# 金融代写|金融风险管理代写Financial Risk Management代考|FNCE667

## 金融代写|金融风险管理代写Financial Risk Management代考|DATA AND METHODOLOGY

This study uses two types of information, related to fires and companies affected by them, to identify situations where the risk of liquidity shocks becomes evident. The fact that fires are used as a source for study results from several beliefs. First, a fire is seen as an imminent risk as it causes great impact and catches people’s attention, depending on its size, leaving marks on their minds. Then, this attention that is aroused varies depending on how close businesses are to the affected locations, the greater the closer they are. Finally, fires are phenomena that can affect a large number of companies.

According to Yin (2003), various sources of evidence are used when collecting data about a company, levels of analysis, and contextual elements. In this case, a quantitative methodology was used, based on the use of information available in mainly two databases.

Information on fires was obtained from the ICNF database by extracting their locations, dates, and impacts in terms of burnt area for the period from 1 January 2009 to 31 December 2015 . There is also information regarding the affected companies through the SABI database, encompassing a set of variables such as total assets, cash amounts, debt levels, and current assets, among others, to assess the impact of fires in the same period.

Regarding information about companies, filters were applied to the results. First, companies were withdrawn from regulated sectors such as the financial, education, health, and public administration, and defense sectors. Then companies were chosen only with an independence indicator level between $\mathrm{B}$ – and $\mathrm{A}+$ (high), which is necessary for financial decision making. In this case, a level of $\mathrm{B}-$ to $\mathrm{B}+$ means that in the companies there is no registered shareholder with more than $50 \%$ direct, indirect, or full participation, and one or more registered shareholders with more than $25 \%$ direct or total participation. An A- to A + level encompasses companies where there is no shareholder with more than $25 \%$ direct or full ownership, being classified as “independent companies”.

Finally, only small and medium-sized enterprises (SMEs) will be analyzed which, according to the definition of the European Commission (2003), are those that 1. Have a total number of workers less than 250 ; 2. Have an annual turnover of less than or equal to EUR 50 million or a total balance sheet of less than or equal to EUR 43 million. In this case, companies that do not exceed these limits are considered in any of the years under review. This group of companies also excluded micro-enterprises, which are those with a total number of employees of less than 10 and an annual turnover of less than or equal to EUR 2 million or a total balance sheet of less than EUR 2 million.

Microenterprises were excluded because, due to their size and consequent low number of employees (some may be sole proprietorships), they did not initially, in principle, have someone dedicated specifically to the treatment of accounting and financial information, which could result in the submission of this information not as correct or complete as would be desirable. On the other hand, large companies have been excluded because they have financial resources that others do not have (such as easier access to external financing sources compared to SMEs) and as such can address the issue analyzed by other avenues, than not the change in cash amounts. Besides, some of these are quoted on the stock exchange, which would require the use of a different analysis model (such as that used by Dessaint and Matray $(2017)$ or that used by Ferreira and Vilela (2004), which consider as variable the market-to-book ratio, which is calculated taking into account the companies’ market value).

## 金融代写|金融风险管理代写Financial Risk Management代考|RESULTS DISCUSSION

About the sample under study, it is made up of SMEs, with average total assets of 1,175.84 thousand euros and an average turnover of $849.25$ thousand euros, with 38,574 companies and 270,018 observations in Portugal (Table 7). These companies have a liability $3.61$ times greater than the amount of Equity (LEV), and this liability is $7.9 \%$ for short-term debt to financial institutions (BANKD). Thus, most external financing is long-term, as it constitutes $29.5 \%$ of the total liabilities (LDEBT). The average cash amounts of Portuguese SMEs are $17.7 \%$ of total assets (Cash).

To analyze whether or not the companies studied are similar before the fire events, Table 8 was constructed. This table presents, in the first part, the average values of the variables one year before the fire events, to verify if these are similar or not before the effect of the ‘treatment’ of the fires, leading to the loss of one year in the sample period. Later, hypothesis tests were performed to test if there are differences between the variables of the two zones studied, whether or not they are statistically significant. Thus, if there are no statistically significant differences, it can be argued that the disparities between companies located in the neighbohhoud and companies located in the rest of Portugal are caused by the effect of the fire treatment. Also, this analysis makes it possible to verify whether these differences have recurred over the years of the sample period or only in some of the years.

Thus, companies are defined taking into account the location of their headquarters. The last columns of Table 8 show, for each year, the t-statistics of a two-sample test for equality of means between treatment and control group companies and the z-values of a median test. This first analysis will then further analyze the effect of the imminence of an event on the risk perceived by the managers of a company through the cash held after the occurrence of a fire.

## 金融代写|金融风险管理代写Financial Risk Management代考|RESULTS DISCUSSION

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