What do small firms do when given an income tax cut? We address this question by examining the consequences of a sharp reduction in the corporate income tax rate for small- and micro-profit enterprises (SMPE) in China based on confidential tax returns. Utilizing the gradual increases in the qualifying threshold for SMPEs during 2010-2016, we find that newly qualified SMPEs with positive taxable income increased investment, interest expense and productivity. SMPEs in taxable losses did not respond to the tax cut. The tax cut induced more SMPEs to register, especially those in financially constrained sectors. Despite these positive effects, firms’ fixed asset growth slows down when they get closer to the SMPE threshold. Our study contributes to understanding the effect of tax preferences for small businesses.
{"title":"Corporate Tax Cuts for Small Firms: What Do Firms Do?","authors":"W. Cui, Mengying Wei, Weisi Xie, Jing Xing","doi":"10.2139/ssrn.3950973","DOIUrl":"https://doi.org/10.2139/ssrn.3950973","url":null,"abstract":"What do small firms do when given an income tax cut? We address this question by examining the consequences of a sharp reduction in the corporate income tax rate for small- and micro-profit enterprises (SMPE) in China based on confidential tax returns. Utilizing the gradual increases in the qualifying threshold for SMPEs during 2010-2016, we find that newly qualified SMPEs with positive taxable income increased investment, interest expense and productivity. SMPEs in taxable losses did not respond to the tax cut. The tax cut induced more SMPEs to register, especially those in financially constrained sectors. Despite these positive effects, firms’ fixed asset growth slows down when they get closer to the SMPE threshold. Our study contributes to understanding the effect of tax preferences for small businesses.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"42 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88480428","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We dissect the performance of private equity (PE) investors in commercial real estate. We observe acquisitions, dispositions, and granular performance data for several thousand U.S. hotels. Investments by PEs specializing in the hospitality industry lead to more substantial operating efficiency gains than those by their generalist counterparts. Specialist PEs also improve bottom-line profits—although at the expense of lower guest satisfaction—and realize significantly higher capital gains than other types of investors. By contrast, generalist PE funds’ main comparative advantage in real estate markets may be their access to cheap financing.
{"title":"Are Private Equity Funds Superior Real Estate Investors? Evidence from the Hotel Industry","authors":"C. Spaenjers, Eva Steiner","doi":"10.2139/ssrn.3738265","DOIUrl":"https://doi.org/10.2139/ssrn.3738265","url":null,"abstract":"We dissect the performance of private equity (PE) investors in commercial real estate. We observe acquisitions, dispositions, and granular performance data for several thousand U.S. hotels. Investments by PEs specializing in the hospitality industry lead to more substantial operating efficiency gains than those by their generalist counterparts. Specialist PEs also improve bottom-line profits—although at the expense of lower guest satisfaction—and realize significantly higher capital gains than other types of investors. By contrast, generalist PE funds’ main comparative advantage in real estate markets may be their access to cheap financing.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"91 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80532779","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the effect of economic policy uncertainty on the financing and success probability of start-ups in the European venture capital market. Specifically, our results show that venture capital investors are less likely to engage in financing activities and start-ups are less likely to have a successful exit under high economic policy uncertainty. Even after controlling for economic uncertainty and industry trends, our results remain stable and significant. However, we highlight the heterogeneity of these effects depending on the venture capital type. We point out the special role of governmental venture capital as it bridges the financing gap for start-ups under high levels of economic policy uncertainty. Still, governmental venture capital investments seem detrimental to a start-up's successful exit probability despite higher economic policy uncertainty. Government policies should be adjusted accordingly, considering the substantial influence of economic policy uncertainty on the start-up market.
{"title":"The effect of economic policy uncertainty on start-up financing and success: Evidence from the European start-up market","authors":"Rouven Litterscheidt","doi":"10.2139/ssrn.3875314","DOIUrl":"https://doi.org/10.2139/ssrn.3875314","url":null,"abstract":"This paper investigates the effect of economic policy uncertainty on the financing and success probability of start-ups in the European venture capital market. Specifically, our results show that venture capital investors are less likely to engage in financing activities and start-ups are less likely to have a successful exit under high economic policy uncertainty. Even after controlling for economic uncertainty and industry trends, our results remain stable and significant. However, we highlight the heterogeneity of these effects depending on the venture capital type. We point out the special role of governmental venture capital as it bridges the financing gap for start-ups under high levels of economic policy uncertainty. Still, governmental venture capital investments seem detrimental to a start-up's successful exit probability despite higher economic policy uncertainty. Government policies should be adjusted accordingly, considering the substantial influence of economic policy uncertainty on the start-up market.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88572126","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper explores the potential outcomes of using peer-to-peer lenders in financing economic activity. Combining a random regression forest, a machine-learning process, with an agent-based model, we perform simulations on artificial economies with various degrees of adoption of peer-to-peer lending. We find that as peer-to-peer lenders proliferate, there is increased financial instability, lower GDP and higher unemployment. On the other hand, peer-to-peer lending increases the total volume of loans given out, but demonstrates a preference towards consumer loans (over corporate loans), which has a negative effect in the long run. Finally, introducing peer-to-peer lenders increases the access of the “unbankable” population to services which conventional banking is not able to offer within the extant regulatory framework. Our results can help policymakers as they address the issue of regulation in the peer-to-peer finance industry.
{"title":"The perfect bail-in: Financing without banks using Peer-To-Peer Lending","authors":"Stathis Polyzos, Aristeidis Samitas, G. Rubbaniy","doi":"10.2139/ssrn.3916661","DOIUrl":"https://doi.org/10.2139/ssrn.3916661","url":null,"abstract":"This paper explores the potential outcomes of using peer-to-peer lenders in financing economic activity. Combining a random regression forest, a machine-learning process, with an agent-based model, we perform simulations on artificial economies with various degrees of adoption of peer-to-peer lending. We find that as peer-to-peer lenders proliferate, there is increased financial instability, lower GDP and higher unemployment. On the other hand, peer-to-peer lending increases the total volume of loans given out, but demonstrates a preference towards consumer loans (over corporate loans), which has a negative effect in the long run. Finally, introducing peer-to-peer lenders increases the access of the “unbankable” population to services which conventional banking is not able to offer within the extant regulatory framework. Our results can help policymakers as they address the issue of regulation in the peer-to-peer finance industry.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79059928","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how Small Business Administration (SBA) employees respond to salient defaults. Using novel data to identify employees transferring across SBA offices, we find that defaults on SBA loans in their previous workplace reduce SBA loans in their current workplace. The effect is independent of local risk conditions and the informational content of the non-local defaults, consistent with a mechanical updating of risk perceptions among local SBA employees and inconsistent with rational learning. The local SBA loan market becomes geographically clustered and concentrated among fewer borrowers and lenders, especially those who have prior relationships with the SBA, suggesting higher barriers for participation.
{"title":"Regulatory Risk Perception and Small Business Lending","authors":"Joseph Kalmenovitz, Siddharth Vij","doi":"10.2139/ssrn.3904357","DOIUrl":"https://doi.org/10.2139/ssrn.3904357","url":null,"abstract":"We study how Small Business Administration (SBA) employees respond to salient defaults. Using novel data to identify employees transferring across SBA offices, we find that defaults on SBA loans in their previous workplace reduce SBA loans in their current workplace. The effect is independent of local risk conditions and the informational content of the non-local defaults, consistent with a mechanical updating of risk perceptions among local SBA employees and inconsistent with rational learning. The local SBA loan market becomes geographically clustered and concentrated among fewer borrowers and lenders, especially those who have prior relationships with the SBA, suggesting higher barriers for participation.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"69 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74963388","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Exploiting the staggered introductions and lifting of COVID-19 lockdowns across different regions in China, we study how lockdowns affect the investment decisions of venture capital (VC) investors and whether such changes are temporary or permanent. China provides a unique setting that allows us to examine VC investment decisions after the pandemic is under control and lockdowns are lifted. Contrary to the conventional wisdom that VCs tend to invest in local ventures during lockdowns, we find that they invest in remote ventures during lockdowns and such effects persist even after lockdowns are lifted. Such lockdown effects are stronger when there is better internet infrastructure, when the level of information asymmetry between VCs and entrepreneurs is lower, when VCs are more experienced, and when ventures are in the early stages of development. The lockdown effects can be explained by the advancement of remote communication technology as a response to the social distancing requirements. As VCs invest in remote ventures, the regional inequality of entrepreneurial access to VC financing has been reduced. Our findings uncover how VC investors adapt to the pandemic and such changes can have long-lasting effects in the post-pandemic era.
{"title":"Invest Local or Remote? COVID-19 Lockdowns and Venture Capital Investment","authors":"Pengfei Han, Chunrui Liu, X. Tian","doi":"10.2139/ssrn.3871317","DOIUrl":"https://doi.org/10.2139/ssrn.3871317","url":null,"abstract":"Exploiting the staggered introductions and lifting of COVID-19 lockdowns across different regions in China, we study how lockdowns affect the investment decisions of venture capital (VC) investors and whether such changes are temporary or permanent. China provides a unique setting that allows us to examine VC investment decisions after the pandemic is under control and lockdowns are lifted. Contrary to the conventional wisdom that VCs tend to invest in local ventures during lockdowns, we find that they invest in remote ventures during lockdowns and such effects persist even after lockdowns are lifted. Such lockdown effects are stronger when there is better internet infrastructure, when the level of information asymmetry between VCs and entrepreneurs is lower, when VCs are more experienced, and when ventures are in the early stages of development. The lockdown effects can be explained by the advancement of remote communication technology as a response to the social distancing requirements. As VCs invest in remote ventures, the regional inequality of entrepreneurial access to VC financing has been reduced. Our findings uncover how VC investors adapt to the pandemic and such changes can have long-lasting effects in the post-pandemic era.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"324 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76870582","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes valuation dynamics of ‘Unicorn’ companies, that is, privately held venture capital-backed companies with a valuation of at least $1 billion. We study the pricing data for 223 investments made by 80 separate funds of 8 U.S. mutual fund managers in 98 Unicorns. In line with price ‘anchoring’ and ‘reference’ theories, our results show that external factors, such as the valuation of peer companies, are the primary driver behind Unicorn stock pricing. Analyses of the stock price patterns additionally reveal the importance of shareholder rights: different share classes with different cash flow rights issued by the same Unicorn are priced differently at the same point in time, even by the same shareholder. Our research creates important implications for investors and regulators, especially by highlighting the behavioral patterns in the pricing of Unicorn shares, and by providing empirical evidence of the dynamics behind discrepancies in investors’ share class valuations.
{"title":"The Pricing of Private Assets: Mutual Fund Investments in ‘Unicorn’ Companies","authors":"Björn Imbierowicz, Christian Rauch","doi":"10.2139/ssrn.3684722","DOIUrl":"https://doi.org/10.2139/ssrn.3684722","url":null,"abstract":"This paper analyzes valuation dynamics of ‘Unicorn’ companies, that is, privately held venture capital-backed companies with a valuation of at least $1 billion. We study the pricing data for 223 investments made by 80 separate funds of 8 U.S. mutual fund managers in 98 Unicorns. In line with price ‘anchoring’ and ‘reference’ theories, our results show that external factors, such as the valuation of peer companies, are the primary driver behind Unicorn stock pricing. Analyses of the stock price patterns additionally reveal the importance of shareholder rights: different share classes with different cash flow rights issued by the same Unicorn are priced differently at the same point in time, even by the same shareholder. Our research creates important implications for investors and regulators, especially by highlighting the behavioral patterns in the pricing of Unicorn shares, and by providing empirical evidence of the dynamics behind discrepancies in investors’ share class valuations.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75121876","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Financial management is the important of Business operation and for the financial managers.
财务管理是企业经营的重要环节，也是财务管理者的重要任务。
{"title":"Financial management importance for financial managers.","authors":"Dr. Iqbal Shaukat","doi":"10.2139/ssrn.3853611","DOIUrl":"https://doi.org/10.2139/ssrn.3853611","url":null,"abstract":"Financial management is the important of Business operation and for the financial managers.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88307743","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article analyzes crowdfunding campaigns of technology firms in England. We compare the predictions of crowdfunding theories with empirical evidence. We are particularly focused on factors of campaign success related to indirect signalling (such as the choice of campaign target) by founders that have mixed evidence in existing research as opposed to direct signalling (eg. the number of updates by founders). We are also focused on comparing different cities of UK with regard to crowdfunding. Regression and correlation analyses were used to analyze the connections between different factors and the campaign outcomes. We have found that the campaign target has U-shape effect on success of campaign. For example, the probability of success increases if the threshold value is neither very small or significantly large. This is consistent with the spirit of some theoretical research on crowdfunding. We also find that cities with better access to ultrafast broadband among households and cities with greater number of people with higher education have significantly better results in crowdfunding. We also provide an overview of literature related to informational problems in crowdfunding, highlight gaps and controversial areas and provide some suggestions for future research.
{"title":"Comparing Crowdfunding Theory and Practice: The Case of Technology Industry in England","authors":"A. Miglo","doi":"10.2139/ssrn.3818387","DOIUrl":"https://doi.org/10.2139/ssrn.3818387","url":null,"abstract":"This article analyzes crowdfunding campaigns of technology firms in England. We compare the predictions of crowdfunding theories with empirical evidence. We are particularly focused on factors of campaign success related to indirect signalling (such as the choice of campaign target) by founders that have mixed evidence in existing research as opposed to direct signalling (eg. the number of updates by founders). We are also focused on comparing different cities of UK with regard to crowdfunding. Regression and correlation analyses were used to analyze the connections between different factors and the campaign outcomes. We have found that the campaign target has U-shape effect on success of campaign. For example, the probability of success increases if the threshold value is neither very small or significantly large. This is consistent with the spirit of some theoretical research on crowdfunding. We also find that cities with better access to ultrafast broadband among households and cities with greater number of people with higher education have significantly better results in crowdfunding. We also provide an overview of literature related to informational problems in crowdfunding, highlight gaps and controversial areas and provide some suggestions for future research.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-04-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75696553","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper reviews 133 of Mike Wright’s contributions to the management buy-out and entrepreneurial finance literature. The outline is chronological and subject-related, revealing the development of Professor Wright’s scholarly work over time and its variety. We begin with the emergence of buy-outs, a discussion of agency costs and corporate governance issues. We then move to internationalisation, boom and bust, Mike's acknowledgement of the arrival of active investors, emerging markets, deal structuring, syndication, new venture finance, financial and economic performance, and recent developments. We document the legacy of an abundant scholar and provide, thanks to his outstanding academic impact, guidance on the evolution of management buy-out and entrepreneurial finance research since its inception.
{"title":"The Legacy of the Dean of Management Buy-out and Entrepreneurial Finance Research","authors":"Aurélie Sannajust, Alexander Groh","doi":"10.2139/SSRN.3809698","DOIUrl":"https://doi.org/10.2139/SSRN.3809698","url":null,"abstract":"This paper reviews 133 of Mike Wright’s contributions to the management buy-out and entrepreneurial finance literature. The outline is chronological and subject-related, revealing the development of Professor Wright’s scholarly work over time and its variety. We begin with the emergence of buy-outs, a discussion of agency costs and corporate governance issues. We then move to internationalisation, boom and bust, Mike's acknowledgement of the arrival of active investors, emerging markets, deal structuring, syndication, new venture finance, financial and economic performance, and recent developments. We document the legacy of an abundant scholar and provide, thanks to his outstanding academic impact, guidance on the evolution of management buy-out and entrepreneurial finance research since its inception.","PeriodicalId":11881,"journal":{"name":"Entrepreneurship & Finance eJournal","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76715155","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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