Somme borrowers are more equal than others

This paper provides evidence on the strategic lending decisions made by banks facing a negative funding shock. Using bank–firm level credit data, we show that banks reallocate credit within their loan portfolio in at least three different ways. First, banks reallocate to sectors where they have a high market share. Second, they also reallocate to sectors in which they are more specialized. Third, they reallocate credit toward low-risk firms. These reallocation effects are economically large. A standard deviation increase in sector market share, sector specialization, or firm soundness reduces the transmission of the funding shock to credit supply by 22%, 8%, and 10%, respectively.

Some borrowers are more equal than others: bank funding shocks and credit reallocation. O. De Jonghe, H. Dewachter, K. Mulier, S. Ongena, G. Schepens. Review of Finance, 2019, 1-43. DOI: 10.1093/rof/rfy040

New directions in entrepreneurial finance

Entrepreneurial finance is a distinctive aspect of corporate finance, notably with respect to informational asymmetries and investor involvement in portfolio companies. Entrepreneurial finance research has explored four levels of analysis: the entrepreneur or entrepreneurial firm, the organization providing finance to the entrepreneurs, the organizations providing funds to these organizations, and the region or country in which the entrepreneurial firms or investors are established. We discuss recent developments in forms of entrepreneurial finance. We summarize the contributions of the papers published in this issue on entrepreneurial finance at different points in the life cycle, including work on trade credit, debt finance, micro-cap IPOs, venture capital, and angel finance. Also, we highlight avenues for future research focusing on funding gaps, accelerators, crowdfunding, secondary buyouts, boards, and exits.

D. Cumming , M. Deloof , S. Manigart , M. Wright. Journal of Banking & Finance, 100, 252-260 (2019)

Equity crowdfunding and governance

A new paper by Douglas Cumming, Tom Vanacker and Shaker Zahra is forthcoming in Academy of Management Perspectives. In this paper, we depart from current equity crowdfunding research that focuses almost exclusively on the funding success and funding dynamics on platforms to study the effective governance of equity-crowdfunded (ECF) firms and how it relates to these firms’ success. We propose a conceptual model that identifies a multitude of governance mechanisms (e.g., internal or external and formal or informal) that potentially operate in equity crowdfunding markets to reduce adverse selection and moral hazard problems. Further, building on this framework, we offer a roadmap for future research that examines how different governance mechanisms may help in the selection and development of successful ECF firms.

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Equity crowdfunding research featured in Chicago Booth Review

Research by Xavier Walthoff-Borm, Armin Schwienbacher and Tom Vanacker on equity crowdfunding is featured in Chicago Booth Review.

Entrepreneurs are the rock stars of the business world. We read about them constantly in the press, many people wish they could be them, and we hear that people who invest in them make a lot of money. Until recently, only the richest among us were able to invest in entrepreneurs (technically, in their companies)—but not anymore. Enter equity crowdfunding, where anyone can go online to invest in early-stage companies in exchange for ownership shares.

Read the whole article in Chicago Booth Review

Business Administration Seminar with prof. Anita Quas “What money cannot buy”

Seminar/workshop with prof. Anita Quas (emlyon Business School, Lyon)

Title:  What money cannot buy: a new approach to measuring venture capital ability to add non-financial resources

Date: 20 December, 10h00 – 12h00
Venue: department of Accounting, Corporate Finance and Taxation, Sint-Pietersplein 7, 9000 Gent (room will be indicated)

Abstract (pdf)

Best paper award for Klaas Mulier

The European Commission rewards professor Mulier the Prize for best policy-relevant paper in financial research for his paper with Olivier De Jonghe and Thorsten Beck on ‘Bank Sectoral Concentration and (Systemic) Risk’.

A link to the paper can be found here:

In the picture, prof. Mulier and De Jonghe receive their prize from Vladimir Sucha (Director-General Joint Research Center, EC) and John Berrigan (left) (Deputy Director-General, DG FISMA, EC).

Sustainability in equity crowdfunding

New paper by Silvio Vismara forthcoming in Technological Forecasting & Social Change.

Existing studies on the relationship between sustainability and crowdfunding are focused on campaigns that provide rewards for backers. Equity crowdfunding is substantially different in terms of motivations to invest as well as in size, horizon, and expectations of the investment. For the first time – using a sample of 345 initial equity offerings in United Kingdom platforms Crowdcube and Seedrs in the period 2014–2015 – this study provides evidence of the attractiveness of sustainability-oriented ventures in equity crowdfunding. Results show that, although sustainability orientation does not increase the chances of success or of engaging professional investors, it attracts a higher number of restricted investors. This evidence is interpreted considering institutional logic, whereas professionals follow a market logic, and restricted investors consider also a community logic.

Equity Crowdfunding, Shareholder Structures, and Firm Performance

New paper by Xavier Walthoff-Borm, Tom Vanacker & Veroniek Collewaert forthcoming in Corporate Governance: An International Review.

The paper provides a first-time glimpse into the post-campaign financial and innovative performance of equity-crowdfunded (ECF) and matched non-equity-crowdfunded (NECF) firms. We further investigate how direct and nominee shareholder structures in ECF firms are associated with firm performance. We find that ECF firms have 8.5 times higher failure rates than matched NECF firms. However, 3.4 times more ECF firms have patent applications than matched NECF firms. Within the group of ECF firms, we find that ECF firms financed through a nominee structure make smaller losses, while ECF firms financed through a direct shareholder structure have more new patent applications, including foreign patent applications.

Venture Capital Internationalization

In a new paper, David Devigne, Sophie Manigart, Tom Vanacker and Klaas Mulier review the extant literature on VC internationalization. We identify three major research streams within this literature, which revolve around the following questions: (1) which VC firms invest across borders and what countries do they target; (2) how do VC firms address liabilities of foreign investing; and (3) what are the real effects of international VC investments? We provide an overview of the contributions in these research streams, discuss the role of public policy, and suggest avenues for future research. 

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