Zaccaria, Luana
(2016)
Essays in corporate finance.
PhD thesis, London School of Economics and Political Science.
Abstract
In most countries financial authorities regulate capital markets by monitoring banks’ lending activity and imposing disclosure requirements on issuers of publicly traded securities. However, most companies’ financial claims are not listed and many different investors, outside of the banking industry, affect credit expansion and capital provision to the real economy. Examples of non-banks capital providers include venture capital firms and money market funds. This PhD thesis focuses on the growing and largely unsupervised finance arena that lies outside of traditional banking intermediation or public capital markets. In the first chapter, “Are Family and Friends the Wrong Investors? Evidence from U.S. Start-ups”, I investigate the effects of funding from family and friends on firms’ subsequent access to venture capital. To address potential endogeneity of informal finance, I use an instrument that hinges on founders’ family size as an exogenous constraint on the supply of informal funds. My results show that informal finance reduces the probability of future financing events. In the second chapter, “Private Capital Markets and Entrepreneurial Debt: Evidence from U.S. Unregistered Securities Offerings” co-authered with Dr. Juanita Gonzalez-Uribe, we investigate the use of non-bank private debt by very early stage firms. Contrary to many accounts of start-up activity, we document that entrepreneurial firms have an important reliance on private debt. We show that late stage rounds are 3% more likely to be conducted with debt contracts but we find little evidence that collateral availability affects the issuance of private debt. Finally, in “Discipline in the Securitization Market”, I examine how investors’ sophistication in securitization markets affects efficiency of credit generation and loan performance. I find that it is never optimal to have a perfectly informed Buy Side, as it would constrain high quality credit generation. Furthermore, market discipline is facilitated by high risk free rates and diminished volatility in loan payoffs.
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