The Role of Agents in Private Entrepreneurial Finance

Abstract:     
In this paper we examine for the first time the role of agents in private-market entrepreneurial financings. After controlling for the endogenous issuer-agent matching and a whole host of other potential determinants, the empirical findings in this paper indicate that agents attract more investors, broaden the geographic investor and capital base, and increase the percentage of investors and capital from investors that are most vulnerable to the costs of information asymmetry. We also find that more reputable agents generally provide a higher quality service than less reputable agents, and consequently charge higher fees. Our findings provide strong support for the certification and networking role of agents in the private entrepreneurial financing market, and no support for the idea that agents use their market power to take advantage of private entrepreneurial firms.

Number of Pages in PDF File: 61

Keywords: Private financing, Agent, Information asymmetry, Certification, Networking

JEL Classification: G24, G32

working papers series