Equity crowdfunding (ECF) has potential benefits that might be attractive to high-quality entrepreneurs, including fast access to a large pool of investors and obtaining feedback from the market. However, there are potential costs associated with ECF due to early public disclosure of entrepreneurial activities, communication costs with large pools of investors, and equity dilution that could discourage future equity investors; these costs suggest that ECF attracts low-quality entrepreneurs. In this paper, we hypothesize that entrepreneurs tied to more risky banks are more likely to be low-quality entrepreneurs and thus are more likely to use ECF. A large sample of ECF campaigns in Germany shows strong evidence that connections to distressed banks push entrepreneurs to use ECF. We find some evidence, albeit less robust, that entrepreneurs who can access other forms of equity are less likely to use ECF. Finally, the data indicate that entrepreneurs who access ECF are more likely to fail.

This study investigates the association between CEO perquisites and bank loan spreads. We collect detailed data on CEO perquisites from the proxy statements of S&P 500 firms between 1993 and 2015 to study this issue. The empirical evidence supports the agency cost view that the lending banks demand significantly higher returns (spread), more collateral, and stricter covenants from firms with higher CEO perquisites. We further confirm that the effect of these perquisites remains after we control for various corporate governance and agency cost factors. We conclude that banks consider CEO perquisites as a type of agency cost when they make lending decisions.

We investigate how VC participation affects the failure of startups. Using a unique dataset of the survival of peer-to-peer (P2P) platforms in China, we identify two types of failures, bankruptcy, and run off with investors' money. The Competing Risk Model results show that while VC participation reduces bankruptcy hazard, it has little impact on the runoff failures. The findings are robust to the use of matched subsamples that disentangle the influence of pre-investment screening by VC. Further analysis of exit routes reveals that conditional on failure, VC participation is associated with a higher chance of running for the exit.

This paper examines the effect of credit rating disagreements on merger and acquisition (M&A) decisions. We show that acquirers with split ratings prefer to use stock to finance their acquisitions. More importantly, we find that acquirers with split ratings experience lower announcement returns. Further analysis shows that overpayment by acquirers with split ratings is concentrated in acquirers with entrenched managers. Our results are robust to alternative identification strategies. Overall, our evidence indicates that credit rating disagreements are heavily priced in the M&A market.

Career-concerned analysts are averse to firm risk. Not only does higher firm risk require more effort to analyze the firm, thus constraining analysts' ability to earn more remuneration through covering more firms, but it also jeopardizes their research quality and career advancement. As such, career concerns incentivize analysts to pressure firms to undertake risk-management activities, thus leading to a lower cost of debt. Consistent with our hypothesis, we find a negative association between analyst career concerns and bank loan spreads. In addition, our mediation analysis suggests that this association is achieved through the channel of reducing firm risk. Additional tests suggest that the effect of analyst career concerns on loan spreads is more pronounced for firms with higher analyst coverage. Our study is the first to identify the demand for risk management as a key channel through which analysts help reduce the cost of debt.

This paper estimates relative risk aversion using the observed shares of risky assets and characteristics of households from the Household Finance and Consumption Survey of the European Central Bank. Given that the risky share is a fractional response variable belonging to [0, 1], this paper proposes a censored fractional response estimation method using extremal quantiles to approximate the censoring thresholds. Considering that participation in risky asset markets is costly, I estimate both the heterogeneous relative risk aversion and participation cost using a working sample that includes both risky asset holders and non-risky asset holders by treating the zero risky share as the result of heterogeneous self-censoring. Estimation results show lower participation costs and higher relative risk aversion than what was previously estimated. The estimated median relative risk aversions of eight European countries range from 4.6 to 13.6. However, the results are sensitive to households’ perception of the risky asset market return and volatility.