nep-cfn New Economics Papers
on Corporate Finance
Issue of 2012‒03‒28
three papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Working Paper 146 - Bank Financing to Small and Medium Enterprises in East Africa: Findings of a Survey in Kenya, Tanzania, Uganda and Zambia By AfDB
  2. Reaching an Optimal Mark-Up Bid through the Valuation of the Option to Sign the Contract by the Successful Bidder By João Adelino Ribeiro; Paulo Jorge Pereira; Elísio Brandão
  3. Which form of venture capital is most supportive of innovation? By Bertoni, Fabio; Tykvová, Tereza

  1. By: AfDB
    Abstract: Bank Financing to Small and Medium Enterprises in East Africa: Findings of a Survey in Kenya, Tanzania, Uganda and Zambia
    Date: 2012–03–16
  2. By: João Adelino Ribeiro (Faculdade de Economia, Universidade do Porto, Portugal); Paulo Jorge Pereira (CEF.UP, Faculdade de Economia, Universidade do Porto, Portugal); Elísio Brandão (Faculdade de Economia, Universidade do Porto, Portugal)
    Abstract: This paper aims to establish a support decision model by which an optimal mark-up (profit margin) in the context of a bidding process is reached through the valuation of the option to sign the contract assuming the contractor is chosen to perform the project. The price included in the bid proposal remains unchanged from the moment the offer is sealed until the contractor has the right - but not the obligation - to sign the contract, whereas construction costs vary stochastically throughout the period. Contractors should only sign the contract if the construction costs, at that moment, are lower than the price previously defined. We evaluate the option using an adapted version of the Margrabe (1978) exchange option formula and we also assign a probability of winning the bid for each profit margin using a function that respects the inverse relationship between these two variables. We conclude that to the higher value of the option - weighted by the probability of winning the contract - corresponds the optimal mark-up bid. Finally, we consider the existence of penalty costs which makes the model more efficient in explaining what actually takes place in some legal environments; we then conclude that the option to sign the contract and, therefore, the optimal mark-up bid are affected by their existence.
    Keywords: Optimal bidding; real options; construction projects; price determination
    JEL: G31 D81
    Date: 2012–03
  3. By: Bertoni, Fabio; Tykvová, Tereza
    Abstract: Although there seems to be consensus in the literature that venture capital investors increase the innovation output of their portfolio companies, there is little evidence about how investor type (governmental vs. private) and transaction structure (syndicated vs. non-syndicated) moderate this impact. Using a sample of 865 young biotech and pharmaceutical companies from seven European countries, we investigate which form of venture capital is most supportive of innovation. Our results suggest that in companies financed by syndicates and by private venture capital investors, the innovation output increases significantly faster than in non-venture-backed companies. The most supportive form is a heterogeneous syndicate (i.e., consisting of both types of venture capital investors) led by a private investor. --
    Keywords: innovation,patents,private venture capital investors,governmental venture capital investors,syndication,biotech and pharmaceutical companies,Europe
    JEL: G24 H0 O3
    Date: 2012

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