What is the Role of Legal Systems in Financial Intermediation? Theory and Evidence

We develop a theory and empirical test of how the legal system affects the relationship between venture capitalists and entrepreneurs. The theory uses a double moral hazard framework to show how optimal contracts and investor actions depend on the quality of the legal system. The empirical evidence is based on a sample of European venture capital deals. The main results are that with better legal protection, investors give more non-contractible support and demand more downside protection. These predictions are supported by the empirical analysis. Using a new empirical approach of comparing two sets of fixed-effect regressions, we also find that the investor’s legal system is more important than that of the company in determining investor behavior.Financial Intermediation;Law and Finance;Corporate Governance;Venture Capital

The Importance of Trust for Investment: Evidence From Venture Capital (Revision of DP 2009-43)

We examine the effect of trust on financial investment and contracting decisions in a micro-economic environment where trust is exogenous. Using hand-collected data on European venture capital, we show that the Eurobarometer measure of trust among nations significantly affects investment decisions. This holds even after controlling for investor and company fixed effects, geographic distance, information and transaction costs. The national identity of venture capital firms’ individual partners further contributes to the effect of trust. Education and work experience reduce the effect of trust but do not eliminate it. We also examine the relationship between trust and sophisticated contracts involving contingent control rights and find that, even after controlling for endogeneity, they are complements, not substitutes.Venture Capital;Social Capital;Trust;Financial Contracts;Corporate Governance.

Linking entanglement and quantum phase transitions via density functional theory

Density functional theory (DFT) is shown to provide a novel conceptual and computational framework for entanglement in interacting many-body quantum systems. DFT can, in particular, shed light on the intriguing relationship between quantum phase transitions and entanglement. We use DFT concepts to express entanglement measures in terms of the first or second derivative of the ground state energy. We illustrate the versatility of the DFT approach via a variety of analytically solvable models. As a further application we discuss entanglement and quantum phase transitions in the case of mean field approximations for realistic models of many-body systems.Comment: 6 pages, 2 figure

Electronic band structure, Fermi surface, and elastic properties of new 4.2K superconductor SrPtAs from first-principles calculations

The hexagonal phase SrPtAs (s.g. P6/mmm; #194) with a honeycomb lattice structure very recently was declared as a new low-temperature (TC ~ 4.2K) superconductor. Here by means of first-principles calculations the optimized structural parameters, electronic bands, Fermi surface, total and partial densities of states, inter-atomic bonding picture, independent elastic constants, bulk and shear moduli for SrPtAs were obtained for the first time and analyzed in comparison with the related layered superconductor SrPt2As2.Comment: 8 pages, 4 figure

Quantum phase transitions in photonic cavities with two-level systems

Systems of coupled photonic cavities have been predicted to exhibit quantum phase transitions by analogy with the Hubbard model. To this end, we have studied topologies of few (up to six) photonic cavities each containing a single two-level system. Quantum phase space diagrams are produced for these systems, and compared to mean-field results. We also consider finite effective temperature, and compare this to the notion of disorder. We find the extent of the Mott lobes shrink analogously to the conventional Bose-Hubbard model.Comment: 11 pages, 11 figures, updated typo