Personal Equity Investment and Small Business Financial Difficulties

Carter, Richard B.; Auken, Howard E. Van

doi:10.1177/104225879101500206

Cited by 26 publications

(16 citation statements)

References 10 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A theory proposed by Leland and Pyle (1977) and partially tested by Carter and Van Auken (1990) suggests that when founders perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the initial investment (Chandler and Hanks, 1998). Thus, in the presence of liquidity constraints, equity will increase and debt will decrease when perceived entrepreneurial risk is low.…”

Section: Start-up Capital: Theoretical Underpinningsmentioning

confidence: 92%

“…Owners of smaller firms operate without targeting optimal capital structures but show a preference to those financial sources that minimize external intrusion into their business (Hamilton and Fox, 1998). Moreover, Carter and van Auken (1990) related the risk of small business creation to insufficient capitalization and high debt loads arguing that the structure of initial capitalization is a contributing factor to the success or failure of small business. Taking into account asymmetric information, access to the various financial resources will be dictated by the degree of credit rationing and the operation of high risk premiums as well as the owner's personal characteristics and attitudes towards business control.…”

Section: Start-up Capital: Theoretical Underpinningsmentioning

confidence: 98%

“…Following this argument, they show explicitly that if switching is a function of assets, then credit rationing exists and the structure of start-up capital is severely affected. In addition, it is suggested that perceived entrepreneurial risk, i.e., the entrepreneurs' personal judgment about the likelihood of the success of their enterprise, is revealed by their personal equity investment in the firm (Carter and Van Auken, 1990).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

2005

View full text Add to dashboard Cite

It is argued that when founders of SMEs perceive the probability of a successful and lucrative venture to be greater, they are more likely to provide a greater proportion of the start-up capital. This paper provides an empirical examination of two concurrent hypotheses. Firstly, that the size of the debt or equity is affected by factors influencing perceived entrepreneurial risk. Secondly, that the location of the market for the firm’s output is a major factor reducing perceived entrepreneurial risk and increasing equity of the start-up capital. A statistical analysis based on the simultaneous tobit model is used. Results show that significant factors influencing risk perception include the size of the new business and the sector of economic activity, as well as entrepreneurial experience and the location of the markets for the firm’s output. The results highlight implications for the design and implementation of rural development policies and especially for the instruments supporting rural business creation. Copyright Springer 2005

show abstract

Section: Start-up Capital: Theoretical Underpinningsmentioning

confidence: 92%

Section: Start-up Capital: Theoretical Underpinningsmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

2005

View full text Add to dashboard Cite

show abstract

“…Factors such as stage of product development, risk, availability of capital, firm type, ownership structure, and sales history affect the sources and amounts of capital that are most appropriate to pursue (Cassar, 2004;Timmons and Spinelli, 2004). In addition, the success of an entrepreneur's search for capital will be determined in part by the investment preferences of the providers of capital; factors that affect investment decisions include level of investment, type of firm, length of time, expected return on investment, growth potential, and risk tolerance (Carter and Van Auken, 1990). Different investors often have different motivations for and expectations from their investments in small firms.…”

Section: Small Firm Capital Acquisitionmentioning

confidence: 99%

A Model of Small Firm Capital Acquisition Decisions

Auken

2005

Entrepreneurship Mgt.

Self Cite

View full text Add to dashboard Cite

This paper presents a model that describes the dynamics of small firm capital acquisition decisions. The model proposes that the primary factors influencing capital acquisition decisions are (1) availability of information, (2) ease of capital acquisition, (3) owner's goals, and (4) terms of external providers of capital. The paper discusses the relationships between these primary influence variables and capital acquisition decisions. A better understanding of the factors influencing capital acquisition can provide insight into the process by which small firms make capital acquisition decisions. A better understanding of these dynamics can also lead to improved support systems and conditions for small businesses that may be searching for capital. Insight from the model can be useful for business owners, business consultants, and classroom instructors.

show abstract

“…Zimmerman (2008) thinks that TMT heterogeneity provides a signal to potential investors about the quality of IPO which is associated with greater capital accumulations in the future. Other researches find that the higher the proportion of firm shares held by its TMT, the more possibility to affect the issue price of IPO positively (Carter and Auken 1990;Certo 2003).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Impact of insiders and outsiders of entrepreneurial firms on valuation in initial public offering

Xie

2014

J. of Chin. Management

View full text Add to dashboard Cite

The studies of initial public offering pricing had been a popular interest of academic research recently, but there is still little study for entrepreneurial firms now. Under the asymmetric information hypothesis and signaling theory, we try to find some factors affecting the initial public offering pricing of entrepreneurial firms. Based on the 153 listed firms on China's Growth Enterprise Market, we do an empirical test for the correlation between initial public offering pricing and board of director independency, top management team ownership, venture capital existence, and reputation of underwriter. Finally, some research hypotheses are verified. As a result, we find that the top management team's ownership is significantly correlated to initial public offering pricing which means that the top management team plays a more important role in pricing of entrepreneurial firms as an insider, compared to board of director independency as an outsider's role. Also, we find that venture capital backing is significantly correlated to initial public offering pricing while underwriter reputation is not, which means that venture capital plays a more important role in pricing of entrepreneurial firms as an insider after it invested, compared to underwriter as an outsider.

show abstract

Personal Equity Investment and Small Business Financial Difficulties

Cited by 26 publications

References 10 publications

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

The Location of Markets, Perceived Entrepreneurial Risk, and Start-up Capital of Micro Rural Firms

A Model of Small Firm Capital Acquisition Decisions

Impact of insiders and outsiders of entrepreneurial firms on valuation in initial public offering

Contact Info

Product

Resources

About