Maurizio La Rocca

Effect of Diversification on Capital Structure

Previous empirical financial studies have paid little attention to the role of diversification strategy on financial choices. This study analyses the financing strategies of multibusiness firms, suggesting the relevance of sorting the diversification phenomena into its related and unrelated components. The implications of our findings are important because they explain earlier contradictory results on capital-structure determinants and offer an explanation of how the degree of product specialization/diversification and the direction of diversification (related or unrelated) translate into different corporate financial behaviours.

The influence of local institutional differences on the capital structure of SMEs: Evidence from Italy

This paper explains both capital-structure and debt-maturity choices for SMEs in terms of institutional differences at the local level, making use of regions as the unit of analysis. Specifically, the article considers local financial development and the effectiveness of the local enforcement system, controlling for firm-specific characteristics. The ability of the local financial market to provide funds efficiently is of particular interest to SMEs, due to the fact that large firms can tolerate imperfections in the local financial system by moving to international, more highly integrated financial markets. The main findings of the analysis suggest that capital-structure and debt-maturity choices interact as complementary factors and that corporate financial decisions are not only the result of firm-specific or industry-specific characteristics, but are also based on the institutional climate in which a firm operates. After controlling for heterogeneity in firm characteristics, leverage was found to be positively influenced by local financial development, while the enforcement system was less relevant. Conversely, debt maturity was longer in regions with high levels of law enforcement, whereas local financial development did not play a relevant role.

Investment cash flow sensitivity and financial constraint: a cluster analysis approach

This article sheds light on the mixed empirical evidence concerning financial constraint and investment sensitivity to cash flow. The literature suggests that measuring financial constraint is far from straightforward, and we therefore propose a cluster analysis procedure to identify unambiguous groups of constrained firms. We found the investment results to be highly sensitive to cash flow for financial constraint firms. Moreover, in line with previous research, our results showed that the traditional criteria used to identify financially constrained firms led to ambiguous interpretations. Overall, our results propose that the cluster analysis can be used to encompass the various single-criterion approaches, thereby providing a finer measurement of the financial constraint construct and deeper insight into the relationship between investment sensitivity to cash flow and financial constraint.

Corporate Governance, Intellectual Capital and Value Creation

This paper is a tentative to integrate, using a heterodox approach, the capabilities perspective, that raises the role of the managers competences, and the incomplete contract perspective, that raises the role of agency problems, to describe how the corporate governance relationships work in high competitive and complex environments. This paper provides a redefinitions and reassessments of corporate governance theoretical models according to the changing nature of the firm. This paper tries to describe the corporate governance relationships by the interaction between authority, as the most valuable source of incentive to offer to the manager for firm-specific investment, and responsibility, as a mechanism to avoid opportunistic behaviors. The interaction between them allows managers to solve hold-up problems at the beginning and, after, moral hazard problems. These two factors balance the incentive problem with the need of a constraint to the managers activities and explain the way to incentive innovation and managerial creativity to reach firms success and support value creation processes.

Long-term investment sensitivity to cash flow and financial crisis

ABSTRACT This study examined investment–cash flow sensitivity in unconstrained and constrained firms from 1980 to 2010 in a sample of Italian manufacturing firms. Investment sensitivity to cash flow decreased over time, and financially constrained firms showed little difference in the decline compared with unconstrained firms. Last, investment sensitivity to cash flow increased during the financial crisis of 2008.

Unveiling the Antecedents of International Diversification: An Agency Theory Approach

While various studies have developed hypotheses about the antecedents of international diversification drawing mainly on the resource-based view, the behavioral theory of the firm, and the transaction costs literature, we advance our understanding by investigating the explanatory power of agency costs of free cash flow arguments. Using a sample panel of 167 Italian firms longitudinally evaluated during the 1980-2010 period, this study tests whether the firm’s choice to spread operations in multiple foreign countries is conditioned by excess of free cash flow and debt, especially in firm-contexts where agency problems are exacerbated by managers or large shareholders’ opportunism. We find that debt has a negative effect on international diversification, while, contrary to our expectation, we find that the effect of cash flow is negative. Results also show that both high ownership concentration and low growth opportunities have a significant moderating effect on the debt - and cash flow - international diversification relationships.

Local Banking Development and the Use of Debt Financing by New Firms

Abstract We investigate the effects of local banking development on the debt financing of new firms using a large sample of Italian firms. Controlling for potential endogeneity issues, we find that new firms are more likely to use bank debt and have higher leverage in provinces with more bank branches relative to population. However, it is important to account for bank heterogeneity. For instance, more foreign banks in a province actually reduce access to bank debt. Taken together, our study provides new and nuanced evidence on the role of local banking development for the debt financing of new firms.

Cash holding and firm value: a meta-analysis

Il paper presenta una meta-analisi fra cash holding e valore. Facendo riferimento a un campione di 290 studi, i risultati mostrano che la detenzione di liquidita genera un aumento del valore delle imprese. Inoltre, dall’analisi dei fattori di moderazione si evince la presenza di alcuni fattori che condizionano significativamente la relazione oggetto di studio. In particolare, l’effetto positivo delle riserve di cassa e amplificato quando il valore delle imprese e misurato da una variabile di mercato, quando gli studi si riferiscono agli anni 2000 e in particolari contesti istituzionali. Al contrario, l’effetto si riduce nelle imprese con scarse opportunita di sviluppo, negli studi che risultano essere pubblicati e in quelli che impiegano tecniche econometriche che controllano i problemi di endogeneita.

The Changing Effect of Cash Holdings on Firm Performance

This paper examines the relationship between cash holdings and performance. Specifically, in light of the presence of conflicting evidence concerning the worth of cash stock, which could lead to a positive effect rather than a negative one, the role of moderating factors that can shape the magnitude of this relationship is investigated. The results show that the value of cash holdings is affected by firm-specific characteristics, as well as factors related to the institutional context. Although other studies have analyzed moderators one at a time, this is the first work to consider how they jointly work. When the moderators are considered together, some of them become not statistically significant anymore while others become even more economically and statistically relevant.

Corruzione e liquidità influenzano le performance delle imprese

italianon questo contributo viene analizzata la relazione fra cash holding e performance, con particolare riferimento all’effetto di moderazione svolto dal livello di corruzione proprio del contesto istituzionale in cui le imprese operano. I risultati del lavoro evidenziano un ruolo rilevante della corruzione, che arriva a modificare segno e intensita della relazione tra cash holding e performance aziendali. EnglishThis paper analyses the relationship between cash holding and performance, especially considering the moderating effect played by the level of corruption of the institutional context in which firms operate. The results show the importance of the institutional context in influencing firms’ financial policies and that corruption can shape the sign and intensity of the impact of cash holding on business performance.