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- The pricing of sustainable syndicated loansPublication . Alves, Paulo; Gonçalo, Jorge; Pinto, João MThis paper provides a comparative analysis of sustainable and conventional syndicated loan spreads and pricing. Using a cross-section of 24,962 syndicated loan tranches closed between 2018 and 2022 in OECD countries, we show that sustainable and conventional loans are differently priced, spreads of sustainable versus conventional loans do not differ significantly, and banks rely on contractual, macroeconomic, bank syndicate structure, and borrowers’ characteristics when pricing sustainable tranches. At the deal-level, our results do not support the hypothesis of sustainable debt financing as a mechanism for reducing firms’ funding costs. We also find that economies of scale, institutional, and information asymmetry arguments affect firms’ choice between sustainable and conventional syndicated deals.
- Sustainable versus conventional bonds: a comparative analysis of primary market spreadsPublication . Pinto, João; Ribeiro, DivaThis paper offers a comparative analysis of the credit spreads and pricing of sustainable and conventional corporate bonds. Using a cross-section of 30,368 bonds issued by 8,267 nonfinancial firms globally between 2012 and 2022, we find that sustainable and conventional bonds react differently to common pricing factors. Notably, investors rely less on credit ratings when pricing sustainable bonds compared to conventional bonds. We also find no significant difference in the spreads of sustainable bond tranches relative to similar conventional bonds. This result holds across green, social, and sustainability bonds, as well as in a matched sample of conventional bonds. Furthermore, our findings are consistent across both pre-COVID and COVID periods, indicating that issuing firms do not use sustainable bonds as a strategy to lower borrowing costs.
- Vertical product differentiation in the lab: impact of consumers’ preferencesPublication . Alventosa, Adriana; Pinho, Joana; Jorge, Sílvia Ferreira; Catalão-Lopes, MargaridaWe revisit a quality-then-pricing duopoly game, theoretically and experimentally exploring how heterogeneity in consumers’ preferences affects firms’ decisions and profits. We find that firms differentiate less their products in the lab than the theoretical model predicts, especially when the heterogeneity in consumers’ preferences is high. When this heterogeneity is small, the firm producing the low-quality good profits more than the rival in the lab, which contradicts the theoretical predictions.
- Horizontal mergers between multisided platforms: insights from Cournot competitionPublication . Correia-da-Silva, João; Jullien, Bruno; Lefouili, Yassine; Pinho, JoanaThis paper discusses the literature on horizontal mergers between multisided platforms and argues that the Cournot model can provide useful insights into the welfare effects of such mergers. To illustrate those insights, we develop a simple model in which two-sided platforms offer a homogeneous service and compete à la Cournot, and derive the effects of “average-marginal-cost-preserving” mergers on consumers on both sides of the market. We conclude with a discussion of several research avenues that could be explored to understand better the impact of horizontal mergers between multisided platforms.
- The effects of contract mechanisms between the government and private hospitals on the social utilityPublication . Teymourifar, Aydin; Kaya, Onur; Ozturk, GurkanIn this work, we deal with a real healthcare system, in which public and private hospitals with different characteristics co-exist. While public hospitals have lower costs, they also suffer from long waiting times, diminishing the perceived quality of care for patients. Conversely, private hospitals, with their higher fees, offer shorter waiting periods, resulting in a more favorable perception of quality. A balanced healthcare system could offer societal benefits. Pricing strategies greatly influence a patient's hospital selection. For instance, reduced fees in private hospitals attract more patients, consequently reducing overcrowding in public facilities and elevating the overall quality of services provided. This study aims to develop pricing models to foster a balanced and socially advantageous healthcare system. Within this system, private hospital pricing is determined through contract mechanisms with the government. Thus, we delve into the ramifications of various contract models between the government and private hospitals on social utility. Our findings underscore the communal advantages of contract mechanisms. Furthermore, we generalize the proposed models to be applicable to similar systems.
- Using DEMATEL and ISM to design green public policies based on the system of system approachPublication . Teymourifar, Aydin; Trindade, Maria A. M.In this paper, we propose a novel approach to the development of green public policies. We emphasize the significance of the System of Systems (SoSs) methodology, which concentrates on understanding and managing complex systems by contemplating their interdependencies and interactions as a single integrated system. Based on this perspective, we view green public policy as a system interacting with the energy, health, pollutants, and economic systems of the SoSs. We employ both Decision-Making Trial and Evaluation Laboratory (DEMATEL) and Interpretive Structural Modeling (ISM) techniques as a method of systematic structural analysis to comprehend the relationships between the aforementioned systems. We provide a comprehensive literature review on the application of these soft operation research (SOR) techniques. We note that SOR methods are suitable for the formulation of effective and long-lasting public policies. Using an example, we demonstrate the primary advantage of DEMATEL and ISM, which is the establishment of easily comprehendible causal relationships between the systems in the SoSs.
- Structured finance and the boundaries of the firm: the case of project financePublication . Alves, Paulo P.; Pinto, João M.We examine the factors that influence public firms’ choice between project finance over internally organized investment projects. Using a large sample of syndicated deals closed between 2000 and 2020 in conjunction with Datastream data, we find that economies of scale, agency costs of debt, and information asymmetry arguments affect the choice of on- versus off-balance-sheet funding. As project finance deals have higher borrowing costs than comparable corporate financing deals, we show that other firm-level countervailing benefits play a key role in the sponsoring firms’ choice: borrowers choose project over corporate financing when they are relatively larger, less profitable and creditworthy, and seek long-term financing; and switchers resorting to project finance tend be more levered and to have larger growth opportunity sets.
- Governance of PPP infrastructure projects: a variable capital structure valuation approachPublication . Pinto, João Monteiro; Santos, Mário Coutinho dos; Matos, Pedro VergaOver the next decade, governments around the world will invest massively in new projects, aiming at closing the long-identified infrastructure gap, in order to sustain economic and social development, and recover from recent adverse shocks. This paper examines this topic from two perspectives: (i) how should these projects be valued and selected? and (ii) how should these projects be financed? We discuss conceptual, methodological and governance issues raised in the context of infrastructure investment project valuation with variable capital structures. The commonly used free cash flow (FCF) valuation approach may prove inappropriate, or even imprudent, for valuing, namely, very long-term infrastructure projects financed with variable capital structure arrangements. Under this framework, the literature recommends using the Capital Cash Flow (CCF) or the Adjusted Present Value models to mitigate some of the biases of the standard FCF approach. We show that despite dealing with tax benefits differently, FCF and CCF models are algebraically equivalent, the latter being a way to value future cash flows using the same assumptions made in the context of the FCF methodology, while overcoming some of its shortcomings.
- The CSPP impact on non-financial firms’ cost of borrowing and debt choicePublication . Kanda, Joana F.; Pinto, João M.; Silva, Beatriz P.In this study, we examine the impact of the European Central Bank’s (ECB) corporate sector purchase programme (CSPP) on euro area non-financial firms’ cost of borrowing and choice between bank and public debt. Using a large sample of corporate bonds and syndicated loans closed between 2000 and 2019, we find that the CSPP reduced corporate bond spreads significantly, in both announcement and implementation periods. Findings also suggest that the CSPP had a positive spillover effect into the syndicated loan market during the implementation period. Our results show that there is a substitution effect between eligible bonds and equivalent loans, with non-financial firms choosing to use more corporate bonds than syndicated loan deals after the CSPP announcement, and that this effect is more important for non-switchers, those that may have more difficulty in accessing the bond market. Finally, we provide evidence that, when controlling for the CSPP, borrowers that choose corporate bonds are larger, more profitable, and have larger growth opportunity sets; and switchers with high agency costs of debt prefer bank debt.
- Is the united intelligence response, the end of speciesism and the emergence of new avatarism?Publication . Silva, Susana C.; Stibe, Agnis; Cicco, Roberta DeWith the advancements in artificial intelligence (AI) research, the "algorithm aversion" concept has become evident, referring to situations in which an algorithm consistently beats human judgment, despite people's preference for interaction with humans. Moreover, another idea following this one emerged: the concept of "uncanny valley" referring to people feeling comfortable dealing with AI for solving more cognitive-oriented tasks and less prone to condescend to, share feelings with, and feel less proximity to it, for more emotional experiences. Despite this visible aversion but apparent reliability in AI mechanisms, the truth is that AI seems to be inescapable in different fields, inclusively in the interaction with the public. Thus, it is probably time to ask ourselves if living along with these forms of intelligence is not inevitable, with full respect for each other's idiosyncrasies. And, if it is not about time either to start foreseeing the world as a place where a united intelligence response would eventually emerge and give space for a new avatarism era. This manuscript aims to start immersing in this quest.