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Author: C. Edward Fee Publisher: ISBN: Category : Languages : en Pages :
Book Description
Recent theoretical work suggests that outside equity monitoring and control come with costs as well as benefits, especially in small, entrepreneurial firms. These costs arise when outside investors undervalue any private benefits of control that may accrue to an entrepreneur. The resulting hold-up problems may reduce the entrepreneur's incentives to invest personal effort into the firm. This paper investigates the financing of individual motion pictures in light of a tradeoff between better monitoring and better creative effort. Filmmakers have the choice of using studio funds (and giving up control) or of obtaining independent financing (and retaining control.) Consistent with arguments in the literature on investor control, I find that independent motion picture finance is more common when a filmmaker's private artistic stake in the film is high and for films requiring a high level of creative effort. This paper also investigates the role of several other factors, the most important of which is reputation, in financial contracting. I find that a filmmaker's commercial reputation affects the amount of resources independent investors, without control, are willing to provide. In contrast, studio investors, who maintain high levels of monitoring and control, appear relatively less concerned about reputation.
Author: C. Edward Fee Publisher: ISBN: Category : Languages : en Pages :
Book Description
Recent theoretical work suggests that outside equity monitoring and control come with costs as well as benefits, especially in small, entrepreneurial firms. These costs arise when outside investors undervalue any private benefits of control that may accrue to an entrepreneur. The resulting hold-up problems may reduce the entrepreneur's incentives to invest personal effort into the firm. This paper investigates the financing of individual motion pictures in light of a tradeoff between better monitoring and better creative effort. Filmmakers have the choice of using studio funds (and giving up control) or of obtaining independent financing (and retaining control.) Consistent with arguments in the literature on investor control, I find that independent motion picture finance is more common when a filmmaker's private artistic stake in the film is high and for films requiring a high level of creative effort. This paper also investigates the role of several other factors, the most important of which is reputation, in financial contracting. I find that a filmmaker's commercial reputation affects the amount of resources independent investors, without control, are willing to provide. In contrast, studio investors, who maintain high levels of monitoring and control, appear relatively less concerned about reputation.
Author: Stewart C. Myers Publisher: ISBN: Category : Languages : en Pages : 52
Book Description
This paper explores the necessary conditions for outside equity financing when insiders, that is managers or entrepreneurs, are self-interested and cash flows are not verifiable. Two control mechanisms are contrasted: a partnership,' in which outside investors can commit assets for a specified period, and a corporation,' in which assets are committed for an indefinite period but insiders can be ejected at any time. The paper also shows how going public to reduce outsiders' power can be efficient if it preserves appropriate incentives for insiders. The concluding section explains how the difficulty of verifying the act of investment leads to monitoring costs and insiders' pursuit of private benefits of control.
Author: Kerstin Groß Publisher: Springer Science & Business Media ISBN: 3790819344 Category : Business & Economics Languages : en Pages : 380
Book Description
The empirical studies presented in this book model the endogeneity by applying the simultaneous equations methodology on the relation of ownership and financial performance as well as on different ownership dimensions themselves. Its final model comprises a four equations system containing performance, general ownership concentration, managerial and institutional ownership.
Author: Frederico Belo Publisher: ISBN: Category : Assets (Accounting) Languages : en Pages : 60
Book Description
The ability of corporations to finance its operations by issuing new equity varies with macroeconomic conditions, because the time varying macroeconomic conditions affect investors' (or workers') willingness to pay for new equity. We document that an empirical proxy of the shocks to the cost of equity issuance captures systematic risk in the economy, even controlling for the impact of aggregate productivity (or stock market) shocks. Exposure to this shock helps price the cross section of stock returns including book-to-market, size, investment, debt growth, and issuance portfolios. We then propose a dynamic investment-based model that features an aggregate shock to the firms' cost of external equity issuance, and a collateral constraint. Our central finding is that time-varying external financing costs are important for the model to quantitatively capture the joint dynamics of firms' real quantities, financing flows, and asset prices. Furthermore, the model also replicates the failure of the unconditional CAPM in pricing the cross-sectional expected returns.
Author: Noam Wasserman Publisher: Princeton University Press ISBN: 0691158304 Category : Business & Economics Languages : en Pages : 490
Book Description
The Founder's Dilemmas examines how early decisions by entrepreneurs can make or break a startup and its team. Drawing on a decade of research, including quantitative data on almost ten thousand founders as well as inside stories of founders like Evan Williams of Twitter and Tim Westergren of Pandora, Noam Wasserman reveals the common pitfalls founders face and how to avoid them.
Author: Mohamed Belkhir Publisher: International Monetary Fund ISBN: 1513519808 Category : Business & Economics Languages : en Pages : 44
Book Description
Using a sample of publicly listed banks from 62 countries over the 1991-2017 period, we investigate the impact of capital on banks’ cost of equity. Consistent with the theoretical prediction that more equity in the capital mix leads to a fall in firms’ costs of equity, we find that better capitalized banks enjoy lower equity costs. Our baseline estimations indicate that a 1 percentage point increase in a bank’s equity-to-assets ratio lowers its cost of equity by about 18 basis points. Our results also suggest that the form of capital that investors value the most is sheer equity capital; other forms of capital, such as Tier 2 regulatory capital, are less (or not at all) valued by investors. Additionally, our main finding that capital has a negative effect on banks’ cost of equity holds in both developed and developing countries. The results of this paper provide the missing evidence in the debate on the effects of higher capital requirements on banks’ funding costs.
Author: Harold L. Vogel Publisher: Cambridge University Press ISBN: 113946499X Category : Business & Economics Languages : en Pages : 503
Book Description
In this newly revised book, Harold L. Vogel examines the business economics of the major entertainment enterprises: movies, music, television programming, broadcasting, cable, casino gambling and wagering, publishing, performing arts, sports, theme parks, and toys and games. The seventh edition has been further revised and broadened and differs from its predecessors by restructuring and repositioning the previous Internet chapter, including new material on the economics of networks and advertising, adding a new section on policy implications, and further expanding the section on recent theoretical work pertaining to box-office behaviour. The result is a comprehensive up-to-date reference guide on the economics, financing, production, and marketing of entertainment in the United States and overseas. Investors, business executives, accountants, lawyers, arts administrators, and general readers will find that the book offers an invaluable guide to how entertainment industries operate.
Author: Najah Attig Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
In this paper, we examine whether the presence of multiple large shareholders alleviates firm's agency costs and information asymmetry embedded in ultimate ownership structures. We extend extant corporate governance research by addressing the effects of multiple large shareholders on firm's cost of equity capital - a proxy for firm's information quality. Using data for 1,165 listed corporations from 8 East Asian and 13 Western European countries, we find evidence that the implied cost of equity decreases in the presence of large shareholders beyond the controlling owner. We also find that the voting rights, the relative voting size (vis-a-vis the first largest shareholder) and the number of blockholders reduces firm's cost of equity. Interestingly, we uncover that the presence of multiple controlling shareholders with comparable voting power lowers firm's cost of equity. We also find that the identity of the second largest shareholder is important in determining the risk of corporate expropriation in family-controlled firms. Our regional analysis reveals that, mainly in East Asian firms, multiple large shareholders structures exert an internal governance role in curbing private benefits and reducing information asymmetry evident in cost of equity financing, perhaps to sidestep deficiencies in the external institutional environment.
Author: Zsuzsanna Fluck Publisher: ISBN: Category : Languages : en Pages : 44
Book Description
This paper investigates the optimal design of long-term financial contracts when future investments are non-contractible ex-ante.We show that creditors are willing to write long-term debt if they are granted the right to replace the manager, extend debt maturity and take over the company as a going concern upon default. It is the combination of these control rights that makes these contracts sustainable. The threat of dismissal induces the manager to comply with the contract and make appropriate investments during the life of the contract even when these investments cannot be contracted upon. But it is the creditors' ability to extend the maturity of the contract upon default that makes this threat credible. We further show that if equity and debt has the same concentration, equally strong legal rights and if there are no tax benefits of holding debt, then a project that can raise long-term debt can also raise outside equity but the reverse is not true: there are projects that cannot issue debt but may still obtain outside equity financing. This is so because of the nature of the debtholders' control rights in no-default states. Since debtholders have contingent control rights, they cannot exercise control unless default has occurred. Hence, the manager can plan his strategic default ahead of time and milk the assets prior to default. For this reason, strategic default is more profitable for the manager when debt is used. Hence, the manager demands a higher compensation threshold in the case of debt financing. This is an endogenous indirect bankruptcy cost. The presence of this cost provides a rationale for a tax code that favors debt. With a code that allows for the tax-deductibility of interest, competition among investors increases since investors can trade off this bankruptcy cost against the tax benefits of debt. When interest is tax-deductible, projects with safe cash flows will strictly prefer to raise debt and projects with more volatile cash flows will issue outside equity.
Author: C. Edward Fee
Author: C. Edward Fee
Author: Stewart C. Myers
Author: Kerstin Groß
Author: Frederico Belo
Author: Noam Wasserman
Author: Mohamed Belkhir
Author: Thi Hong Nga Nguyen
Author: Harold L. Vogel
Author: Najah Attig
Author: Zsuzsanna Fluck