Marc Deloof

University of Antwerp | UA · Accounting and finance

We investigate the financing and performance of international entrepreneurship in an environment that was characterized by severe information problems and very weak investor protection. Despite these problems, new ventures could raise large amounts of equity and debt on the Belgian capital market between 1890 and 1914. Many of these firms were inte...

We investigate the determinants of dividend payments in Belgium between 1838 and 2020. As the institutional environment changes drastically over time, we explore whether the determinants of dividend payments depend on the environment in which firms operate. Large firms, firms that are not informationally opaque, firms with a high share denomination...

We investigate firms' initial stock and bond issues in public capital markets and explain fluctuations in these IPOs over time. We study Belgium from 1839 to 1935, which provides a setting with poor investor protection, no tax distortions, and changing regulations. We find that economic growth induces stock and bond IPOs and that the issuers time o...

Société Générale de Belgique was the world’s first universal bank. They pioneered another innovation: investing in non-listed equity. Using hand-collected data, we show they earned significant positive risk-adjusted returns from 1850 to 1934. This offset the flat performance of listed equity or the underperforming bond portfolio. Other Belgian...

In this paper, we investigate the link between uncertainty in industrial policy and firm investment by focusing on China's Five‐Year Plan (FYP). Our sample period is from 1998 to 2017. In our investigation, we examine whether a change in the FYP is a source of uncertainty in industrial policy because of the difficulties in FYP predictability. Our m...

In this article, we investigate the effect of local financial development on cash holdings of Italian small and medium-sized enterprises (SMEs). Consistent with the hypothesis that local financial development reduces the need to hold precautionary cash because it facilitates access to bank debt, we find that local financial development measured by...

Dividend policy is not set de novo each year, but dividends are smoothed from one year to another. This smoothing leads to a short-term persistence in dividend policy. In this paper, we investigate the persistence of a dividend policy in the long run by using a unique sample of firms listed on the Brussels Stock Exchange (BSE) since 1824. The impri...

Research Question/Issue This paper studies the relationship between country‐level unemployment insurance and cash holdings of privately‐held firms. When public unemployment insurance is weak, firms may provide alternative unemployment insurance by committing not to lay off workers in bad times. We hypothesize that one way firms can do so is by hold...

We investigate the determinants of dividends by using a unique sample of Belgian firms listed on the Brussels Stock Exchange between 1838 and 2012. More specifically, we investigate whether the motives to pay dividends are driven by the historical environment in which firms operate. We find common determinants of dividend policy in different instit...

Using a large sample of multinational corporations (MNCs), we examine the location of earnings management within the firm. We posit and find that MNCs manage their consolidated earnings through an orchestrated reporting strategy across subsidiaries over which they exert significant influence. Specifically, we find that headquarters' influence on su...

We re-examine dividend growth and return predictability evidence using 165 years of data from the Brussels Stock Exchange. The conventional wisdom holds that time-varying dividend yield is predominately explained by changes in expected returns and that expected dividend growth is only weakly forecastable. However, we find robust dividend growth pre...

We investigate the value of stable ownership for a sample of European firms using the global financial crisis as an exogenous shock and pre-and post-crisis years as benchmark periods. Consistent with the argument that stable ownership allows managers to focus on the creation of long-term value, we find that stable ownership resulted in higher stock...

We study the payment of bonuses to directors of Belgian firms listed on the Brussels Stock Exchange in 1925–1934. Directors received substantial cash bonuses which were positively related to firm performance, measured by accounting income and changes in the market value of equity. If shareholders were expropriated via the payment of excessive direc...

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 acco...

We investigate the effects of the recent financial crisis on start‐up financing and survival using a data set that covers all Belgian new business registrations between 2006 and 2009. We find that bank debt is the single most important source of funding, even for start‐ups founded during the crisis. However, start‐ups founded in crisis years use le...

We re-examine dividend growth and return predictability evidence using 165 years of data from the Brussels Stock Exchange. The conventional wisdom holds that time-varying dividend yield is predominately explained by changes in expected returns and that expected dividend growth is only weakly forecastable. However, we find robust dividend growth pre...

Drawing on a set of insurance contracts brokered in Antwerp in 1562–1563, we demonstrate that by that time Antwerp hosted a sophisticated, large, and international market for marine insurance in which small and large traders could acquire and sell insurance, backed by the intermediation of a large broker, Juan Henriquez who functioned as an open-ac...

We investigate whether investor protection and taxation legislation affect dividend policy, using a unique sample of all Belgian firms listed on the Brussels Stock Exchange between 1838 and 2012. Investor protection was very weak in Belgium before World War I, but gradually improved over time. Dividend taxation was introduced only in 1920. While it...

We investigate how the presence of an outside CEO is related to the financing policy of privately held family firms, taking into account the degree of family control via the board of directors. For a sample of 367 Belgian firms we find that family firms with an outside CEO have a lower leverage, although they take more entrepreneurial risk. The neg...

We investigate how board characteristics were related to the value of listed Belgian firms in the 1928-1931 period, when investor protection was weak and firms were hit by the largest financial crisis of the 20 th century. We find that firms typically had a large board and many directors held multiple directorships. Most boards included bank direct...

We investigate the evolution of entrepreneurial firms’ debt policies over a period of 15 years after startup, considering leverage, debt specialization, debt maturity and debt granularity. Our analysis is based on a unique sample covering all non-financial Belgian firms founded between 1996 and 1998. We find that the debt policy of entrepreneurial...

This paper examines the impact of tax enforcement and public listing status on income shifting by multinational corporations (MNCs). For a sample of over 8,000 subsidiaries that are majority-owned by 959 European MNCs over the period 1998–2009, we find strong evidence of income shifting from high to low tax countries and that income is shifted more...

This paper examines the value of government ownership in Europe during the global financial crisis. This crisis was an exogenous shock for European firms, which allows us to observe an out-of-equilibrium effect on the costs and benefits of government ownership. Using a comprehensive sample of 4,737 listed firms in 28 European countries over the per...

We investigate the relation between local financial development and trade credit in an integrated financial market. Our results suggest that trade credit complements the formal finance of small- and medium-sized enterprises (SMEs) at the local level. Provincial banking development in Italy increases the provision of trade credit by SMEs and stimula...

This study provides evidence that Belgian firms affiliated to a business group (holding) manage their earnings more than stand-alone firms. Earnings management is especially more prevalent in fully owned group firms compared to group firms with minority shareholders. This evidence is consistent with the hypothesis that controlling shareholders face...

This study investigates the financial disclosure policy of small and medium-sized enterprises listed on a stock market with very low disclosure requirements: the Free Market of the Euronext Stock Exchange. In contrast to firms listed on a regulated stock market, firms on the Free Market do not have any obligation to disclose periodic or price-sensi...

We investigate the value of stable ownership for a large sample of European firms from 2005 to 2010, using the global financial crisis as an exogenous shock and using pre-and post-crisis periods as benchmarks. Controlling for ownership concentration, we find that stable blockholder ownership results in higher stock returns during the crisis, but no...

We investigate monthly returns of Belgian stocks listed on the Brussels Stock Exchange in the period 1838-2010. Our sample covers all stocks in the market over the entire period. Stock returns strongly depend on dividend income: real capital appreciation tends to be negative. Stocks were less risky in the 19th century than in the 20th century. Whil...

We investigate the impact of ownership stability and concentration on firm value and risk for a large sample of listed firms in 29 European countries in the 2005-2010 period. This time frame allows us to exploit the Global Financial Crisis as an exogenous shock and use the pre-crisis period as a benchmark. We find that a stable and concentrated own...

We use the recent financial crisis to investigate financing constraints of private small and medium-sized enterprises (SMEs) in Belgium. We hypothesize that SMEs with a large proportion of long-term debt maturing at the start of the crisis had difficulties to renew their loans due to the negative credit supply shock, and hence could invest less. We...

This study investigates the financial disclosure policy of small and medium-sized enterprises listed on a stock market with very low disclosure requirements: the Free Market of the Euronext Stock Exchange. In contrast to firms listed on a regulated stock market, firms on the Free Market do not have any obligation to disclose periodic or price-sensi...

In this article, we calculate a market-weighted return index for the 20 largest stocks listed on the Brussels Stock Exchange over the period 1833–2005, based on a new, unique and high-quality database. We find that this index captures the most important stylised facts of the value-weighted return of all shares listed on the Brussels Stock Exchange...

Manuscript Type: Empirical Research Question/Issue: This study examines the conditions under which foreign subsidiaries maintain active boards of directors. Active boards are in this study defined as boards that perform tasks beyond fulfilling local legal requirements. We focus on both monitoring and service roles. Research Findings/Insights: Based...

Manuscript Type: EmpiricalResearch Question/Issue: We study the relationship between informal rules (represented by social norms and social cohesion in a community) and corporate governance. A community is a large social unit characterized by a distinct set of informal rules. Specifically, three hypotheses are tested: (1) Communities with stronger...

This study investigates cash policies of multinational corporations (MNCs) for a large sample of European MNCs and their subsidiaries in the period 1998-2004. The results are consistent with the hypothesis that cash holdings depend on a trade-off between the superior knowledge of the subsidiary over headquarters and the agency costs of discretionar...

We analyze the impact of bank relationships on the performance of Belgian firms listed on the Brussels stock exchange at the start of the Great Depression, in 1929–1931. Most of these firms were affiliated with one or more banks via interlocking directorships. Taking into account the number of affiliated banks and their size, the proportion of bank...

We investigate the impact of universal banks on the dividend policy of affiliated companies, in an environment characterised by poor investor protection, booming stock markets and strong banks. Our results, based on a unique sample of 428 listed companies in pre-World War I Belgium, are consistent with the hypothesis that companies with good invest...

In this article the authors study the impact of a family business transfer on the financial structure and performance based on a sample of 152 small- to medium-sized businesses. The aim is to identify the effects of a succession by relying on panel data gathered over the period 1991 to 2006 resulting in more than 2,000 firm–year observations. The m...

In this article the authors study the impact of a family business transfer on the financial structure and performance based on a sample of 152 small- to medium-sized businesses. The aim is to identify the effects of a succession by relying on panel data gathered over the period 1991 to 2006 resulting in more than 2,000 firm—year observations. The m...

In this study, we examine whether corporate governance characteristics of multinational corporations (MNCs) and the institutional structure in their home-country influence earnings management by their domestic and foreign-owned subsidiaries. We perform our analyses on a large sample of both publicly traded and privately held majority-owned subsidia...

This study examines the dividend policies of privately held Belgian companies, differentiating between stand‐alone companies and those affiliated with a business group. We find that privately held companies typically do not pay dividends. Compared to public companies, they are less likely to pay dividends and they have lower dividend payouts. Our r...

Pre-World War I Belgium was characterized by a strong concentration of power in the hands of a small elite with ties to business, banks, and politics. We find that political and upper class connections were widespread amongst listed firms, especially connections with the ruling political party. Connected firms had higher growth levels and a higher...

This study investigates the impact of headquarters–subsidiary interdependencies on performance evaluation and reward systems in multinational enterprises. Headquarters–subsidiary interdependencies refer to the extent to which headquarters and subsidiaries depend on each other to accomplish their tasks. When headquarters–subsidiary interdependencies...

This paper examines the relation between private equity (PE) investors' involvement and their portfolio firms' earnings quality. We operationalize earnings quality through comparative analyses of conditional loss recognition timeliness. For a sample of unlisted Belgian firms, we find that PE involvement increases a firm's willingness to recognize l...

We investigate the impact of universal bank relations on the performance and the risk of listed companies in Belgium in the period 1905-1909. Our results are consistent with the view that universal banks are efficient institutions which overcome problems of asymmetric association inevitably associated with external finance. We find that universal b...

We investigate the determinants of trade credit granted by suppliers in a historical environment which was characterized by high-information asymmetries and strong banks, focusing on the role of bank-firm relationships. Our results, which are based on a unique sample of 535 firm-year observations for 125 listed Belgian firms in four dominant indust...

We investigate the determinants of corporate financial reporting in an unregulated setting. Prior to the First World War, limited liability companies in Belgium were obliged to publish financial statements, but financial reporting was virtually unregulated. Investor protection was generally very poor. Nevertheless, Belgian stock markets were boomin...

We investigate the valuation and the pricing of initial public offerings (IPOs) by investment banks for a unique dataset of 49 IPOs on Euronext Brussels in the 1993–2001 period. We find that for each IPO several valuation methods are used, of which Discounted Free Cash Flow (DFCF) is the most popular. The offer price is mainly based on DFCF valuati...

In the current study, we dynamically analyze unlisted firms' voluntary disclosure decisions around private equity (PE) participation. First, we disentangle the role of disclosure in attracting PE investments. In addition, we examine the extent to which a firm's disclosure policy is affected by the changing corporate setting and intensified corporat...

Manuscript Type: Empirical Research Question/Issue: It is fairly well established that business group affiliation can compensate for relatively weak institutions in emerging markets, and in Japan. However, business groups are also common in the EU, and there have not yet been any studies of business group affiliation and firm performance in the EU....

We examine the determinants of the debt-equity choice and the debt maturity choice for a sample of small, privately held firms in a creditor oriented environment. Our results, which are based on 4,706 firm-year observations for 1132 Belgian firms in the period 1996–2000, generally confirm the role of asymmetric information and agency costs of debt...

This study investigates whether modern theories can explain capital structure in a historical environment which was characterized by poor investor protection, booming stock markets and strong banks, and in which taxes did not affect leverage. Our results, based on a unique, hand-collected sample of 556 firm-year observations for 129 listed companie...

We examine the determinants of the debt-equity choice and the debt maturity choice for a sample of small, privately held firms in a creditor oriented environment. Our results, which are based on 4,706 firm-year observations for 1132 Belgian firms in the period 1996–2000, generally confirm the role of asymmetric information and agency costs of debt...

This study investigates the lease-debt relationship for Belgian small and medium-sized enterprises (SMEs). Traditional finance theory suggests that leases and corporate debt are substitutes: both leases and debt are fixed, contractual obligations that reduce the firm's debt capacity. More use of leases should therefore be associated with less non-l...

We investigate the impact of universal banks on the performance and the risk of affiliated companies in an unregulated environment with booming financial markets. For a unique sample of 129 Belgian companies listed in the period 1905-1909, we find that universal bank affiliation had a positive impact on the market-to-book ratio and return-on-assets...

This study investigates whether capital structure theory can explain debt ratios in an historical environment which was characterized by poor investor protection, booming stock markets and strong banks, and in which corporate income tax did not affect capital structure. Our results, based on a unique, hand-collected sample of 556 firm-year observat...

We experimentally investigate social effects in a principal-agent setting with incomplete contracts. The strategic interaction scheme is based on the well-known Investment Game (Berg et al., 1995). In our setting four agents (i.e., trustees) and one principal (i.e., trustor) are interacting and the access to choices of peers in the group of trustee...

We investigate the impact of universal banks on the dividend policy of affiliated companies, in an environment characterized by poor investor protection, booming stock markets and strong banks. Our results, based on a unique, hand-collected sample of 428 listed companies in pre-World War I Belgium, are consistent with the hypothesis that companies...

This paper provides evidence that Belgian firms belonging to a business group have a lower effective tax rate (ETR) and face a less positive association between pre-tax income and ETRs than independent firms. These findings suggest that individual group members apply efficient tax planning techniques in order to minimize taxes at the group level. W...

For a sample of 781 Belgian subsidiaries of multinational corporations (MNCs) from 13 different countries, we investigate how religion and trust in the parent country of the MNC affect the likelihood that the board of directors of the Belgian subsidiary includes parent country nationals, and the likelihood that the managing director of the subsidia...

We hypothesize that the lower costs of asymmetric information and financial distress and the potentially higher tax benefits associated with intragroup debt will cause firms with access to such funds to have higher leverage. The presence of intragroup debt could worsen the relations between the firm and non-group creditors, resulting in lower non-g...

Several studies find that business groups create value for affiliated companies in developing countries, which are characterized by weak institutions and poorly functioning markets. In these countries, business groups can act as an intermediary between imperfect markets and individual entrepreneurs. This raises the question whether business groups...

This paper examines the quality of financial statements reported by private equity (PE) backed companies in the years around the initial PE investment. We study both pre- and post-investment earnings characteristics of a unique hand-collected sample of 556 Belgian unlisted companies, receiving PE financing between 1985 & 1999, and a matched non-PE...

Recent empirical evidence has shown that internal capital markets within multinational corporations are used to reduce overall financing costs by optimizing the mix of internal and external debt of affiliates in different countries. We show that this cost saving use of internal capital markets is not limited to multinationals, but that domestic bus...

Holding companies, which play an important role in corporate finance in Belgium and in other Continental European countries, often trade at a discount to their estimated net asset value (NAV). In the first part of this paper, we provide a structured analysis of possible explanations for the holding company discount. First, if the costs of a holding...

Holding companies, which play an important role in corporate finance in Belgium and in other Continental European contries, often trade at a discount to their estimated net asset value (NAV). First, we discuss possible explanations for this discount: holding company destroys value, NAV overestimates actual value, noise traders cause underpricing, a...

Several studies have already addressed the question whether R&D subsidies lead to additionality effects or crowd out firms’ private investment. This paper provides insights into the impact of R&D grants on private R&D expenditure, distinguishing between research and development activities. We employ parametric treatment effects models and IV regres...

Once a firm decides to issue debt, the characteristics of this debt instrument should be considered. One of the critical decisions involves debt maturity. Using a sample of 1091 Belgian small firms from 1996 until 2000, this study analyses the determinants of the corporate debt-maturity structure of small firms in a creditor-oriented s ystem. Consi...

The relation between working capital management and corporate profitablity is investigated for a sample of 1,009 large Belgian non-financial firms for the 1992-1996 period. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle is used as a compreh...

Ondernemingsgroepen komen overal ter wereld voor maar de opvatting, het doel en de werking ervan kunnen heel uiteenlopend zijn. Met deze paper willen we een overzicht geven van de bestaande literatuur over ondernemingsgroepen, met specifieke aandacht voor Europese en voor Belgische ondernemingsgroepen. Veel voorkomend bij deze laatste is de aanwezi...

This paper analyses how financial characteristics and institutional factors affect the timeliness of financial reporting in Belgium. The analysis is based on a sample of 1892 non-financial Belgian companies for 1996. The contribution of this paper is to investigate how external financing affects the timeliness of financial reporting of closely held...

In this paper, pre-IPO value estimations by the lead underwriting investment bank of Belgian IPO stocks are compared to the offer price and the stock price in the first month of listing. The valuation methods used by the lead underwriter and the estimated values are often discussed in Belgian IPO-prospectuses. For 33 IPOs in the 1993-2000 period, w...

The determinants of liquid reserves are investigated for a sample of 1038 large Belgian non‐financial firms in the 1992–94 period. The results confirm the hypothesis that the terms of payment of intragroup claims can be adjusted to the firm’s liquidity needs, thereby reducing the need for liquid reserves. Furthermore, the results confirm the transa...

In Belgian corporate groups, complex pyramidal structures and interlocking ownership lead to separation of ownership and control. This may generate incentives for the controlling shareholder to divert resources within the group through intragroup equity sales. This in turn could lead to significant private benefits at the expense of the minority sh...

The relation between working capital management and corporate profitability is investigated for a sample of 1009 large Belgian non-financial firms for the 1992-1996 period. Trade credit policy and inventory policy are measured by number of days accounts receivable, accounts payable and inventories, and the cash conversion cycle is used as a compreh...

Much ink has flowed over the possible effects that introducing the Euro might have on various aspects of economic life in Europe. Despite that, however, up to now relatively little attention has been paid to its possible impact on the financial management of businesses. In this paper we aim to examine what effect the Euro can be expected to have on...

We investigate the role of trade credit as a source of financing. Using a sample of 661 large non-financial Belgian firms for the 1989-1991 period, we find that the amount of trade credit a buyer takes is determined by his need for funds and the internally available funds. Trade credit is primarily used to finance short-term assets. As such, it see...

Finance theory suggests that leases and corporate debt are substitutes. However, empirical evidence is mixed. The contribution of the present paper is to test the substitution hypothesis for a sample of 1,066 large Belgian non-financial firms for the 1992-1994 period, considering different debt categories, including intra-group loans. Belgium provi...

We hypothesize that the lower costs of asymmetric information and financial distress and the potentially higher tax benefits associated with intragroup debt will cause firms with access to such funds to have higher leverage. The presence of intragroup debt could worsen the relations between the firm and non-group creditors, resulting in lower non-g...

In Belgium, financial and industrial groupings play a crucial role in the accumulation and allocation of capital in the economy. In this paper, it is hypothesized that Belgian firms for which investment is partly financed on an internal capital market, will not be subject to financing constraints to the same extent as firms which have to borrow fro...

For a sample of large Belgian non-financial firms quoted on the Brussels stock exchange, it is found that investment of firms borrowing on an internal capital market is not determined by internal cash flow, while cash flow has a significant effect on investment for the other firms in the sample. Further analysis indicates that the cash flow effect...