theme, evolving through different routes to form distinct systems. This scenario together with 2 types of agency problems (investor vs. management and minorities vs. controlling shareholders) produce different definitions for governance. Usually, studies investigate whether corporate governance structures influence firm performance, and company valuation. This approach implies investors can identify those impacts and later take them into consideration when making investment decisions. However, behavioral finance theory shows that not always investors take rational decisions, and therefore the modus operandi of those professionals needs to be understood. So, this research aimed to investigate to what extent Brazilian corporate governance standards and practices influence the investment decision-making process of equity markets' professionals from the sell-side and buy-side. This exploratory study was carried out through qualitative and quantitative approaches. In the qualitative phase, 8 practitioners were interviewed and 3 dimensions emerged: understanding, pertinence and practice. Based on the interviews’ findings, a questionnaire was formulated and distributed to buy-siders and sell-siders that cover Brazilian stocks. 117 respondents from all over the world contributed to the study. The data obtained were analyzed through structural equation modeling and descriptive statistics. The 3 dimensions became 5 constructs: definition (institutionalized governance, informal governance), pertinence (relevance), practice (valuation process, structured governance assessment) The results of this thesis suggest there is no definitive answer, as the extent to which governance will influence an investment decision process will depend on a number of circumstances which compose the context. The only certainty is the need to present a “corporate governance behavior”, rather than simply establishing rules and regulations at firm and country level.

Firm financial constraints and the impact of monetary policy: evidence from financial conglomerates

Building on recent evidence on the functioning of internal capital markets in financial conglomerates, this paper conducts a novel test of the balance sheet channel of monetary policy. It does so by comparing monetary policy responses of small banks that are affiliated with the same bank holding company, and this arguably face similar constraints in accessing internal/external sources of funds, but that operate in different geographical regions, and thus face different pools of borrowers. Because these subsidiaries typically concentrate their lending with small local businesses, we can use cross-sectional differences in state-level economic indicators at the time of changes of monetary policy to study whether or not the strength of borrowers' balance sheets influences the response of bank lending. We find evidence that the negative response of bank loan growth to a monetary contraction is significantly stronger when borrowers have 'weak balance sheets. Our evidence suggests that the monetary authority should consider the amplification effects that financial constraints play following changes in basic interest rates and the role of financial conglomerates in the transmission of monetary policy.

Ativos intangíveis: avaliação e mensuração no contexto de private equity e venture capital

Os ativos intangíveis tornaram-se a principal fonte de competitividade para as empresas operantes na Economia do Conhecimento. Entretanto, ativos intangíveis são de difícil mensuração, colocando desafios para investidores e bancos que, expostos a uma maior assimetria de informação, tendem a requerer retornos significativos, para aportar capital em Pequenas e Médias Empresas (PMEs) inovadoras, quando o fazem. O setor de Private Equity e Venture Capital (PE/VC) se desenvolveu concomitantemente à crescente importância dos ativos intangíveis na economia. Trata-se de um importante segmento de intermediação financeira composto por organizações desenhadas para lidar com elevada assimetria de informação. Neste trabalho, dez dessas organizações, atuantes no mercado brasileiro, foram entrevistadas. O objetivo é descrever o processo de seleção de investimentos, os critérios e os indicadores utilizados por tais organizações para identificar e mensurar os ativos intangíveis. O método usualmente adotado por essas organizações para a valoração (valuation) das PMEs inovadoras também é estudado. Resultados sugerem que as organizações de PE/VC utilizam técnicas sofisticadas para avaliar propostas de investimento, com critérios e indicadores específicos para se medir as principais classes de ativos intangíveis de uma empresa. Entretanto, tais ativos não são avaliados individualmente. A informação obtida é utilizada para se compreender a origem dos fluxos de caixa projetados e os principais fatores de risco. Por sua vez, tais elementos são combinados pelo método do fluxo de caixa descontado para se estimar o valor da empresa. Graças à extensa experiência dos gestores de PE/VC com PMEs inovadoras, acredita-se que o estudo das práticas deste segmento traz importantes reflexões para a recente discussão em torno dos ativos intangíveis

Main obstacles in the business environment affecting firm growth: a comparative analysis between Chinese and Brazilian SMEs

Usando dados do Banco Mundial, esta dissertação analisa as semelhanças e diferenças entre os obstáculos enfrentados pelas micro, pequenas e médias empresas (MSME) no Brasil e na China. Realizamos tanto uma análise comparativa entre os dos países como uma análise de clusters para confrontar os dados subjetivos e objetivos recolhidos, de modo a identificar o desempenho das empresas, levando em consideração as características dos países e o ambiente de negócios.

Regulatory reform in the brazilian railway sector and concession valuation: a preliminary assessment

Trabalho apresentado na 4th Conference on the Regulation of Infrastructures

Not delivering as one: asymmetric outcomes in firm-university collaborations

Extant literature examined the benefits of relational embeddedness in facilitating collaboration between organizations, as well as the necessity of firms to balance their knowledge generation into exploration and exploitation activities. However, the effects of relational embeddedness in the specific outputs of firm-university collaborations, as well as the elements that affect the exploratory nature of such outcomes remain underexplored. By examining fine grained data of more than 4.000 collaborative research and development projects by a firm and universities, 5.000 patents, and 300.000 scientific publications, it was proposed that relational embeddedness would have a positive effect on resource commitment and on joint scientific publications, but a negative effect on joint patents and exploratory outcomes resulting of such collaborations. Additionally, it was proposed that knowledge similarity would have a negative impact in exploratory endeavors made in such projects. Although some of the propositions were not supported by the data, this study revealed that relational embeddedness increases resource commitment and the production of joint scientific publications in such partnerships. At last, this study presents interesting opportunities for future research.

Valuing emerging markets companies : new approaches to determine the effective exposure to country risk

The aim of this paper is to propose new methods to measure the effective exposure to country risk of emerging-market companies. Starting from Damodaran (2003), we propose seven new approaches and a revised CAPM for emerging markets companies. The “Prospective Lambda” represents the effective exposure according to analysts’ estimates of growth. The “Relative Lambda” relies on the firm value estimated through a relative valuation. The “Retrospective Lambda” represents the ex-post effective exposure to country risk. The “Company Effective Risk Premium” is a generalization of the Retrospective Lambda, and expresses the premium effectively requested by investors to invest in that specific company in the past year. “The Actual Lambda” and the “Company Actual Risk Premium” represent, respectively, the actual exposure to country risk of a company and the actual premium requested by investors to invest in that specific company. The “Industry Lambda” reflects the median exposure to country risk of the industry in which the company belongs. We tested our new measures of exposure to country risk on the Latin American emerging markets companies according to the classification of the MSCI Emerging Markets Latin America Index. The results confirm that the new approaches can be effectively applied by financial analysts to stable-growth companies that operate in emerging markets and to mature markets companies that operate in emerging markets, providing with a more reliable estimate of both the premium effectively requested by investors in the past and the actual premium. Applying the new approaches, the cost of equity reflects the effective exposure of a company to country risk without being over- or underestimated, as is the case with other existing approaches.

Bank networks and firm credit: an agent based model approach

Starting from the idea that economic systems fall into complexity theory, where its many agents interact with each other without a central control and that these interactions are able to change the future behavior of the agents and the entire system, similar to a chaotic system we increase the model of Russo et al. (2014) to carry out three experiments focusing on the interaction between Banks and Firms in an artificial economy. The first experiment is relative to Relationship Banking where, according to the literature, the interaction over time between Banks and Firms are able to produce mutual benefits, mainly due to reduction of the information asymmetry between them. The following experiment is related to information heterogeneity in the credit market, where the larger the bank, the higher their visibility in the credit market, increasing the number of consult for new loans. Finally, the third experiment is about the effects on the credit market of the heterogeneity of prices that Firms faces in the goods market.

Boundary decisions of the firm: make, buy, cooperate

Firms are not atomistic hierarchies only linked with one another at arm’s-length distance in markets. Instead, a myriad of long-lived, highly cooperative relationships between suppliers and customers are pervasively found in the B2B world. And it is within those enmeshed relationships and networks that the co-evolution of capabilities and business specialisms is brought about and developed. If that is the actual ‘topography’ of the business landscape, then the coordination of economic activities in general, and the boundary decisions of each and every firm in particular, are unlikely to be reduced to a (dual) choice between ‘making’ or ‘buying’. Inter-firm cooperation is in itself a third governance structure, in alternative to the hierarchical and the market modes of coordination. And, what is also equally important to note, it is through the make-or-buy-or-cooperate decisions that the (embedded) firm is able to change its nature and scope, redefine its (fuzzy) boundaries, and thus adapt to an ever-changing business setting.

Economic valuation of collecting water to billing in the aspersion irrigated bean in the no tillage system and conventional crop

The law's project n.676/2000 approved the collecting of billing water for farmers in a maximum foreseen value of US$ 0.01 m(-3) of extracted water in the São Paulo State. As the irrigated agriculture is the activity that consumes more water, the farmers profitability can be affected. This work was to analyze the economic impact of billing water in the aspersion irrigated bean crop to consider the system of conventional production and no tillage system in the Paranapanema municipal district, São Paulo State, Brazil. The indicators used to analyze the economic results were unit variable cost, market price and unit profitability. The results showed that for the aspersion irrigated bean crop in conventional system, the participation of cost to the recourse water in cost variable totality was of 2.5% and in no tillage system the participation was of 2.2%. The fall of profitability just the billing water in conventional crop system and in no tillage system was US$ 0.01 kg(-1).

Analysis of forecasting capabilities of ground surfaces valuation using artificial neural networks

Fundação de Amparo à Pesquisa do Estado de São Paulo (FAPESP)

Economic valuation of the Emas waterfall, Mogi-Guaçu River, SP, Brazil

A Cachoeira de Emas, no Rio Mogi-Guaçu, é reconhecida regionalmente como um importante local para a pesca e o turismo. Os primeiros registros da pesca profissional e esportiva no local datam da década de 30, que é o mesmo período em que a atividade do turismo teve seu início. O presente artigo fornece uma valoração ambiental deste local e identifica as diferenças entre os principais grupos de pessoas que o frequentam. Durante o ano de 2006 nós entrevistamos 33 pescadores profissionais, 107 pescadores esportivos, 45 turistas e 103 excursionistas para estimar a Disposição a Pagar ( P) de cada categoria e para analisar a influência de fatores socioeconômicos através de regressões logísticas e ANCOVAs. A DAP dos pescadores profissionais foi significativamente influenciada pela idade e escolaridade e a DAP dos pescadores esportivos foi significativamente influenciada pela renda familiar. As variáveis que influenciaram a DAP dos turistas e excursionistas fora o sexo e a escolaridade. valor anual total agregado para manter a Cachoeira nas condições atuais foi estimado em US$ 81.080,00, e US$ 44.055.911,46 para recuperá-la.

Gradually truncated log-normal in USA publicly traded firm size distribution

We study the statistical distribution of firm size for USA and Brazilian publicly traded firms through the Zipf plot technique. Sale size is used to measure firm size. The Brazilian firm size distribution is given by a log-normal distribution without any adjustable parameter. However, we also need to consider different parameters of log-normal distribution for the largest firms in the distribution, which are mostly foreign firms. The log-normal distribution has to be gradually truncated after a certain critical value for USA firms. Therefore, the original hypothesis of proportional effect proposed by Gibrat is valid with some modification for very large firms. We also consider the possible mechanisms behind this distribution. (c) 2006 Published by Elsevier B.V.

Assessment and statistics of Brazilian hydroelectric power plants: Dam areas versus installed and firm power

The Brazilian relief, predominantly composed by small mountains and plateaus, contributed to formation of rivers with high amount of falls. With exception to North-eastern Brazil, the climate of this country are rainy, which contributes to maintain water flows high. These elements are essential to a high hydroelectric potential, contributing to the choice of hydroelectric power plants as the main technology of electricity generation in Brazil. Though this is a renewable source, whose utilized resource is free, dams must to be established which generates a high environmental and social impact. The objective of this study is to evaluate the impact caused by these dams through the use of environmental indexes. These indexes are ratio formed by installed power with dam area of a hydro power plant, and ratio formed by firm power with this dam area. In this study, the greatest media values were found in South, Southeast, and Northeast regions respectively, and the smallest media values were found in North and Mid-West regions, respectively. The greatest encountered media indexes were also found in dams established in the 1950s. In the last six decades, the smallest indexes were registered by darns established in the 1980s. These indexes could be utilized as important instruments for environmental impact assessments, and could enable a dam to be established that depletes an ecosystem as less as possible.