An analysis of adverse selection, entrepreneurial activity, and the decision to go public
Tóm tắt
We study a regional economy with a large number of entrepreneurs who own firms and who want to go public. Specifically, our analysis focuses on the contractual interaction between a representative risk averse entrepreneur who owns a firm and a risk neutral monopolistic investment bank that proposes the terms of the initial public offering (IPO) that is placed in the market. First, we determine the terms of the IPO when there is full information. Second, we describe the attributes of the entrepreneur/bank contractual interaction when this interaction is framed as a screening problem with adverse selection. Third, we solve this screening problem fully and then we discuss the properties of the optimal solution. Finally, we point out how the preceding optimal solution is impacted when there is competition between investment banks.
Tài liệu tham khảo
Acs, Z.J., Braunerhjelm, P., Audretsch, D.B., Carlsson, B.: The knowledge spillover theory of entrepreneurship. Small Bus. Econ. 32, 15–30 (2009)
Audretsch, D.B.: Sustaining innovation and growth: public policy support for entrepreneurship. Ind. Innov. 11, 167–191 (2004)
Audretsch, D.B., Aldridge, T.T.: Knowledge spillovers, entrepreneurship, and regional development. In: Capello, R., Nijkamp, P. (eds.) Handbook of Regional Growth and Development Theories. Edward Elgar, Cheltenham (2009)
Batabyal, A.A.: On the irrelevance of collusion in perfectly correlated environments. Int. Rev. Econ. Finance 7, 393–405 (1998)
Batabyal, A.A., Beladi, H.: Private information, entrepreneurial investment, and debt repayment in an open regional economy. Unpublished Manuscript, Rochester Institute of Technology (2009)
Batabyal, A.A., Nijkamp, P.: Is there a tradeoff between average patent pendency and examination errors? Int. Rev. Econ. Finance 17, 150–158 (2008)
Batabyal, A.A., Nijkamp, P.: Asymmetric information, entrepreneurial activity, and the scope of fiscal policy in an open regional economy. Unpublished Manuscript, Rochester Institute of Technology (2009)
Bernheim, B.D., Whinston, M.D.: Common agency. Econometrica 54, 923–942 (1986)
Bolton, P., Dewatripont, M.: Contract Theory. MIT Press, Cambridge (2005)
Brophy, D.J., Shulman, J.M.: A finance perspective on entrepreneurship research. Entrep. Theory Pract. 16, 61–71 (1992)
Buera, F.J.: A dynamic model of entrepreneurship with borrowing constraints: theory and evidence. Ann. Finance 5, 443–464 (2009)
Certo, S.T., Daily, C.M., Dalton, D.R.: Signaling firm value through board structure: an investigation of initial public offerings. Entrep. Theory Pract. 26, 33–50 (2001)
Cumming, D., Johan, S.: Preplanned exit strategies in venture capital. Eur. Econ. Rev. 52, 1209–1241 (2008)
Deeds, D.L., Decarolis, D., Coombs, J.E.: The impact of firm specific capabilities on the amount of capital raised in an initial public offering: evidence from the biotechnology industry. J. Bus. Venturing 12, 31–46 (1997)
Fischer, M.M., Nijkamp, P.: Entrepreneurship and regional development. In: Capello, R., Nijkamp, P. (eds.) Handbook of Regional Growth and Development Theories. Edward Elgar, Cheltenham (2009)
Fischer, M.M., Scherngell, T., Jansenberger, E.: The geography of knowledge spillovers between high technology firms in Europe: evidence from a spatial interaction modeling perspective. Geogr. Anal. 38, 288–309 (2006)
Kreps, D.M.: A Course in Microeconomic Theory. Princeton University Press, Princeton (1990)
Malecki, E.J.: Technology and Economic Development. Addison-Wesley/Longman, Harlow (1997)
McCormick, B., Wahba, J.: Overseas work experience, savings, and entrepreneurship amongst return migrants to LDCs. Scot. J. Polit. Econ. 48, 164–178 (2001)