nep-ent New Economics Papers
on Entrepreneurship
Issue of 2019‒05‒27
four papers chosen by
Marcus Dejardin
Université de Namur

  1. The Rise and Decline of Private Foundations as Controlling Owners of Swedish Listed Firms: The Role of Tax Incentives By Henrekson, Magnus; Johansson, Dan; Stenkula, Mikael
  2. The Optimal Turnover Threshold and Tax Rate for SMEs By Feng Wei; Jean-François Wen
  3. Evaluation Tool for Business Success By Miguel Ramirez de la Huerga; Víctor A. Bañuls Silvera; Murray Turoff; Manuel Rincón Roldan
  4. Asset-Based Lending By Suzanne Bijkerk; Casper de Vries

  1. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Örebro University School of Business); Stenkula, Mikael (Research Institute of Industrial Economics (IFN))
    Abstract: Private foundations became a vehicle for the corporate control of large listed firms in Sweden during the post-war era, but in the 1990s, they were replaced by wealthy individuals who either directly own controlling blocks or who own them through holding companies. We study potential explanations for this change and pro­pose two taxation-related candidates: shifts in the relative effective taxation across owner types and the dismantling of the inheritance taxation that prevented the genera­tional transfer of the ownership of large controlling blocks. Our analysis exploits newly computed marginal effective capital income tax rates across capital owners, accounting for all relevant factors, including rules governing tax exemptions. We show that the 1990–91 tax reform, abolition of the wealth tax for controlling owners in 1997, 2003 tax exemption of dividends and capital gains on listed stock for holding companies with a voting or equity share of at least 10 percent, and abolition of the inheritance and gift taxes in 2004 reversed the rules of the game. Recently, control has largely been wielded through direct ownership, and the role of foundations is rapidly declining. These find­ings point to the importance of tax incentives for the use of foundations as the control vehicles of listed firms.
    Keywords: Corporate governance; Entrepreneurship; Family firms; Foundations; Owner-level taxation
    JEL: H20 K34 L26 N44
    Date: 2019–05–20
  2. By: Feng Wei; Jean-François Wen
    Abstract: Presumptive income taxes in the form of a tax on turnover for SMEs are pervasive as a way to reduce the costs of compliance and administration. We analyze a model where entrepreneurs allocate labor to the formal and informal sectors. Formal sector income is subjected either to a corporate income tax or a tax on turnover, depending on whether their turnover exceeds a threshold. We characterize the private sector equilibrium for any given configuration of tax policy parameters (corporate income tax rate, turnover tax rate, and threshold). Given private behavior, social welfare is optimized. We interpret the first-order conditions for welfare maximization to identify the key margins and then simulate a calibrated version of the model.
    Date: 2019–05–07
  3. By: Miguel Ramirez de la Huerga (MSIG Smart Management S.L. (UPO Spin-Off)); Víctor A. Bañuls Silvera (Department of Business Administration, Universidad Pablo de Olavide); Murray Turoff (New Jersey Institute of Technology (NJIT), USA); Manuel Rincón Roldan
    Abstract: This paper describes the construction of a tool supporting decision making (DSS). The name of the tool ‘’CIBSE’’, comes from the acronym CIA-ISM for Business Success Evaluation, and it evaluates the success rate of entrepreneurial ideas by analyzing the previously modified Business Model Canvas (BMC). Modified Business Model Canvas include financial and no financial dimensions as a way to extend the original BMC. In order to analyze data, a model based on CIA-ISM is used to evaluate scenarios, and it enables the estimation of direct, indirect and cascading effects interrelationships between all dimensions to calculate an indicator of success. Moreover, this tool is able to identify weak and strong points of BMC, which will help to attain the survival goal of undertaking by reducing the level of uncertainty, or in other words, by reducing risk. Paradigm of Design Science has been used as a point of reference to design this tool, along the seven guidelines stated from the conceptualization of goal to the dissemination of results. Although this study is focused on regional context, it is associated with a project of public services of the 4th biggest region of the EU regarding the population size, as well as the 6th biggest region regarding its extent. This approach allows direct access, as well as a privileged access to data, technical resources and professionals to develop the model, tool and perform further validation having data of real projects.
    Keywords: DSS, Entrepreneurship, Modelling, CIA-ISM, Validation, Information Systems, Simulation
    Date: 2019–05
  4. By: Suzanne Bijkerk (Erasmus University Rotterdam); Casper de Vries (Erasmus University Rotterdam)
    Abstract: Asset-based lending, the supply of loans based on floating collateral, is an important source of funding for small firms. We analyze the effect of competition on asset-based loan markets on interest rate distributions and the mobility of small firms. Close monitoring of collateral by lenders results in an informational advantage for the incumbent lender and third-degree price discrimination. We find that adverse selection results in a unique equilibrium in which lenders randomize interest rates and firms switch lender with positive probability. Increased competition between lenders does not benefit firms through lower expected interest rates, neither does it improve their mobility.
    Keywords: asset-based lending, floating collateral, adverse selection
    JEL: D82 D53
    Date: 2019–05–06

This nep-ent issue is ©2019 by Marcus Dejardin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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