A gender financing gap: fake news or evidence?

Women-led businesses are less likely to raise venture capital than male-only businesses and the amounts that they raise are lower. Yet women-led businesses deliver better revenue performance and return on investment. So why are venture capitalists reluctant to invest in women-led businesses? One reason is that women entrepreneurs are over concentrated in sectors that are less attractive to investors and have a low presence in technology sectors. Another reason is the lower propensity of women entrepreneurs to seek venture capital. However, women who do approach venture capital funds are almost as likely as men to be successful in raising finance. Moreover, women-led businesses perform well in raising follow-on finance. And women business angels – a minority of all business angels – have a clear propensity to invest in women founders.

Rudy Aernoudt, Ampara De San José. Venture Capital, published online 31 March 2020.

Unleashing firms’ growth potential

For a long time, growth has been assumed to be the result of an optimal combination of the production factors of labour and capital. This article argues that growth of companies no longer depends on only those two factors, but also on a third one: i.e., intangibles, such as investment readiness, investors mindset and entrepreneurship. Tangibles are the necessary, but not sufficient condition. The current era of robotization, digitalization and disruptive innovation increases the importance of the intangibles. Therefore, regional policy should henceforth be reoriented towards those intangibles leaving behind the classical subsidy-oriented policy, focused on SMEs as such, without controlling for those intangibles. That is the only way to achieve that companies with a growth potential can succeed in becoming a scale-up company, and that lifestyle companies optimize their growth potential. Moreover, if support policies are designed on that basis, they might even bring former offshored companies back.

Rudy Aernoudt, Ekonimiaz, 2019, p. 134 – 156

Identifying Credit Supply Shocks with Bank-Firm Data: Methods and Applications

In a paper that is published this month in the Journal of Financial Intermediation, we demonstrate the importance of single-bank borrowers for the identification of credit supply shocks.

Current empirical methods to identify and assess the impact of bank credit supply shocks rely strictly on multi-bank firms and ignore firms borrowing from only one bank. Yet, these single-bank firms are often the majority of firms in an economy and most prone to credit supply shocks. We propose and underpin an alternative demand control (using industry–location–size–time fixed effects) that allows identifying time-varying cross-sectional bank credit supply shocks using both single- and multi-bank firms. Using matched bank-firm credit data from Belgium, we show that firms borrowing from banks with negative credit supply shocks exhibit lower financial debt growth, asset growth, investments, and operating margin growth. Positive credit supply shocks are associated with bank risk-taking behavior at the extensive margin. Importantly, to capture these effects it is crucial to include the single-bank firms when identifying the bank credit supply shocks.

H. Degryse, O. De Jonghe, S. Jackovljevic, K. Mulier, and G. Schepens. Identifying Credit Supply Shocks with Bank-Firm Data: Methods and Applications, Journal of Financial Intermediation, 2019, Vol. 40, 100813


Signal Strength, Media Attention, and Resource Mobilization

In a new paper, forthcoming in the Academy of Management Journal, we deepen our understanding of how new firms can mobilize resources with signals of different strengths and of how the media—as a key information intermediary—differently impacts their effectiveness. For this purpose, we exploit the private equity context and examine the fundraising ability of new private equity funds that report their unrealized and realized performance across time.

Vanacker Tom, Forbes Daniel, Knockaert Mirjam & Manigart Sophie.
Signal Strength, Media Attention, and Resource Mobilization: Evidence from New Private Equity Firms, Academy of Management Journal (in press).

For more details, please visit:  https://doi.org/10.5465/amj.2018.0356

Some 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.

For more information, please visit:


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

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.