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Abstract:
Assuming a demand-side point of view, i.e., the view of owner-managers of small and medium enterprises (SME), we identify the drivers and inhibitors of the utilisation of private equity. Subsequently, we test these using survey data. Intention to finance with private equity explains the variations in actual private equity utilisation (R² = 31 %). Attitude, social norm and perceived behaviour control determine intention (R² = 57 %). Attitude towards financing with PE is mainly driven by perceived value addition, followed by the negative influence of perceived loss of control and perceived risks for the business. Social norm is mainly explained by the normative influence of external consultants (especially bankers and auditors). However, the strength of these influencing factors varies for different groups of SME. Our results lead to several suggestions with respect to how PE offers for SME should be designed to bring about maximum intention, and, consequently, also a higher probability of success. SME PE should be packaged with hands-on involvement, rely on monitoring by means of milestones and supervisory council control, and should avoid interfering with operations and the ownermanagers' relationship with core personnel. It is best distributed through the involvement of intermediaries, especially banks. In family businesses, the family should be involved in the PE process. With regard to theory implications, we reconfirm and deepen the applicability of the Theory of Planned Behaviour (TPB) to SME financing questions. We draw special attention to attitude and social norms as variables of relevance in the complex interplay of factors affecting the SME financing behaviour. Moreover, based on our multivariate approach, we suggest that factors like the influence of external consultants, family and value adding activities are of equal importance to a small or medium enterprise’s financial decision making as obtaining capital, avoiding loss of control and risk considerations. This all brings us to the conclusion that, in order to integrate the full scope of relevant variables, a descriptive-inductive approach to SME capital structure choice may be justified, at least as much as a prescriptive-deductive one.

finance paradigm, private equity, SME financing, SME capital structure decision, Theory of Planned Behaviour (TPB)

Abstract:
Using a hand-collected sample of contracts and investment proposals from German venture capital financing relationships, we analyze specific incentive conflicts. We apply indirect and direct measures of these problems and extend the direct approach by Kaplan and Strömberg (2004) to a four- instead of a three-factor analysis. This enables us to distinguish better between hidden action and hold-up problems. Moreover, we find several differences between our German sample and the results of US studies that may be caused by the different role of debt finance. Furthermore, the superiority of direct indicators is more pronounced for Germany than for the US.

agency conflicts, covenants, German capital market, hold-up problems, venture capital

Abstract:
Using a hand-collected sample of contracts and investment proposals from German venture capital (VC) financing relationships, we find that experienced and or private law/independent VC firms rely to a lesser degree on debt financing and more on certain covenants in VC contracting even when we control for direct risk indicators as introduced by Kaplan and Strömberg (2004). However, risk indicators determine VC contracting even when differences in VC types are taken into account. Differences in risk perception across different VC types are not as pronounced as differences in contracting. This may imply that different VC types are primarily distinguished from each other by their respective capability of avoiding negative incentive effects of too tight contracting arrangements and only secondarily by their subjective evaluation of the relevance of certain incentive problems.

Covenants, German capital market, risk indicators, venture capital, corporate governance

Abstract:
This paper analyzes the positions that Venture Capital firms hold in a syndication network and determines the effect that network positions have on generating deal flow quantity and quality. Using data on syndicated investments in the German venture capital market and data on the deal flow of the firms, we show that those firms that hold network positions characterized by network openness have a higher deal flow quantity and quality.

German capital market, syndication network, venture capital, deal flow

Abstract:
We empirically investigate possible reasons for successful syndications in private equity transactions. To this end, we analyze the answers of 115 private equity firms regarding relevant resources of potential syndication partners. Based on structural equation modeling we find that only three out of six main resources of potential syndication partners have a significantly positive impact on the perceived success of a private equity syndication: financial resources, organizational network and a syndication partner's reputation. Rather remarkably, shorter distances between a potential syndication partner and the portfolio firm have a significantly negative influence on the perceived success of a syndication, while a partner's implicit knowledge and experience as well as issues of the organizational culture are of no significant importance.

Notice: Paper is written in German.

G24, G32, G34

Abstract:
We develop properties of abnormal return for equity offers that have been timed to periods of firm-specific overvaluation and empirically test a sample of 174 equity carve-outs for these characteristics. While carve-outs exhibit clear signs of market timing, these phenomena are not detectable uniformly across time but can be traced to the 1998-2000 "hot-market" period. Our arguments imply that pre-offer run-ups of abnormal return and decreasing cross-sectional variance of event-time post-offer abnormal return, rather than long-term underperformance or the level of a market index, can serve as indicators for market timing. Results provide a basis to empirically reassess the time variance of long-term IPO and SEO performance.

pulic offering, market timing, market efficiency