Internal and External Equity

2021 ◽  
Vol 44 (9) ◽  
pp. 7-8
Keyword(s):  
External Equity

Effectiveness of clauses restricting equity transfer in articles of association of limited liability companies using fuzzy AHP: A data analysis of related cases in China from 2010 to 20191

2021 ◽  
pp. 1-12
Author(s):  
Peng Chen ◽  
Yingzhi Nie
Keyword(s):  
Fuzzy Ahp ◽  
Limited Liability ◽  
Limited Liability Company ◽  
Analytic Hierarchy ◽  
Legal Norms ◽  
The Past ◽  
Analytic Hierarchical Process ◽  
Closed Characteristics ◽  
A Company ◽  
External Equity

Based on the company cases published in China over the past ten years, both theoretical methods and Artificial intelligence technologies were applied to analysis cases data on the effectiveness of clauses restricting equity transfer in articles of association of limited liability companies (LLCs). With its unique characters based on shareholders and strong vitality, limited liability company (LLC), as the “evergreen tree” among the market players, is a company form adopted by many investors. Nevertheless, due to its prominent closed characteristics, equity transfer has become a bottleneck for the development of LLCs. According to this paper, it is necessary to distinguish between the effectiveness of clauses restricting internal and external equity transfer in articles of association of LLCs. Fuzzy Analytic Hierarchical Process (AHP) is utilized for which involves process of analytic hierarchy modelled with utilizing theory of fuzzy logic. Moreover, instead of being confined to the existing legal norms, the judgment standard of clauses restricting equity transfer in articles of association of LLCs should be comprehensively measured by the golden rules, i.e. “fairness”, “autonomy” and “operability”.

Capital Market Imperfections and the Sensitivity of Investment to Stock Prices

2009 ◽  
Vol 44 (3) ◽  
pp. 551-578 ◽  
Author(s):  
Alexei V. Ovtchinnikov ◽  
John J. McConnell
Keyword(s):  
Capital Markets ◽  
Stock Prices ◽  
Financial Distress ◽  
Stock Price ◽  
Debt Overhang ◽  
Capital Market Imperfections ◽  
Investment Opportunities ◽  
Imperfect Capital Markets ◽  
Empirical Tests ◽  
External Equity

AbstractPrior studies argue that investment by undervalued firms that require external equity is particularly sensitive to stock prices in irrational capital markets. We present a model in which investment can appear to be more sensitive to stock prices when capital markets are rational, but subject to imperfections such as debt overhang, information asymmetries, and financial distress costs. Our empirical tests support the rational (but imperfect) capital markets view. Specifically, investment–stock price sensitivity is related to firm leverage, financial slack, and probability of financial distress, but is not related to proxies for firm undervaluation. Because, in our model, stock prices reflect the net present values (NPVs) of investment opportunities, our results are consistent with rational capital markets improving the allocation of capital by channeling more funds to firms with positive NPV projects.

STILL A MAN'S WORLD? SECOND GENERATION GENDER BIAS IN EXTERNAL EQUITY TERM SHEET NEGOTIATIONS

2016 ◽  
Vol 21 (03) ◽  
pp. 1650015 ◽  
Author(s):  
ETHNÉ SWARTZ ◽  
FRANCES M. AMATUCCI ◽  
SUSAN COLEMAN
Keyword(s):  
Gender Bias ◽  
Women Entrepreneurs ◽  
Second Generation ◽  
Negotiation Process ◽  
Future Research ◽  
Exploratory Research ◽  
Endogenous Factors ◽  
Optimal Outcomes ◽  
Equity Funding ◽  
External Equity

Women increasingly start and lead growth ventures yet receive a small proportion of external equity funding. Term sheet negotiation is a pivotal moment for obtaining growth capital. We employ a multi-method, mixed mode research design to explore strategies of women entrepreneurs who have negotiated term sheets and discuss our quantitative findings. Results indicate that women entrepreneurs in our sample worked hard to achieve optimal outcomes yet come up short because of exogenous and endogenous factors linked to second generation gender bias in the negotiation process. Propositions for future research are generated given the results of this exploratory research.

The direct costs of raising external equity capital for US REIT IPOs

2012 ◽  
Vol 30 (6) ◽  
pp. 538-562
Author(s):  
Ranajit Kumar Bairagi ◽  
William Dimovski
Keyword(s):  
Initial Public Offerings ◽  
Economies Of Scale ◽  
Weighted Average ◽  
Direct Costs ◽  
Equity Capital ◽  
Return Volatility ◽  
Critical Determinant ◽  
Content Type ◽  
Underwriting Fees ◽  
External Equity

PurposeThe purpose of this paper is to investigate the total direct costs of raising external equity capital for US real estate investment trust (REIT) initial public offerings (IPOs).Design/methodology/approachThe study provides recent evidence on total direct costs for a comprehensive dataset of 125 US REIT IPOs from 1996 until June 2010. A multivariate OLS regression is performed to determine significant factors influencing the level of total direct costs and also underwriting fees and non‐underwriting direct expenses.FindingsThe study finds economies of scale in total direct costs, underwriting fees and non‐underwriting expenses. The equally (value) weighted average total direct costs are 8.33 percent (7.52 percent), consisting of 6.49 percent (6.30 percent) underwriting fees and 1.87 percent (1.22 percent) non‐underwriting direct expenses. The study finds a declining trend of total direct costs for post 2000 IPOs which is attributed to the declining trend in both underwriting fees and non‐underwriting direct expenses. Offer size is a critical determinant for both total direct costs and their individual components and inversely affects these costs. The total direct costs are found significantly higher for equity REITs than for mortgage REITs and are also significantly higher for offers listed in New York Stock Exchange (NYSE). Underwriting fees appear to be negatively influenced by the offer price, the number of representative underwriters involved in the issue, industry return volatility and the number of potential specific risk factors but positively influenced by prior quarter industry dividend yield and ownership limit identified in the prospectus. After controlling for time trend, the paper finds REIT IPOs incur higher non‐underwriting direct expenses in response to higher industry return volatility prior to the offer.Originality/valueThis paper adds to the international REIT IPO literature by exploring a number of new influencing factors behind total direct costs, underwriting fees and non‐underwriting direct expenses. The study includes data during the recent GFC period.

Financial Decision Making in Family Firms

2014 ◽  
Vol 27 (4) ◽  
pp. 307-327 ◽  
Author(s):  
Christian Koropp ◽  
Franz W. Kellermanns ◽  
Dietmar Grichnik ◽  
Laura Stanley
Keyword(s):  
Behavioral Intentions ◽  
Structural Equation ◽  
Family Firms ◽  
Behavioral Control ◽  
Behavioral Approach ◽  
Equation Modeling ◽  
Future Research ◽  
Perceived Behavioral Control ◽  
External Equity ◽  
Family Norms

Adapting the theory of planned behavior to the area of financial choices in family firms, we argue that these choices in family firms are largely affected by family norms, attitude, perceived behavioral control, and behavioral intentions. A time-lagged sample, estimated via structural equation modeling of 118 German family firms, supports a behavioral approach to the study of financing decisions. Specifically, we show that family norms and attitude toward external debt and external equity affect behavioral intention to use the respective financing choices, which in turn affects financing behavior. Perceived behavioral control, however, was shown to negatively affect behavioral intentions to use external equity and was positively related to the use of internal funds. Implications of these capital structure decisions and ideas for future research are discussed.

scholarly journals COMPARATIVE STUDY OF THE RELEVANCE OF EQUITY FINANCING IN EUROPEAN SMES

2020 ◽  
Vol 21 (6) ◽  
pp. 1543-1560
Author(s):  
Monika Wieczorek-Kosmala ◽  
Joanna Błach ◽  
Joanna Trzęsiok
Keyword(s):  
Order Theory ◽  
Equity Financing ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Eu Countries ◽  
Internal Funds ◽  
Financing Gap ◽  
External Equity ◽  
The Eu ◽  
Academic Debate

This paper contributes to the academic debate on the pecking order theory and SMEs equity financing, in this equity financing gap. In order to address this problem, this study relies on the empirical design that is driven by the premises of the pecking order theory and distinguishes between the relevance of internal funds vs. external equity. The main aim of this study is to investigate whether the relevance of equity financing for European SMEs is driven by the country-specifics (captured by the clusters of the EU countries) and whether there are any other factors that may potentially explain the relevance of internal funds or external equity, with respect to SMEs performance and characteristics. For that purposes the SAFE survey data were used to run non-parametric and correlations analysis. The results have clearly indicated that there are statistically significant differences between the clusters of the EU countries (if we differentiate between core and peripheral EU countries in particular). It was also found that there is no unified pattern of the associations between the relevance of equity financing and SMEs performance and characteristics, thus these associations seem to be influenced by the country-specifics as well.

scholarly journals Bank Loan Financing Decisions of Small and Medium-Sized Enterprises: The Significance of Owner/Managers’ Behaviours

2018 ◽  
Vol 10 (5) ◽  
pp. 231 ◽  
Author(s):  
Forbeneh Agha Jude ◽  
Ntieche Adamou
Keyword(s):  
Order Theory ◽  
Study Data ◽  
Bank Loans ◽  
Bank Loan ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Financing Decisions ◽  
Loan Financing ◽  
Finance Theory ◽  
External Equity

The objective of this study is to highlight the influence of entrepreneurs’ behaviour on the decisions to apply for bank loans. A mixed research methodology known as triangulation was employed in order to achieve the objective of the study. Data were sourced from a stratified randomly selected sample of 450 Cameroonian SMEs and analysed using logistic regression. The result of the study revealed that both control aversion and overconfidence behaviours of the owner/managers influence significantly the decisions of SMEs to apply for bank loans.  From the result, it is found that behavioural finance theory explains the decisions of SMEs to seek for bank credits. Contrary to the predictions of the pecking order theory, managerial behaviours such as the fear to loss the control of the firm, and overconfidence provide explanations on the decisions of SMEs to seek for bank loans. For instance, the fact that debt does not entail any loss of business control urges SMEs to prefer debt than external equity.

Bootstrapping: Complementary Lines of Inquiry in Entrepreneurship

2021 ◽  
Author(s):  
Matthew Rutherford ◽  
Duygu Phillips
Keyword(s):  
External Debt ◽  
Supply Side ◽  
Demand Side ◽  
Home Equity ◽  
Ceteris Paribus ◽  
Significant Difference ◽  
Resource Poor ◽  
Cultural Entrepreneurship ◽  
External Equity

Bootstrapping is a term, a construct, and a paradigm that has attracted substantial attention from both popular press writers and scholarly researchers. In the scholarly community bootstrapping research is concerned, broadly, with studying the phenomenon of startups in resource poor environments. While this would describe virtually all startups, bootstrapping is most focused upon those resource-starved startups that elected to use only the resources existing internally to the firm or founder(s). That is, in bootstrapped firms, no financing has been attained from individuals or entities outside the firm. In practice, bootstrapping is understood as (a) launching a business with no external debt or equity, and (b) finding creative ways to manage a business launched with no external debt or equity. Most entrepreneurs bootstrap at founding. It is estimated that few (20%) take on external debt at startup; and far fewer (5%) launch with external equity. Examples of techniques employed because of the decision to bootstrap include using credit cards, drawing upon home equity and sweat equity, taking loans from family, and investing salary from one’s “day job.” There are fundamental reasons for this, both from a demand side and a supply side. From the demand side entrepreneurs, on average, are autonomous and therefore have a preference for control and a general aversion to external forms of capital, both debt and equity. On the supply side, because of extreme asymmetric information that exists between financiers and entrepreneurs, financiers often cannot accurately gauge the underlying quality of the entrepreneur/venture and are therefore reluctant to provide capital to them. With regard to outcomes of bootstrapping, though, the research is equivocal. Ceteris paribus, it appears that there is no significant difference in performance between bootstrappers and non-bootstrappers; however, contingencies likely exist. For example, non-bootstrappers are likely more prone to failure because they often take more risks. Therefore, while a few heavily financed ventures may achieve lofty success, many fail in dramatic fashion. By contrast, bootstrappers are often more cautious and therefore these firms demonstrate less variance in outcomes. Understanding of both antecedents and outcomes of bootstrapping has grown since the introduction of the construct in the late 1980s. Because of this expanded understanding, the construct has evolved from phenomenological roots to one more grounded in theory. That said, there remain ambiguities around bootstrapping, not the least of which is the existence of myriad definitions and resultant operationalizations. Partially because of these varied conceptualizations, the scholarship on bootstrapping has been somewhat fragmented and challenging to decipher. This fragmented accumulation has led to not only a literature with vivid applications and examples, but also one with little universal logic. This fact has made it somewhat difficult for a field to advance. However, insights from existing theory (e.g., signaling, cultural entrepreneurship) as well as the relatively recent development of closely related bases (e.g., effectuation, bricolage) can complement and advance bootstrapping by adding theoretical breadth and depth. When understood alongside these related lines of research in entrepreneurship, researchers are better equipped to create, catalog, and accumulate knowledge regarding bootstrapping. In turn, educators will be more effective in communicating how entrepreneurs are able to launch in resource poor environments, and ultimately achieve success.

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