Pension fund deficits and stock market efficiency: evidence from the United Kingdom

Wotking paperThis paper examines the effect of a company’s unfunded pension liabilities on its stock market valuation. Using a sample of UK FTSE350 firms with defined benefit pension schemes, we find that although unfunded pension liabilities reduce the market value of the firm, the coefficient estimates indicate a less than one-for-one effect. Moreover, there is no evidence of significantly negative subsequent abnormal returns for highly underfunded schemes. These results suggests that shareholders do take into consideration the unfunded pension liabilities when valuing the firm, but do not fully incorporate all available information

Access to Finance for Cleantech Innovation and Investment:Evidence from U.K. Small- and Medium-Sized Enterprises

Clean technology (cleantech) is becoming increasingly important as firms and industries seek to address challenges around the global scarcity of resources and also achieve wider social and environmental goals. Yet there are underlying problems with how capital markets respond to this increasing demand for new and innovative cleantech investments. In this article, we use a large U.K. dataset to first consider the extent to which firms engaging with cleantech increase their demand for external capital. We then consider how different types of debt and equity financiers deal with this demand for funds. Our key findings are that: 1) businesses engaging with clean technologies have a higher demand for external capital and 2) these demands are not being fully met by traditional providers which forces firms to seek out alternative and nontraditional sources of finance.</p

Venture capital support to small businesses

Supplementary Appendices 1-3 to report published by National Audit Office (HC: 23, 2009-10; ISBN: 9780102963304)This report looks at the Department’s programme of venture capital funds which 2 support small businesses seeking equity based finance. The scope of the report does not include Government provision of debt finance or tax incentives for small businesses, nor does it attempt to look in detail at “investment readiness” programmes within Government which assist small businesses in preparing their business plans so that they can pitch their propositions to investors more effectively.The National Audit Office commissioned Professor Gordon Murray supported by Dr Louis Liu of Exeter University to undertake a data collection exercise to allow the National Audit Office to understand the extent of publicly sponsored venture capital programmes in other countries

Pension Funding Constraints and Corporate Expenditures

Working paperThis paper examines the effect of a company’s pension contributions on its dividend and investment policies. Using a sample of all FTSE350 UK listed firms with at least one defined benefit pension scheme from 2001 to 2004, we find a strong and negative relation between pension contributions and corporate dividend payments even after controlling for the correlation between funding status and unobserved investment opportunities. We find a weaker result using investment equations, where investment is negatively related to pension contributions but the relation is not statistically significant. Our results suggest a preference of financial rather than real channels for firms making balance sheet adjustments. We also examine whether the new funding requirements under the Pensions Act 2004 have had any effects on firms’ pension contributions and accordingly their corporate expenditure decisions. We include additional data from 2005-2006, and find that both dividend and investment sensitivity to pension contributions is more pronounced after the introduction of the new funding requirements

Organisational capabilities and small and medium sized firms’ attainment of innovation outcomes: the moderating roles of exports and formal business networks

Purpose: We examine the influence of planning and execution capability (PEC) and operational improvement capability (OIC) on small-and-medium-sized firms’ (SMEs) attainment of different innovation outcomes under the conditions of exports and formal business networks, based on the capability-based perspective and organisational learning literature. Design/methodology/approach: We analyse time-series data about UK SMEs, extracted from the 2015 and 2016 UK Longitudinal Small Business Surveys (LSBS). Findings: We failed to find any direct effects of PEC and OIC on product innovation outcomes. However, we discovered that OIC supports the generation of process innovation outputs more strongly than PEC. Additionally, exports and formal business networks provide SMEs with different learning opportunities. We find limited support that exports amplify the beneficial effect of PEC on product innovation outcomes more than formal business networks. On the other hand, formal business networks strengthen the effect of PEC on process innovation outcomes more than exports. As a result, exports reduce the beneficial effect of OIC on product innovation outcomes more than formal business networks. However, formal business networks weaken the beneficial effect of OIC more than exports. Originality: We distinguish between two types of organisational capabilities - PEC and OIC - and examine their impact on SMEs in achieving innovation outcomes. We also identify SMEs’ involvement in exports and formal business networks as the important boundary conditions for such effect

An independent econometric analysis of the “Innovation Investment Fund” Programme (IIF) of the Australian Commonwealth Government: findings and implications

An analysis of the firms funded by the IIF programme indicates that the programme is well focused and has provided material and relevant support to a significant number of early-stage enterprises from Australia’s science base. IIF supported portfolio firms are more likely to be early-stage investments, to be in receipt of follow-on finance, and to achieve a successful exit than comparator firms outside the IIF programme. However these supported firms are also more likely to fail than comparator firms in part because the programme focuses on genuinely early-stage and therefore risky firms. The programme has raised substantial finance for young and new knowledge based firms that would not have been available in the absence of this scheme. None the less, the VC funds supported have largely made modest returns which would not by itself attract long term private investment interest in Australia’s high technology entrepreneurs. The IIF Programme while important is unlikely to engender by itself a viable and flourishing VC industry in Australia. Thus, the objectives imposed on the programme are overly ambitious and do not reflect fully the highly challenging environment for early-stage VC investment across the developed world.In 2010 Professor Gordon Murray and his colleagues Professor Marc Cowling and Dr Weixi Liu were contracted by the Department of Innovation, Industry, Science and Research to undertake an econometric analysis of the Innovation Investment Fund (IIF) program

Has previous loan rejection scarred firms from applying for loans during Covid-19?

The concept of the ‘discouraged’ borrower is well documented. In this paper we consider whether smaller firms in the UK who have been previously rejected for bank loans have been scarred by the experience so badly that even in the presence of two exceptionally generous Covid-19 loan guarantee schemes they still refuse to make an application. Further, we also consider what happens when they do. As banks have either zero or minimal loss exposure, do they still maintain their normal strict lending protocols or do they relax their standards to fulfil the governments’ objective of supporting struggling businesses through the crisis? Our findings show that 72% of previously rejected borrowers are reluctant to request loans. We find some evidence that previously scarred firms faced such severe liquidity problems that they relaxed their distrust of banks during the Covid-19 crisis. However, their share of the governments guaranteed loan portfolio was slightly lower suggesting that banks were treating each new loan application on its merits.N/