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on Corporate Finance |
| By: | Aguirre, Emilie |
| Abstract: | Founders, employees, consumers, and even funders increasingly expect businesses to pursue social goals alongside financial performance. Yet even the most committed firms have found it difficult to maintain social performance over time. Scholars in economics, management, and law have put forth several explanations for this "mission drift, " including inappropriate governance, poor management, lack of genuine commitment, and threat of takeovers. Puzzlingly, research to date primarily focuses on later-stage firms, even though the events and decisions that take place in a firm's early stages can critically impact retention of its social performance. Drawing from over five years of qualitative field research at six firms, this Article argues that a company's early-stage financing can have lasting consequences for social performance. I find that the structure of VC - the most prestigious and coveted form of startup funding - shifts organizational focus toward prioritizing rapid growth and exit, implicitly crowding out firm social performance. I find this dynamic occurs even when VCs package themselves as "impact investors" committed to preserving social performance. This study underscores the need to reorient impact VC models and startup corporate governance to avoid losing sight of social aspirations. It also has implications for corporate law and finance more broadly, challenging whether the current legal system operates optimally to achieve efficiency, promote innovation, and serve societal goals. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336737 |
| By: | Raab, Georg |
| Abstract: | This paper assesses the debt financing gap for SMEs, which undermines their competitiveness and leads to sub-optimal investments |
| JEL: | F34 G18 G21 G28 H81 M13 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2025/45 |
| By: | Fernando Broner (CREI); Juan J. Cortina (World Bank); Sergio L. Schmukler (World Bank); Tomas Williams (George Washington University) |
| Abstract: | This paper examines how shifts in investor demand influence firm financing and investment decisions. For identification, the paper exploits a large-scale MSCI methodo logical reform that mechanically redefined the stock weights in major international equity benchmark indexes, changing the portfolio allocation of 2, 508 firms across 49 countries. Because benchmark-tracking investors closely follow these indexes, the rebalancing constituted a clean shock to equity demand. The results show that portfolio rebalancing by benchmark-tracking investors generated significant capital inflows and outflows at the firm level. Firms experiencing larger inflows increased equity issuance, even more so debt financing, and real investment. The paper complements the empirical analysis with a simple model of firm financing in which a decline in the cost of equity increases the value of equity and relaxes borrowing constraints. Higher equity valuations allow firms to expand borrowing even without issuing substantial new equity, so debt financing responds more strongly than equity issuance. |
| Keywords: | asset managers; benchmark indexes; corporate debt; equity; investment; institutional investors; issuance activity |
| JEL: | F33 G00 G01 G15 G21 G23 G31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:196 |
| By: | Alexander Dyck; Freda Fang; Camille Hebert; Ting Xu |
| Abstract: | We assemble the first comprehensive sample of venture fraud cases involving 614 U.S. venture capital (VC)-backed startups founded since 2000. We find that VC-backed firms are 54% more likely to face fraud charges than comparable non-VC-backed firms within a subsample of newly public firms where detection likelihood is high and homogeneous. We then examine the role of governance in explaining venture fraud, focusing on two features that have risen in recent years—founder-friendly structures and cap table complexity. In a panel prediction model examining all venture fraud cases, we find that fraud is more likely in startups with stronger founder control rights, more convex founder cash flow rights, more investors, and greater participation of non-traditional investors. Founder-controlled boards are 88% more likely to commit fraud than VC-controlled or shared-control boards, even within the same firm. Governance variables matter much more than founder characteristics in predicting fraud. Hot funding conditions at the initial round, which weaken governance incentives, predict future fraud. Fraudulent entrepreneurs continue to found new VC-backed startups unharmed relative to non-fraudulent entrepreneurs, suggesting a lack of market discipline. Overall, our results highlight rising agency costs in VC-backed firms that could lead to misallocation and broader social costs. |
| JEL: | G24 G3 G38 K22 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34868 |
| By: | Bobojanov, Shakhrukh; Ilyosov, Imron |
| Abstract: | This study examines the determinants of access to bank financing for enterprises in Uzbekistan, addressing both the decision to apply for credit and the probability of approval conditional on applying. Using World Bank Enterprise Survey data (n=1, 008 enterprises), we employ a twostage analytical framework: binary logit regression models examine factors associated with having an existing loan, and Heckman probit selection models jointly estimate the loan application decision and approval probability, accounting for potential selection bias. The study reveals severe credit rationing in Uzbekistan, with only 13.3% of enterprises holding bank loans and 10.1% applying for new credit. The most striking finding is the dominant effect of existing banking relationships: enterprises with current loans achieve 87.0% approval rates compared to 41.7% for first-time applicants. The Heckman outcome equation confirms this relationship banking effect, representing approximately 30-35 percentage point higher approval probability. Medium-sized enterprises enjoy substantial advantages in both application propensity and approval probability. Export activity and checking account ownership significantly enhance credit access. Contrary to international evidence, female-managed enterprises show positive approval coefficients, though statistical significance is marginal. The highly significant selection parameter confirms substantial selection bias, validating the Heckman approach. |
| Keywords: | SME financing, Credit access, Heckman selection model, Relationship banking, financial inclusion, Transition economies, Uzbekistan |
| JEL: | G21 G32 O16 P34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127588 |
| By: | Abramova, Inna; Barrios, John Manuel |
| Abstract: | Private equity (PE) has moved rapidly into professional services, yet its impact on accounting, where licensing regimes, reputational capital, and partnership governance traditionally limit external ownership, remains poorly understood. We examine how PE ownership alters the organization and market structure of accounting firms using data from 1999-2024 that link more than 3, 600 PE transactions to detailed information on mergers and acquisitions (M&A), labor markets, and audit pricing. PE investment increases sharply after 2020 and extends to both CPAlicensed audit firms and non-CPA advisory practices, with most activity in large mid-tier PCAOBregistered firms. After PE entry, firms grow faster: non-audit revenues rise, employment expands, and cross-state M&A accelerates, consistent with platform-building and consolidation. These adjustments have market-level implications. PE investment raises labor-market concentration in key accounting occupations and drives up ERISA audit fees in a standardized setting, as confirmed by a synthetic difference-in-differences design. Our results reveal a key tension at the core of professions: preserving independence and competition in a market increasingly driven by financial capital. |
| Keywords: | Private equity, accounting firms, audits, consolidation, market power, labormarket concentration, M&A, professional services |
| JEL: | G23 G34 L22 L84 M41 M42 J44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336743 |
| By: | Asdrubali, Pierfederico (European Commission); Testa, Giuseppina |
| Abstract: | Using a newly constructed dataset, this paper investigates the determinants of cross-regional venture capital (VC) flows within Europe through a structural gravity model |
| Keywords: | venture capital; cross-regional investment; structural gravity model, PPML, European regions, fixed effects |
| JEL: | G24 R11 C23 O33 R12 L26 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:bda:wpsmep:wp2025/46 |
| By: | Katarzyna Bilicka; Simone Traini; Katarzyna Anna Bilicka |
| Abstract: | We examine whether the public revelation of sensitive tax information prompts firms to adopt reputation repair policies targeting shareholders. Between 2013 and 2021, the International Consortium of Investigative Journalists (ICIJ) released leaked information on over 800, 000 offshore entities incorporated in tax havens, publicly revealing their use by multinational firms to avoid taxes. Leveraging this setting, we investigate whether firms implicated in the leaks improve their governance, increase investor remuneration, and reorganize their activities to restore shareholder trust relative to unaffected firms. We find that, after the leaks, firms appoint more directors, especially in operations, audit, and finance and accounting, pay higher dividends, and reduce their presence in tax havens, without increasing effective tax rates. Additional analyses suggest that concerns about managerial diversion and public scrutiny may drive these responses. Overall, data leaks appear to change the cost-benefit trade-off of tax strategies in ways that are, on net, favorable to shareholders. |
| Keywords: | offshore subsidiaries, tax havens, data leaks, corporate governance, dividend payouts, reputation repair |
| JEL: | G30 H25 L14 M41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12435 |
| By: | Kirschenmann, Karolin; Koch, Felicitas; von Schickfus, Marie-Theres; Hainz, Christa |
| Abstract: | We study how mandatory climate-related disclosure affects bank lending using the phased introduction of the EU Taxonomy Regulation. Exploiting the staggered development and implementation of the regulation, we distinguish banks' responses to anticipated disclosure requirements from their responses to realized firm-level sustainability information. Using syndicated loan data from 2016 to 2025 and a loan-level difference-in-differences design, we show that banks adjust lending to regulated firms with greater Taxonomy-eligible exposure following the 2019 announcement, reallocating credit toward similarly exposed non-regulated firms. Once firms report alignment, higher alignment is associated with larger loan volumes. We further show that banks adjust contractual terms to manage transition risk. |
| Keywords: | Green Finance, Climate Regulation, Sustainability Disclosure, Bank Lending |
| JEL: | G18 G21 G32 E43 Q51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:336770 |