Early-stage financing and firm growth in new industries

This paper shows that active investors, such as venture capitalists, can affect the speed at which new ventures grow. In the absence of product market competition, new ventures financed by active investors grow faster initially, though in the long run those financed by passive investors are able to catch up. By contrast, in a competitive product market, new ventures financed by active investors may prey on rivals that are financed by passive investors by “strategically overinvesting” early on, resulting in long-run differences in investment, profits, and firm growth. The value of active investors is greater in highly competitive industries as well as in industries with learning curves, economies of scope, and network effects, as is typical for many “new economy” industries. For such industries, our model predicts that start-ups with access to venture capital may dominate their industry peers in the long run. JEL Classifications: G24; G32 Keywords: Venture capital; dynamic investment; product market competitio

Bank capital structure and credit decisions

This paper argues that banks must be sufficiently levered to have first-best incentives to make new risky loans. This result, which is at odds with the notion that leverage invariably leads to excessive risk taking, derives from two key premises that focus squarely on the role of banks as informed lenders. First, banks finance projects that they do not own, which implies that they cannot extract all the profits. Second, banks conduct a credit risk analysis before making new loans. Our model may help understand why banks take on additional unsecured debt, such as unsecured deposits and subordinated loans, over and above their existing deposit base. It may also help understand why banks and finance companies have similar leverage ratios, even though the latter are not deposit takers and hence not subject to the same regulatory capital requirements as banks

CEO replacement under private information

We study a model of “information-based entrenchment” in which the CEO has private information that the board needs to make an efficient replacement decision. Eliciting the CEO’s private information is costly, as it implies that the board must pay the CEO both higher severance pay and higher on-the-job pay. While higher CEO pay is associated with higher turnover in our model, there is too little turnover in equilibrium. Our model makes novel empirical predictions relating CEO turnover, severance pay, and on-the-job pay to firm-level attributes such as size, corporate governance, and the quality of the firm’s accounting system

Delegation of Control Rights, Ownership Concentration, and the Decline of External Finance

If ownership and control are separated, leaving the manager with discretion may be of value. This paper discusses the extent to which a firm's ownership structure may serve as a commitment for shareholders not to interfere with the manager's project decisions, thereby reducing the agency cost of debt. As shareholder passivity means granting the manager more freedom, the costs of this commitment are increased managerial on-the-job consumption and shirking. Trading off the costs and benefits of managerial discretion, we derive a unique optimal ownership concentration. The paper also establishes a link between firm growth and ownership structure, implying that firms with concentrated ownership may forego profitable investment opportunities even if there is no credit rationing. Moreover, the paper discusses the extent to which agency problems between shareholders and debtholders can be alleviated by delegating control to debtholders.

Financing a portfolio of projects

This article shows that investors financing a portfolio of projects may use the depth of their financial pockets to overcome entrepreneurial incentive problems. Competition for scarce informed capital at the refinancing stage strengthens investors’ bargaining positions. And yet, entrepreneurs’ incentives may be improved, because projects funded by investors with ‘‘shallow pockets’’ must have not only a positive net present value at the refinancing stage, but one that is higher than that of competing portfolio projects. Our article may help understand provisions used in venture capital finance that limit a fund’s initial capital and make it difficult to add more capital once the initial venture capital fund is raised. (JEL G24, G31

Competitive Search Markets with Adverse Selection

In a seminal paper, Rothschild and Stiglitz (1976) show that competitive markets with incomplete information in which firms offer contracts to screen privately informed agents may have no equilibrium. In this paper, we argue that frictions in the form of delay or congestion provide a natural solution to the nonexistence problem. To show this, we extend the concept of competitive search equilibrium by Moen (1997) to markets with incomplete information. Our main result is that a separating equilibrium always exists. In particular, the separating equilibrium cannot be broken by a profitable pooling offer as the latter attracts only the lowest types in the population due to the ensuing congestion.

Why Peaches Must Circulate Longer than Lemons

This paper considers a competitive search market where sellers have private information about a good's quality. It is shown that separation of types may arise naturally if high-quality sellers derive a greater utility from search than low-quality sellers. For instance, sellers of high-quality goods may have to invest less time and money on repairs or spare parts than low-quality sellers or simply face a lower probability that the good breaks down before it is sold. In equilibrium, high-quality goods sell at a higher price, but also circulate longer than low-quality goods to ensure that low-quality sellers do not enter the market for high-quality goods. This holds even if an explicit sorting variable (e.g. warranties, advertising) does not exist. Moreover, all members of the short side of the market engage in trade, which is in contrast to the standard analysis where part of the short side of the market may not be served despite the presence of gains from trade

Seelsorge und Tröstung : Christian Scriver (1629-1693) Erbauungsschriftsteller und Seelsorger

Erstmals wird das Leben und Werk von Christian Scriver (02.01.1629-05.04.1693), lutherischer Pfarrer und Erbauungsschriftsteller, in einer wissenschaftlich-theologischen Dissertation umfassend dargestellt und aufgearbeitet. Biografie und Bibliografie sind auf dem aktuellen Stand dokumentiert. Beispiele von Scrivers Seelsorgepraxis, wie sie sich in seiner Erbauungsliteratur niederschlägt, werden dargestellt und für die heutige christliche Seelsorge-Diskussion fruchtbar gemacht

TO BE OR NOT TO BE PRICE-CONSCIOUS: A SEGMENT-BASED ANALYSIS OF COMPROMISE EFFECTS IN MARKET-LIKE FRAMINGS

Numerous researchers have investigated the compromise effect, according to which a middle option of a consideration set is assumed to be perceived more attractive by consumers, thus becoming more likely to be chosen than the extreme options. However, a closer examination of the experimental designs that were used in previous studies on compromise effects clearly reveals a lack of realism in terms of forced choices between fictitious options in hypothetical choice settings of student samples. In two consecutive studies, this article demonstrates that the compromise effect is robust even in an enhanced design that incorporates basic conditions of real purchase decisions in lab-based experiments. Specifically, the relative share of the middle option increases significantly in an overall analysis when experienced consumers make unforced decisions between real brands in a binding choice context. However, segmented analysis indicates substantial differences, meaning that (1) the compromise effect is strong and significant among quality-seeking consumers; whereas (2) the compromise effect is weak and insignificant among price-conscious subjects