Do Social Enterprises Finance Their Investments Differently from For-profit Firms? The Case of Social Residential Services in Italy

Abstract

Using a longitudinal data set of balance sheets of 504 nonpro…t and for-pro…t …rms operating in the social residential sector in Italy, we investigate the relationship between capital structure and type of enterprise. The nondistribution constraint typical of nonpro…t organizations increases the fraction of own capital on total investment: this is shown, by means of a theoretical moral hazard model, to reduce their leverage (i). By contrast, the intrinsecally high commitment of nonpro…t entrepreneurs weakens the moral hazard problem: this augments leverage (ii). Our empirical analysis shows that once control for observable characteristics for-pro…t companies have a leverage 6% higher than nonpro…t enterprises, even if the latter faces lower credit costs. We explain this …nding by arguing that e¤ect (i) prevails on e¤ect (ii).

Crowdfunding for environmental ventures: an empirical analysis of the influence of environmental orientation on the success of crowdfunding initiatives

“…However, environmental ventures commonly experience difficulties to acquire funding (Brown and Murphy, 2003;Fedele and Miniaci, 2010;O'Rourke, 2010). This phenomenon can be explained by different fundamental logics between conventional investors and environmental entrepreneurs.…”

Understanding mechanisms in the social investment market: what are venture philanthropy funds financing and how?

“…Edery (2006) observes increased credit options for UK social enterprises and argues that these increased credit options result from raised ethical awareness. Fedele and Miniaci (2010) analyze the capital structure of Italian social enterprises and find that for-profit companies have higher leverage than nonprofit enterprises that are active in the same field. Brown (2006) uses the implications of liquidation, income, appreciation, voting, and transfer ownerships rights to highlight different options for the equity financing of social enterprises.…”

Unlocking finance for social tech start-ups: Is there a new opportunity space?

“…In this case, social tech start-ups are not attractive or less attractive for the investors with any form of financial returns expectations. On the other hand, the non-distributive restriction represents a protection for grant providers, resulting in a competitive advantage in the donations' market (Glaeser and Shleifer, 2001;Fischer, Wilsker, and Young, 2011;Fedele and Miniaci, 2010).…”