This paper assesses the role of financial performance in explaining firms' investment dynamics in the wine industry from the three European Union (EU) largest producers. The wine sector deserves special attention to investigate firms' investment behavior given the high competition imposed by the latecomers. More precisely, we investigate how the capitalization, liquidity and profitability influence the investment dynamics using firm-level data from the wine industry from France (331 firms), Italy (335) firms and Spain (442) firms. We use data from 2007 to 2014, drawing a comparison between these countries, and relying on difference-and system-GMM estimators. Specifically, the impact of profitability is positive and significant, while the capitalization has a significant and negative impact on the investment dynamics only in France and Spain. The influence of the liquidity ratio is negative and significant only in the case of Spain. Therefore, we notice different investment strategies for wine companies located in the largest producer countries. It appears that these findings are in general robust to different specifications of liquidity and profitability ratios, and to the different estimators we use.
We propose a methodological framework to study the dynamics of inter-regional investment flow in Europe from a Complex Networks perspective, an approach with recent proven success in many fields including economics. In this work we study the network of investment stocks in Europe at two different levels: first, we compute the inward-outward investment stocks at the level of firms, based on ownership shares and number of employees; then we estimate the inward-outward investment stock at the level of regions in Europe, by aggregating the ownership network of firms, based on their headquarter loc…
In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example showing the problem in a classical trade-off model. The firm can issue one-period defaultable debt, invest in capital and pay a dividend. If the firm cannot meet the required debt payment, it is liquidated. Second, we show how to use a dual to the original problem and a change of measure, such that existence and uniqueness can be proved. In the unique Markov-p…
This work analyzes data on all public US firms in the 50 year period 1970-2019, and presents 18 stylized facts of their scale, income, growth, return, investment, and dynamism. Special attention is given to (i) identifying distributional forms; and (ii) scale effects -- systematic difference between firms based on their scale of operations. Notable findings are that the Difference-of-Log-Normals (DLN) distribution has a central role in describing firm data, scale-dependent heteroskedasticity is rampant, and small firms are systematically different from large firms.
We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function of utilization and profitability and can be financed by debt, whereas consumption is independently determined as a function of income and wealth. Prices adjust sluggishly to both changes in labour costs and inventory. Disequilibrium between expected sales and demand is absorbed by…
The new business paradigms originate a strong necessity to re-think the theory of the firm with the aim to get a better understanding on the organizational and functional principles of the firm, operating in the investment economies in the prosperous societies. In this connection, we make the innovative research to advance our scientific knowledge on the theory of firm in the conditions of the nonlinear dynamic financial and economic systems. We propose that the nonlinearities have to be taken to the consideration and the nonlinear differential equation have to be used to model the firm in the…
Grow and Pollute but Invest and Clean: Dynamic Associations between Parent Firm Characteristics and Facility Toxic Releases
Department of Finance, University of Zurich（苏黎世大学金融系）；Swiss Finance Institute（瑞士金融研究所）；KU Leuven（荷语鲁汶大学）；NTNU Business School（挪威科技大学商学院）；CEPR（欧洲经济政策研究中心）
Determination of the correct mix of dividend and retained earnings and its effect on profitability has been a subject of controversy in financial management literature. This paper seeks to contribute to the ongoing debate by examining the relationship between dividend payout policy and the financial performance of 60 firms listed on the National Stock Exchange between 2009-2018. The Return on Assets (ROA) served as a surrogate for the dependent variable, profitability, while the Dividend Pay-out ratio proxied for dividend policy and was the only explanatory variable. Control variables include …
Corporate venture capital is in the midst of a renaissance. The end of 2015 marked all-time highs both in the number of corporate firms participating in VC deals and in the amount of capital being deployed by corporate VCs. This paper explores, rather than defines, how these firms find success in the wake of this sudden influx of corporate investors. A series of interviews was conducted in order to capture the direct and indirect objectives, philosophies, and modes of operation within some of these corporate VC organizations. During the course of this exploration, numerous operational coherenc…
I studied what role the US stock markets and money markets have possibly played in the Gross Private Domestic Investment (GPDI) of the United States from the year 1959 to the year 2001, Gross Private Domestic Investment refers to the total amount of investment spending by businesses and firms located within the borders of a nation. It includes both the values of the purchases of non-residential fixed investment, which include capital goods used for production, and the values of the purchases of residential fixed investment, which include construction spending for factories or offices. And I cr…
In this paper, I examine why some firms have zero leverage. I fail to find evidence that firms are unlevered because of managerial entrenchment since these firms do not have weaker corporate governance. I reject the hypothesis that firms become zero-leverage after prolonged periods of high market valuation, since before levering these firms do not suffer from declining valuations and continue to issue large amounts of equity. I find strong evidence in favor of the financial constraints explanation of the zero-leverage puzzle. Zero-leverage firms appear to be financially constrained using three…
Current research helps in understanding both positive and negative impacts of capital structure on profits of Indian automobile companies by using variables like Return on Capital Employed, Return on Long Term Funds, Return on Net Worth, Gross Profit Margin, and Operating Profit, and Return on Asset. The study hypothesized that RoCE, RoLT, and RoNW have a positive effect and GP, OP and ROA have a negative impact on debt-equity and interest coverage ratios i.e capital structure of the companies. Also, the study proves that the relationship between profitability and capital structure variables i…
On a daily investment decision in a security market, the price earnings (PE) ratio is one of the most widely applied methods being used as a firm valuation tool by investment experts. Unfortunately, recent academic developments in financial econometrics and machine learning rarely look at this tool. In practice, fundamental PE ratios are often estimated only by subjective expert opinions. The purpose of this research is to formalize a process of fundamental PE estimation by employing advanced dynamic Bayesian network (DBN) methodology. The estimated PE ratio from our model can be used either a…
Investment planning requires knowledge of the financial landscape on a large scale, both in terms of geo-spatial and industry sector distribution. There is plenty of data available, but it is scattered across heterogeneous sources (newspapers, open data, etc.), which makes it difficult for financial analysts to understand the big picture. In this paper, we present Sabrina, a financial data analysis and visualization approach that incorporates a pipeline for the generation of firm-to-firm financial transaction networks. The pipeline is capable of fusing the ground truth on individual firms in a…
