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on Corporate Finance |
| By: | Saul Estrin; Susanna Khavul; Alexander S. Kritikos; Jonas Löher |
| Abstract: | Financing entrepreneurship spurs innovation and economic growth. Digital financial platforms that crowdfund equity for entrepreneurs have emerged globally, yet they remain poorly understood. We model equity crowdfunding in terms of the relationship between the number of investors and the amount of money raised per pitch. We examine heterogeneity in the average amount raised per pitch that is associated with differences across three countries and seven platforms. Using a novel dataset of successful fundraising on the most prominent platforms in the UK, Germany, and the USA, we find the underlying relationship between the number of investors and the amount of money raised for entrepreneurs is loglinear, with a coefficient less than one and concave to the origin. We identify significant variation in the average amount invested in each pitch across countries and platforms. Our findings have implications for market actors as well as regulators who set competitive frameworks. |
| Keywords: | equity crowdfunding, soft information, entrepreneurship, finance, financial access and inclusion |
| JEL: | D26 G23 G41 L26 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2064&r=cfn |
| By: | Saul Estrin (Lucas College and Graduate School of Management, San José State University, London School of Economics); Susanna Khavul (London School of Economics); Alexander S. Kritikos (DIW Berlin, CEPA, University of Potsdam, IZA, IAB); Jonas Löher (Institut für Mittelstandsforschung Bonn) |
| Abstract: | Financing entrepreneurship spurs innovation and economic growth. Digital financial platforms that crowdfund equity for entrepreneurs have emerged globally, yet they remain poorly understood. We model equity crowdfunding in terms of the relationship between the number of investors and the amount of money raised per pitch. We examine heterogeneity in the average amount raised per pitch that is associated with differences across three countries and seven platforms. Using a novel dataset of successful fundraising on the most prominent platforms in the UK, Germany, and the USA, we find the underlying relationship between the number of investors and the amount of money raised for entrepreneurs is loglinear, with a coefficient less than one and concave to the origin. We identify significant variation in the average amount invested in each pitch across countries and platforms. Our findings have implications for market actors as well as regulators who set competitive frameworks. |
| Keywords: | Equity crowdfunding, Soft information, Entrepreneurship, Finance, Financial access and inclusion |
| JEL: | D26 G23 G41 L26 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:72&r=cfn |
| By: | Camilo Gómez (Central Bank of Colombia); Daniela Rodríguez-Novoa (Central Bank of Colombia) |
| Abstract: | This paper examines the relationship between three government support measures (debt moratorium, credit guarantee programs, and payroll subsidies) and the firm's payment behavior on loans in Colombia. To do so, we take advantage of the COVID-19 pandemic and use it as a case study. Using highly granular data at the bank-firm level and a difference-in-difference approach, we find that firms subject to debt reliefs and government guarantee programs experienced a lower probability of default while these policies were in force. Subsequently, once the programs ended, the dynamic of the payment behavior of these firms was similar to that of those untreated. On the contrary, payroll subsidies did not affect firms' payment behavior. Regarding the effect on banks' risk assessment, our results suggest that participation in relief programs provided banks with new information about debtors' risk, which could indicate unintended consequences of government support programs. |
| Keywords: | firm support; credit default; credit risk |
| JEL: | G18 G21 G38 |
| Date: | 2024–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp03-2024&r=cfn |
| By: | Christophe J. Godlewski (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg); Hong Nhung Le (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg) |
| Abstract: | We investigate the impact of family ties on the performance of family firms in East Asia. To measure family ties, we used both objective and subjective indicators from the World Value Survey. Our findings indicate that family firms that are nurtured in a society with strong family ties tend to have better performance compared to family firms that operate in a culture with weak family ties. Furthermore, family firms that have strong familial relationships are more likely to gain a competitive advantage over nonfamily firms. Conversely, family firms with weak ties tend to underperform nonfamily firms. Our results are robust across various measures of firm performance, classifications of family firm, considerations of heteroskedasticity and endogeneity, and different econometric methods. |
| Date: | 2024–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04435944&r=cfn |
| By: | Seungho Choi; Ross Levine; Raphael Jonghyeon Park; Simon Xu |
| Abstract: | This paper investigates how shocks to expected cash flows influence CEO incentive compensation. Exploiting changes in compliance with environmental regulations as shocks to expected future cash flows, we find that adverse shocks typically prompt corporate boards to recalibrate CEO compensation to reduce risk-taking incentives. However, this pattern is not uniform. Financially distressed firms exhibit milder reductions in compensation convexity, with some even increasing it, suggesting a “gambling for resurrection” strategy. Moreover, the strength of corporate governance influences shareholders’ capacity to align executive incentives with shareholder risk preferences following unanticipated changes in the stringency of environmental regulations. |
| JEL: | G34 G38 M52 Q53 Q58 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32101&r=cfn |
| By: | Isil Erel; Eduard Inozemtsev |
| Abstract: | Nonbank lenders have been playing an increasing role in supplying debt, especially after the Great Recession. How important are the distortions in the greater regulation of banks that differentially limit risk-taking across alternative providers of credit? How might the growing role of nonbanks in credit markets affect financial stability? This selective review addresses these questions and discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock. We argue that tighter bank regulation has created incentives for nonbanks to increase their participation in credit markets, a trend that creates concerns about financial stability. |
| JEL: | G21 G22 G23 G24 G28 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32114&r=cfn |