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on Corporate Finance |
| By: | İrem Güçeri; Xipei Hou; Jing Xing; Irem Guceri |
| Abstract: | We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds. |
| Keywords: | venture capital, angel investment, tax incentives, entrepreneurship |
| JEL: | G24 G32 H25 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11180 |
| By: | Halil Ýbrahim Aydin; Cagatay Bircan; Ralph De Haas |
| Abstract: | Blended finance programs combine public and private funding to ease credit constraints of specific firm segments. While rapidly gaining popularity, little evidence exists on their economic impact. To address this gap, we match credit registry data with firm level tax records to trace out the impacts of a blended finance program for female entrepreneurs in Türkiye. Using a synthetic difference-in-differences estimator, we show that participating banks durably increase lending to women-both in absolute terms and relative to male entrepreneurs. The average treatment effect on treated banks' share of lending to female entrepreneurs is 22 per cent. Banks expand credit to existing borrowers, poach clients from competitors, and crowd in first-time borrowers. Female clients of treated banks increase net borrowing and investment, especially those with higher capital productivity. Beneficiary firms grow their sales and profits, diversify suppliers, and exit less. There are no discernible impacts on aggregate firm populations at the district level, reflecting the program's relatively modest scale. Implications for program design are discussed. |
| Keywords: | Blended finance; Credit access; Female entrepreneurship; Misallocation |
| JEL: | D22 G21 G32 H81 J16 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2408 |
| By: | Pehr-Johan Norbäck; Lars Persson; Joacim Tåg |
| Abstract: | The creation and scaling of startups are inherently linked to risk-taking, with various types of owners handling these risks differently. This paper investigates the influence of an active venture capital (VC) market on startups’ decisions regarding research and scaling. It outlines conditions under which VC-backed startups prefer riskier, yet potentially more rewarding strategies compared to independent startups. VC firms, by means of temporary ownership and compensation structures, introduce ”exit costs” that make high-risk strategies more attractive to VC-backed startups. Moreover, an active VC market prompts startups to undertake higher initial risks, as VC firms provide support for pivoting after setbacks. Additionally, the presence of VC intensifies research risk among established firms, as their research initiatives are strategic complements to the risk choices of startups. |
| Keywords: | entrepreneurship, pivoting, research, scaling, venture capital |
| JEL: | G24 L26 M13 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11178 |
| By: | Miguel Faria-e-Castro; Samuel Jordan-Wood; Julian Kozlowski |
| Abstract: | We examine borrowing costs for firms using a security-level database with bank loans and corporate bonds issued by U.S. companies. We find significant within-firm dispersion in borrowing rates, even after controlling for security and firm observable characteristics. Obtaining a bank loan is 132 basis points cheaper than issuing a bond, after accounting for observable factors. Changes in borrowing costs have persistent negative impacts on firm-level outcomes, such as investment and borrowing, and these effects vary across sectors. These findings contribute to our understanding of borrowing costs and their implications for corporate policies and performance. |
| Keywords: | credit spreads; bonds; loans; macro-finance |
| JEL: | E6 G1 H0 |
| Date: | 2024–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98542 |