Stefano Monferrà

Measuring shareholder value in asset‐based lending industries

Purpose - The purpose of this paper is to analyse the creation of shareholder value (SHV) created by non-depository financial institutions and, especially, by leasing and factoring (L&F) companies. Design/methodology/approach - The cost of capital of both L&F companies is estimated using an accounting procedure and, next, the economic value added (EVA) created by Italian L&F companies over the period 2002-2004 is estimated. Findings - L&F companies display high profitability and EVA levels over the period analysed: a very large part of leasing and factoring companies achieved a positive EVA and the lowest median level of EVA created is at least 11 per cent of capital invested in the company, while at least 50 per cent of leasing companies achieved a positive EVA and the lowest median level of EVA created is almost 2 per cent of capital invested in the company. Research limitations/implications - Future research may try to investigate other markets. The papers focus on Italy for data collection for L&F is problematic and data are collected from a unique data base. Practical implications - SHV creation is the main strategic objective of L&F companies so the paper is of interest to both academics and practitioners. Originality/value - This is the first study focusing on SHV creation by non-depository financial institutions and, especially, L&F companies.

Do the effects of private equity investments on firm performance persist over time

This study examines whether the effect of private equity (PE) investments persists over time or wears off after the PE investors exit. Unlike previous studies that focus on the PE-backed initial public offerings (IPOs), we constructed a unique and distinctive dataset comprising PE investments exiting both via IPO and other common ways (i.e., trade sale, secondary buy-out and buy-back). Consistent with Jain and Kini (1995), we observe that PE-backed firms outperform other firms. Our results shed light on existing literature because we find that whether PE investments continue to benefit the portfolio firms is strictly related to the type (venture capital versus buy-out) and length of the PE investment, the nature of the PE investor (bank-based versus nonbank based), and the exit strategy (IPO versus other exit strategies).

Competition, specialization and bank–firm interaction: what happens in credit crunch periods?

This article empirically investigates the relationship between interbank competition, bank orientation and credit availability for a sample of more than 30 000 loans granted by a large banking group operating in the Italian credit market. We test whether and how, during a credit crunch period, competition affects bank orientation and how relationship lending and interbank competition can mitigate the credit crunch problem, for financially distressed firms. Using a unique and large bank–firm level data set, the main results show that an increase in competition is associated with a stronger relationship in terms of the length of the bank–borrower interaction, whereas the distance bank branch-headquarter negatively affects it. Moreover, a strong lender–borrower relationship, in terms of length and exclusivity, is found positively significant in determining the change in the amount of credit granted. Nonlinearity and sector specialization effects are tested, too, and report interesting results, supporting the crucial role of relationship lending during a financial crisis.

Bank’s Organizational Form and Effectiveness of the Recovery Process

** Recent empirical findings by Sapienza (2004), Micco and Panizza (2006) and Berger et al. (2008) have pointed to the correlation between bank ownership and lending behavior. We formulate and test hypotheses on the role played by the type of bank ownership (Independent and Dependent) and by the functional distance of the bank in influencing the Loss Given Default Rate (LGDR). This paper refers to data on the Italian Banking System. The empirical results are consistent with our hypotheses on the LGDR and control variables relation. We provide evidence that the LGDR is positively related to the distance between the bank headquarters and the borrower’s location. Besides, the resulting data support the idea that Independent Banks present a low LGDR. Finally, our findings indicate that market power and LGDR are negatively related.

The Shadow Economy and Banks’ Lending Technology

Is there a relationship between bank monitoring models and the level of shadow economy? This paper develops a model of optimal lending technology to study the relationship between local underground economic activity and banks’ lending choices. In turn, as the aggregate level of informality and tax evasion increase, it becomes more profitable for banks to screen and supervise borrowers using more costly in-depth monitoring technologies. A large dataset of regional Italian data confirms these conjectures.

Competition and Relationship Lending: What Happens in Credit Crunch Periods?

This paper empirically investigates the relationship between interbank competition, bank orientation and credit availability for a sample of more than 30,000 loans granted by a large banking group operating in the Italian credit market. We test whether and how, during a credit crunch period, competition affects bank orientation and how relationship lending and interbank competition can mitigate the credit crunch problem, for financially distressed firms. Using a unique and large bank-firm level dataset, the main results show that an increase in competition is associated with a stronger relationship in terms of the length of bank-borrower interaction, whereas the distance bank branch-headquarter negatively affect it. Moreover, a strong lender-borrower relationship, in terms of length and exclusivity, is found positively significant in determining the change in the amount of credit granted. Non-linearity and sector specialization effects are tested, too, and report interesting results, supporting the crucial role of relationship lending during a financial crisis.