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The Resource Equity Financing of the Entrepreneurial Firm

Equity Financing of the Entrepreneurial Firm

Label
Equity Financing of the Entrepreneurial Firm
Title
Equity Financing of the Entrepreneurial Firm
Creator
Author
Subject
Summary
Equity financing of entrepreneurial firms has achieved a rapid increase over the past decade. Venture capital funds, which finance privately held start-ups, raised a record $92.3 billion in 2000. This is a 30-fold increase relative to 1990. At Nasdaq, initial public offerings raised an all-time high of $53.6 billion in 2000, which is 24 times as much as in 1990. This article studies venture equity financing and equity financing through initial public offerings against the background of asymmetric information between the entrepreneur and the (outside) investor. The analysis shows that venture capital financing (1) is superior to initial public offerings when the entrepreneur has low initial wealth relative to the size of the project and (2) is equivalent otherwise. This result highlights the importance of private equity in financing entrepreneurial enterprises. The Gramm-Leach-Bliley Act of 1999 allows banks to expand the scope of their activities in this arena. The act allows financial holding companies to provide equity financing to non-financial enterprises for up to ten years. In particular, the act defines a framework in which financial holding companies can sponsor private equity funds that may provide venture capital to entrepreneurial start-ups
http://library.link/vocab/creatorName
Schmid, Frank A
Label
Equity Financing of the Entrepreneurial Firm
Instantiates
Publication
Note
1249
Control code
ICPSR01249.v1
Governing access note
Access restricted to subscribing institutions
Label
Equity Financing of the Entrepreneurial Firm
Publication
Note
1249
Control code
ICPSR01249.v1
Governing access note
Access restricted to subscribing institutions

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