Funding Continuum for Private Business Owners: Evidence from the Pepperdine Private Capital Markets Project Survey

The Pepperdine Private Capital Markets Project survey for business owners, administered during the spring of 2010, reveals an increasingly important role of friends and family (Friends/Family) to provide capital for privately-held businesses. Examining business owners’ perceptions of their sources of capital reveals that, overall, business owners prefer Friends/Family and angel financing as well as asset-based lenders and banks (ABL/Bank). Business owners consider Friends/Family financing to be the least costly. However, business owners also believe venture capital (VC), private equity (PE), and angels provide more benefits than friends/family and ABL/Bank. This study unveils a detailed spectrum of the funding continuum for privately owned firms across different levels of firms’ size, age, and information availability

Discounts for Lack of Marketability: Are Business Appraisers Discounting the Discounts?

We set out to understand the size of DLOMs by comparing the subject of the discounts, privately held companies, to the bases from which discounts should be applied. These relevant bases include publicly traded firms considered as guideline public companies and public market benchmarks from which cost of capital data are obtained. We created a database of 1,328 matched pairs and 9,765 matched industry pairs using transactions from 1995 to 2008. Our results indicate that entity-level discounts average between 68 and 70 percent, which are significantly larger than those reported in other databases and from other studies. We believe one of the main reasons our discounts are larger is because we captured, from privately held company transactions data, the actual value associated with the expected probability of a public market liquidity event. In other words, a matched pairs approach allowed us to calculate the discounted value associated with the expected probability of private firms becoming public firms at some point in the future

Ceo Compensation And The Transformation Of Banking

We examine the compensation strategies of commercial bank holding companies (BHCs) during 1992-2000. In particular, we analyze whether CEO compensation is more closely tied to the presence of growth options and to risk than is revealed in earlier research. We also examine whether BHC entry into investment banking has influenced compensation policies. Our evidence shows a stronger link between growth options and CEO compensation in the 1990s than observed in earlier studies and that pay-for-performance sensitivities are substantially larger for BHCs that have entered the underwriting business. We also find that BHC leverage and variability in returns have positive effects on CEO incentive pay. Finally, we find some evidence supporting the hypothesis that pay-for-performance sensitivities decline generally at BHCs as return variability increases, as agency theory predicts. 2003 The Southern Finance Association and the Southwestern Finance Association.

THE EFFECTS OF PRIVATE EQUITY AND VENTURE CAPITAL ON SALES AND EMPLOYMENT GROWTH IN SMALL AND MEDIUM-SIZED BUSINESSES

We study the effects private equity (PE) and venture capital (VC) financing have on small and mid-sized single entity business establishments from 1995-2009. We focus on single entity establishments to cleanly examine the impact of PE and VC financing on establishments’ organic growth. This study reveals that PE and VC financing have positive impacts on single entity business establishments’ net sales and employment growth. The impact of PE financing on establishments’ growth is slower and smaller than VC financing. However, we find that the benefit of PE financing lasts longer than VC financing. We also find that ethnic minority, female, and foreign business owners are less likely to receive PE and VC financing. Finally, we find evidence that although establishments with government contracts are more likely to receive PE and VC financing, those contracts fail to produce marginal post-funding growth and employment benefits

A stakeholder resource-based view of corporate social irresponsibility: Evidence from China

Following the stakeholder resource-based view (SRBV), we conceptualize the value relevance of corporate social irresponsibility (CSI) based on the stakeholders’ bargaining power and interests in the well-being of the firm, and classify the stakeholders into residual claimants (i.e., customers, shareholders) and fixed claimants (i.e., employees, environment). Using curated detailed news data of 816 CSI episodes and 56,503 Chinese government daily publications from June 2006 to July 2012, we find that CSI episodes alienating residual claimant stakeholders lead to greater shareholder value destruction. Drawing from the stakeholder salience, we find that CSI episodes alienating high legitimacy claims of shareholders and customers, high urgency claims of employees, and powerful claims of customers result in a more pronounced underperformance. Although there are potentially overlapping boundaries between fixed and residual claimants under special circumstances, the findings provide implications for firms making strategic decisions involving multiple stakeholders

Corporate social irresponsibility and portfolio performance: a cross-national study

This study examines the impact of reputational risk, measured by corporate social irresponsibility (CSI) ratings, on shareholder abnormal returns. Based on 7368 non-financial companies from 42 countries during 2007–2017, we find that long-short portfolios (buying no reputation risk and selling high reputation risk portfolios) earn significantly positive abnormal returns. The cross-national results indicate that the long-short portfolio returns are more pronounced (i) in the emerging market segment than in the developed market segment, (ii) in civil law jurisdictions than in their common law peers, (iii) within nations with higher confidence in corporations and, (iv) within nations with higher institutional trust

The Economics and Politics of Corporate Social Performance

This paper provides an empirical test of a theory that relates corporate financial performance (CFP), corporate social performance (CSP), and social pressure from government and social activist for improved social performance. A three-equation structural model is estimated for a large number of firms for 1996-2004. The estimates are statistically and economically significant and consistent with the theory. CFP as measured by Tobin's q is increasing in CSP, indicating that it is rewarded by consumers, employees, or investors, and decreasing in social pressure. CSP is increasing in social pressure, indicating that social performance is responsive to social pressure which mitigates some of the negative effect of social pressure on CFP. CSP is also increasing in CFP, which is consistent with social performance being a perquisite for management. Social pressure is decreasing in CFP and increasing in CSP, which is consistent with social pressure being directed to soft targets that are likely to be responsive. The measures of CSP and social pressure are also disaggregated, and the relations among CFP, CSP, and social pressure are largely due to responsive CSP and social pressure arising from private politics.

The Economics and Politics of Corporate Social Performance

This paper estimates a three-equation structural model based on a theory that relates corporate financial performance (CFP), corporate social performance (CSP), and social pressure. CFP is found to be independent of CSP and decreasing in social pressure, and CSP is independent of CFP and increasing in social pressure. Social pressure is increasing in CSP and decreasing in CFP, which is consistent with social pressure being directed to soft targets. These relations were stronger during the first four years of the Bush administration than the last four year of the Clinton administration. Disaggregating the measure of social pressure indicate that the relations among CFP, CSP, and social pressure are due to private politics and not public politics. For consumer industries greater CSP is associated with better CFP, and the opposite is true for industrial industries.