Frontiers of Corporate Governance
Friday, Jan. 5, 2018 10:15 AM - 12:15 PM
- Chair: Kelly Shue, University of Chicago
The Economic Impact of Religion: Evidence From Ramadan Loans
AbstractWe examine the effect of religious behavior on decision-making in the context of Ramadan observance, using an administrative data set of all personal and business bank loans in Turkey during 2003-2013. We find that small business loans originated during Ramadan are about 10 to 15 percent more likely to become delinquent within two years of origination than loans originated outside of Ramadan. Despite their worse performance, Ramadan loans have lower credit spreads than non-Ramadan loans at origination. Consistent with Ramadan-induced judgment errors of loan officers, we find no relation between origination in Ramadan and the performance of personal loans which are mostly automated, and large business loans where approval decisions are made by credit committees. Loans granted by banks whose loan officers are more likely to observe the Ramadan perform worse, and so do loans originated on hot Ramadan days when adverse physiological effects of fasting are greatest, and loans that resemble charitable lending involving financially weak borrowers and financially strong lenders.
The Impact of Delay in Going Public: Evidence from China
AbstractIn exchange for the benefits of an IPO, an entrepreneurial firm must increase disclosure, professionalize, and separate its value from specific human capital. Among Chinese firms on the cusp of an IPO, we explore how access to public markets affects this process. Unique features of China’s approval-based listing process permit quasi-experimental variation in the prospect of public listing. Among firms approved to IPO at similar times, surprise IPO suspensions of indeterminate length provide plausibly exogenous variation in listing delay and thus access to public markets. We find that suspension-induced delay affects a basket of standardization measures. It reduces patent applications both during delay and in the medium term after listing. Delay also reduces earnings when the CEO is the firm’s founder, reduces the likelihood of hiring a CFO, and increases the number of underwriting co-managers. The reduction in patenting is larger for firms with venture capital (VC) backing. Across measures, however, foreign VC backing counteracts the pernicious effects of delay. Suspension-induced delay does not affect contemporaneous investment, employment, or leverage, making it unlikely that our results are due to a negative capital supply shock.
- G3 - Corporate Finance and Governance