Posts categorized under Corporate Finance
March 16, 2023
Multinational groups have been in the spotlight because of their activities that shift profits to tax havens, allowing them to minimize corporate tax bills in high-tax countries. The literature has documented several strategies used by multinationals to shift profits. This paper studies one strategy for which systematic empirical evidence is relatively scarce: the use of intra-group services transactions. Under this route, the firms of the group located in high-tax countries may artificially inflate their costs by paying expensive fees for services (e.
October 11, 2022
During the COVID-19 pandemic, the Portuguese government provided a plethora of different support measures for firms. These included state-guarantees for new loans and a public moratorium for existing ones. These measures have been essential to support firms in the most acute phase of the crisis by providing liquidity at reduced costs in a context of an abrupt increase in the level of risk. However, there are still open questions regarding the medium- to long-term impact of these measures.
July 18, 2022
Small knowledge firms struggle to keep their best employees: highly-skilled workers are needed for growth and success, but small firms cannot hold onto them. Advanced knowledge increases the productivity of skilled workers. Because large firms are more innovative and technological, this knowledge-skill complementarity may be different for small and large firms.
This paper applies discrete-time proportional hazards models with unobserved heterogeneity for several worker skill measures and human capital accumulation, interacted with firm-size categories and industry knowledge-intensity to ascertain how knowledge-skill complementarities are influenced by firm size.
June 22, 2022
The survival of less productive firms hampers the aggregate productivity growth in most developed economies as they consume resources that would be more productive elsewhere. Stimulated by the forbearance of creditors and inefficient insolvency regimes, the zombie phenomenon is generally believed to weaken business dynamism.
The paper analyses how the 2012 institutional reforms related to insolvency and prudential supervision of credit institutions, introduced by the Portuguese and European Authorities, have reduced the share of zombie firms in the economy, and how they have impacted the growth of aggregate productivity.
June 22, 2022
Many countries introduced or ramped-up loan guarantee schemes to bridge liquidity shortages as a key element of the policy response to the COVID-19 crisis. The analysis in this paper discusses the potential short and medium-term effects on productivity of loan guarantees via reallocation, relying on historical data on European firms.
The findings suggest that, absent policy support, the COVID-19 shock had the potential to seriously distort market selection, as it would have raised sharply the probability to face financial difficulties across the whole distribution of firm-level productivity.
June 23, 2017
There are several incentives to engage in earnings management, which managers need to consider. Likewise, there are different ways to drive earnings and cash flows in a certain direction. Given the complex context in which firms operate, earnings management may be seen has a continuous and iterative process characterized by a mixture of incentives and practices.
This research studies earnings management in Portuguese listed firms. The paper addresses two main strategies, namely real management and accrual management.