Open Access. Powered by Scholars. Published by Universities.®
Finance and Financial Management Commons™
Open Access. Powered by Scholars. Published by Universities.®
Articles 1 - 2 of 2
Full-Text Articles in Finance and Financial Management
Islamic Profit And Loss Sharing Contracting Versus Regular Equity In Entrepreneurial Finance: Risk Sharing And Managerial Incentives, Abdulali Hadizada, Peter Nippel
Islamic Profit And Loss Sharing Contracting Versus Regular Equity In Entrepreneurial Finance: Risk Sharing And Managerial Incentives, Abdulali Hadizada, Peter Nippel
The Journal of Entrepreneurial Finance
An entrepreneur shares business risk with the investors providing capital for her firm. Risk sharing is per se beneficial, but also results in an agency problem from diminished incentives for the entrepreneur. This classical trade-off depends on the financial contracting between the entrepreneur and the financier. As an alternative to debt or equity, we consider musharaka financing, an Islamic profit and loss sharing contract. First, we show that debt is inferior to equity or musharaka even though debt financing ensures first best efforts in our model. Whether financing with equity or by use of musharaka results in higher utility for …
A High-Tech Start-Up’S Debt Financing Strategy: Implications For Valuing Soft Information, Hyunsung D. Kang
A High-Tech Start-Up’S Debt Financing Strategy: Implications For Valuing Soft Information, Hyunsung D. Kang
The Journal of Entrepreneurial Finance
How does entrepreneurial financing differ from traditional financing? This study sheds new light on this central question of entrepreneurial finance literature by exploring the distinctive role of soft information in a high-tech start-up’s debt financing. Entrepreneurial investors can obtain soft information from strong relationships with potential investees and use the information to evaluate and select promising investees. Using a dataset on 683 SBA 7(a) loan activities involved with information technology based start-ups, this study provides empirical evidence that high-tech start-ups tend to experience a lower rate of default if they are located close to the lending banks and the lending …