While the theoretical literature strongly argues in favor of ratchets (anti-dilution protections) and liquidation rights, recent empirical studies documented limits in their use. This paper studies firms’ financing constraints in a model of staged venture capital financing where new-money raised and post-money values evolve randomly over time. Our analysis reveals that ventures fail if new mone...

In this paper we compare the role of internal finance on the growth of firms between a leading transition country, Slovenia and an established market economy, Belgium. We find that firms in Slovenia are more sensitive to internal financing constraints than their Belgian counterparts. This would suggest that although Slovenian firms are no longer recipients of soft budget constraints, capital ma...

It provides background information on the role of capital markets in PPP financing, and their principal advantages and disadvantages compared to traditional bank financing. It then reviews the dominant delivery model for PPP bonds, the so-called " monoline model " , and the impact of the downgrading of the monolines' rating following the credit crisis. The paper further analyses the reasons why...

In the broad literature of corporate risk management classic models of optimal hedging assume a one-period hedging decision, and therefore no financing need arises to maintain the hedge position. The multi-period models are usually based on the assumption of no liquidity constraints, and accordingly the eventual financing need can always be met from the market. As a consequence of the recent cr...

We derive the optimal crowdfunding contract of a financially constrained monopolist and analyze its implications for production, investment and welfare. Crowdfunding contracts may serve as a price-discrimination mechanism, forcing pivotal consumers to pay a premium above the future spot price, thus increasing profits. When raising funds is costly, entrepreneurs balance the benefits from price d...

The role that financial information plays in facilitating the flow of capital between external providers of capital and the firm is less obvious for private firms compared with public firms. We find that private firms that choose to have their financial information reviewed by an independent external auditor (our proxy for financial transparency) experience significantly lower problems with gai...

Exercises of employee stock options generate substantial cash in‡ows to the …rm. In our model, these cash in‡ows are correlated with improvements in the …rm’s investment opportunities and thus allow …rms to relax …nancing constraints in those states of the world where the demand for investment is high. Using a regression discontinuity approach, we estimate that …rms increase investment by betwe...

This paper unifies the recent analysis of macroeconomic fluctuations of [Brunnermeier and Sannikov(2012)], in which firms subject to financing constraints can sell capital in order to avoid liquidation, with the earlier related paper of [Milne and Robertson(1996)], in which firms manage cash flow, output and investment decisions in order to lower the probability of liquidation. This yields more...

Recent theoretical research in corporate finance has highlighted the role of incentive problems between firms’ investors and insiders in determining corporations’ financial structures, dynamics and investment policies. Financial contracts are designed to mitigate these agency conflicts. However, most of the analysis is qualitative in nature. This paper develops a dynamic firm model in order to ...

This paper attempts to address a puzzle in China’s investment pattern: despite high aggregate investment and remarkable economic growth, negative net investment is commonly found at the microeconomic level. Using a large firm-level dataset, we test three hypotheses to explain the existence and extent of negative investment in each ownership group: what we term the efficiency (or restructuring) ...