Trust and controllability in venture capital fundraising

This study discusses a model of success in venture capital (VC) fundraising. We develop this model based on agency and trust theory. The model is tested against quantitative data collected from 151 limited partners (LP) with headquarters predominantly in North America and Europe. Beyond the well-known criterion of the VC firm's track record, results suggest that trust and perceived controllability shape the investment decisions of those LPs. Moreover, antecedents of these main factors are evaluated. In sum, this study shows how fundraising VC firms can systematically manage the fundraising process.     

The international wealth channel: a global error-correcting analysis

This article investigates empirically whether shocks to asset prices transmit into the trade balance through consumption and investment for a group of five of the world??s most industrialized countries. We refer to this transmission channel as the international wealth channel and estimate a GVAR model including 29 countries with quarterly data over the period 1981Q1?C2006Q4. Generalized impulse response functions show that after a negative stock price shock US and UK consumption decreases, followed by an improving trade balance. This pattern is also visible for France, but not for Germany and Japan. Stock price decreases are only associated with decreasing investment and an improving trade balance in the UK. For housing, we do find that a negative shock to UK housing prices decreases domestic investment and improves the trade balance. However, this pattern is not visible in the other countries. Finally, a domestic negative real exchange rate shock only has a significantly positive impact on the US trade balance.     

What Determines Financial Development? Culture,Institutions or Trade

This paper endeavours to determine in how far theories emphasising cultural values, dysfunctional institutions or impediments to trade can explain the vast differences in the size of financial systems across the globe. To account for endogeneity, an instrumental variables approach is pursued. For a cross-section of countries, we find that trade openness and institutions constraining the political elite from expropriating financiers tend to promote financial development. Conversely, there is only limited evidence that cultural beliefs and the cost of enforcing financial contracts significantly hamper financial development. JEL no.  F36, G2, O16     

Die Kosten des Klimaschutzes am Beispiel der Strompreise für private Haushalte

Power prices in Germany have been surging since the outset of the new millennium. Among the major reasons for this tendency are newly raised taxes and levies on electricity prices, whose introduction is primarily motivated by climate concerns. Without these taxes and levies, net electricity prices would have remained constant for private households. This article discusses these taxes and levies that have been responsible for the cost increases in private households’ electricity consumption. Most influential have been the feed-in tariffs for renewable energies, above all photovoltaics. According to our calculations, the levy for renewables will further increase in the up-coming years, thereby pushing consumers’ electricity cost once again. Our calculations also show that within the next couple of years, there will be a fierce competition among renewable energy technologies, most notably between photovoltaics and wind power. Politics would be well-advised, therefore, to limit the annual capacity of newly installed solar modules in order to avoid both the explosion of consumers’ electricity bills and strong competition among renewables.     

The First European Business Ethics Prize Essay

We are pleased to print here the winning entry for the 1995 European Business Ethics Essay Competition, which was sponsored jointly by the Foundation for Business Responsibilities and London Business School and to which entry was open to students for the MBA or equivalent management degree at any institution in Europe. The author, Mr Nils Elmark, subsequently gained his MSc degree in Public Relations at the Department of Marketing, University of Stirling, and is now with Marks and Brands, St. Kirkstrade 3, DK-1073 Copenhagen, Denmark.     

MEASUREMENT OF CAPITAL IN DENMARK

In December 1973, the so-called 2nd Perspective Plan was published by the Danish Ministry of Finance. It included some 5 and 15 year forecasts of investments in the private sector, based on the projected development of production and labour. The forecasts were made by use of a simple Cobb-Douglas production function, taking as capital-input the stock of buildings and machinery, using the perpetual inventory method (assuming sudden death).
Since the publication of these forecasts, an attempt has been made to refine the capital concept, measuring its services as factor input. Thus, it has been necessary to introduce an exogenous rate of interest. Inspired by Danish findings for private cars, depreciation functions for stocks and utility of machinery are developed. These functions may not seem very realistic for the heterogenous class of durables called machinery, but other possibilities appear even less convincing.
Together with an assumption of exponential decay for buildings, it is possible to produce alternative time-series for changes in input of capital in the production process. Some of the resulting estimates of parameters in the Cobb-Douglas function give a better fit than the original version. But no value of the elasticity of production of capital is firmly established, e.g. it is obviously dependant upon the period of estimation, and therefore of no great value in forecasting. No firm connection between labour productivity and capital input (in short as well as the long run) has so far been revealed in Denmark, so no measure of capital is yet of great use in forecasting, except when future growth in production resembles that of the past fairly closely.     

THE IRRATIONALITY OF ACTION AND ACTION RATIONALITY: DECISIONS, IDEOLOGIES AND ORGANIZATIONAL ACTIONS

Irrationality is a basic feature of organizational behaviour. Organizational decision making tends to be irrational, and organizational ideologies bias organizations’perceptions. Much effort has been spent on prescribing how organizations should achieve more rationality. However, rational decision making affords a bad basis for action. Some irrationalities are necessary requirements for organizational actions. Choices are facilitated by narrow and clear organizational ideologies, and actions are facilitated by irrational decision-making procedures which maximize motivation and commitment.     

Portfolio greenness and the financial performance of REITs

This paper investigates the effects of the energy efficiency and sustainability of commercial properties on the operating and stock performance of a sample of US REITs, providing insight into the net benefits of green buildings. We match data on LEED- and Energy Star-certified buildings with detailed information on REIT portfolios and calculate the share of green properties for each REIT over the 2000–2011 period. We estimate a two-stage regression model and document that the greenness of REITs is positively related to three measures of operating performance – return on assets, return on equity and the ratio of funds from operations to total revenue. We also document that there is no significant relationship between the greenness of property portfolios and abnormal stock returns, suggesting that stock prices already reflect the higher cash flows deriving from investments in more efficient properties. However, REITs with a higher fraction of green properties display significantly lower market betas.