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on Corporate Finance |
| By: | Stephan Schaeffler (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | With the introduction of incentive regulation in many network industries, different approaches how to remunerate invested capital have been used. Under incentive regulation, many regula-tors remunerate the regulated asset base with a weighted average cost of capital (WACC) based on a pre-defined gearing, not considering individual capital structure at all. From a reg-ulator’s point of view, the aim is clear: Provide incentives to the firms to optimize their capital structure, i.e. finding the right balance between equity financing and debt. Taggert (1981) shows that rate-of-return regulation creates an incentive for regulated firms to alter their capi-tal structures in order to influence consumer prices. Spiegel and Spulber (1994) find that the firm chooses its equity and debt in order to affect the outcome of the regulatory process. As a hybrid model between WACC and individual capital structure, the German Regulator sets incentives for a certain capital structure by limiting the return on equity that can be incorpo-rated into network tariffs with a cap. However it has not been analyzed neither in theoretical nor in practical research which incentives are really created by this cap. To analyze the impact of different capital structure regulation mechanisms on the optimal capital structure, a static trade-off-theory model of capital structure is presented and the char-acteristics of several different approaches to capital structure regulation and their characteris-tics are analyzed. The results indicate that the overall effect of capital structure regulation is very important: In an ex-ante regulation setting, the consideration of individual capital struc-tures leads to higher equity ratios than the use of a benchmark-WACC. In this context, caps are an effective mean to set incentives for a predefined equity ratio. In an ex-post regulation where bankruptcy is merely a threat, it may be optimal to rely on extreme strategies solely financing with equity or debt. |
| Keywords: | Capital structure, trade-off theory, network operators, regulation, cost of equity |
| JEL: | G32 G38 L9 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1202&r=cfn |
| By: | Sophie Pommet (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université de Nice Sophia Antipolis (UNS)) |
| Abstract: | We analyze the impact of venture capital on firm performance ; more precisely, we investigate whether venture capital adds value to innovative French companies in terms of increasing their survival time. To this end, we use a hand-collected data set based on a sample of 139 French companies that went public at the "Nouveau Marché" between 1996 and 2002 to compare the survival rates of venture capital backed and non-venture capital backed companies. We develop two sets of econometric models to evaluate the factors that a ffect the fate of French initial public offerings. First, we estimate a discrete time duration model to explain the probability of exit. Second, we apply a competing risk model to account for heterogeneity in rm exit (liquidation versus merger/acquisition). Contrary to common wisdom, the estimates show that venture capital backed companies have a lower survival rate than non-venture capital backed companies and have a higher probability of being liquidated than other firms. Our results are comparable to those ob- tained in previous studies on Germany and Belgium which show that receiving venture capital does not improve firm survival. |
| Keywords: | venture capital, survival, innovation, France |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00720927&r=cfn |
| By: | Khondaker Golam Moazzem; Md. Tariqur Rahman |
| Abstract: | The capital market of Bangladesh is passing through a period of extreme volatility, uncertainty and grave crisis. This paper provides a brief review of the problems that characterise the capital market in Bangladesh; carries out a critical review of the initiatives taken till December 2011 to rescue the market and examines the implications of such measures for the market (if any); and puts forward a number of concrete recommendations towards restoration of market confidence and stability. |
| Keywords: | Capital market of Bangladesh, Probe Committee, Securities and Exchange Commission (SEC) |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:pdb:opaper:95&r=cfn |