Advances in Entrepreneurial Finance - With Applications from Behavioral Finance and Economics

Advances in Entrepreneurial Finance - With Applications from Behavioral Finance and Economics

von: Rassoul Yazdipour

Springer-Verlag, 2010

ISBN: 9781441975270 , 254 Seiten

Format: PDF

Kopierschutz: Wasserzeichen

Windows PC,Mac OSX Apple iPad, Android Tablet PC's

Preis: 154,69 EUR

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Mehr zum Inhalt

Advances in Entrepreneurial Finance - With Applications from Behavioral Finance and Economics


 

Advances in Entrepreneurial Finance

3

Foreword

5

Contents

7

Contributors

9

Chapter 1: Introduction

11

1.1 Part I: The Theoretical Foundation of Entrepreneurial Finance

12

1.2 Part II: Issues in Financing Start-ups and SMEs

15

1.3 Part III: Issues in Growth and Beyond

17

References

18

Part I: Theoretical Foundation

19

Chapter 2: A Behavioral Finance Approach to Decision Making in Entrepreneurial Finance

20

2.1 Introduction

21

2.2 The Entry/Seed Funding Decisions: Problems and Existing Solutions

22

2.2.1 Central Questions in a Launch Decision

22

2.2.2 Markets for Venture Capital

23

2.2.3 Traditional Finance and Economics’ Response to Launch Decisions

23

2.3 A Behavioral Approach to Decision Making in Entrepreneurial Finance

24

2.3.1 Perception Asymmetry

25

2.3.2 Resident Risks and Behavioral Risks: Toward a Behavioral Risk Model

26

2.3.2.1 Resident Risk: Risk as the “Other Side of a Business Opportunity Coin”

27

2.3.2.2 Determinants of Resident Risk

27

2.3.2.3 Behavioral Risks

28

2.3.2.4 Behavioral Risk Processes

28

2.3.3 Individual Decision Making in Highly Uncertain Entrepreneurial Settings: A Discussion and Some Final Thoughts

29

2.4 Summary and Some Suggestions for Future Research

30

2.5 Appendix 1: The Prospect Theory

31

2.5.1 The Editing or Framing Phase

31

2.5.2 Editing Operations

32

2.5.3 The Evaluation Phase

32

2.6 Appendix 2: The Affect Heuristic

32

2.7 Appendix 3: Other Heuristics and Biases

33

2.7.1 Representativeness (Similarity)

34

2.7.2 Availability

35

2.7.3 Anchoring, Adjustment, and Contamination

36

2.7.4 Overconfidence Heuristics and Calibration

36

2.7.5 Hindsight Heuristics

37

2.7.6 Others: Black Swan Phenomenon

37

References

38

Chapter 3: Beyond Agency Theory: Value Creation and the Role of Cognition in the Relationship Between Entrepreneurs and Ventur

39

3.1 Introduction

39

3.1.1 Background and Overview

39

3.2 Entrepreneurial Ventures and Value Creation in an Agency Setting

41

3.3 Cognitive Cost and Cognitive Value Inherent in Entrepreneur–Investor Relations

43

3.4 Conditions of Value Creation in Entrepreneur-VC Relationships

46

3.5 Conclusion and Implications

49

References

50

Chapter 4: Financial Risk Perceptions: A Behavioral Perspective

52

4.1 Introduction

52

4.2 Neoclassical Financial Risk: A Prequel

53

4.3 Fear: The Foundation of Perceived Risk

55

4.4 Dual Decision Processes: Thinking and Feeling

58

4.5 Risk: For Me or for Others Also?

61

4.6 Amplification

62

4.7 Implications and Evidence

64

4.8 Entrepreneurs: Confirmation About the Risk Perception Process

67

4.9 Conclusion

68

References

69

Chapter 5: Contribution of Neuroscience to Financial Decision-Making

75

5.1 Introduction

76

5.2 Overview of Technologies and Methods

77

5.2.1 Methods

77

5.3 Brain Process Involved in Decision-Making

82

5.3.1 The Unconscious Brain

82

5.3.2 The Conscious Brain

83

5.4 How Decisions Are Made

84

5.4.1 Do People Act Primarily in Regards to Cognition?

85

5.4.2 The Interaction of Affect and Cognition

86

5.4.3 Dopamine: The Neurotransmitter of Reward

88

5.5 Looking at the Biases, Errors, and Distortions That Impact Decision-Making

90

5.6 Summary and Conclusions

94

References

96

Chapter 6: Uncertainty Is Psychologically Uncomfortable: A Theoretic Framework for Studying Judgments and Decision Making Under

99

6.1 Introduction

99

6.2 Forming a Subjective Problem Representation

101

6.2.1 Verbal Versus Numeric Probability Labels and the Meaning of “Uncertainty”

104

6.2.2 Problem Format: Frequency Versus Probability and the Meaning of “Uncertainty”

105

6.3 Decision Strategies and Coping with Uncertainty

106

6.4 Uncertainty and Psychological Discomfort

108

6.5 A Proposed Theoretic Framework for Studying Judgments Under Uncertainty

111

6.6 Implications of the Proposed Framework and Some Suggestions for Future Research

113

6.6.1 Implications for the Subjective Representation of Uncertainty

114

6.6.2 Implications for Strategy Selection During Decision Making

115

6.6.3 Implications for Cognitive Versus Affective Components in Decision Making

117

6.7 Conclusion

118

References

119

Part II: Issues in Financing Startups and Small Firms

124

Chapter 7: The Changing Landscape of Small-Firm Finance

125

7.1 Introduction

125

7.2 Time-Series Perspective on Credit Availability and Cost

128

7.3 Current Sources of Funding

132

7.3.1 Start-up Financing

133

7.3.2 Ongoing Small-Firm Financing

134

7.4 Current Issues in Small Firm Financing

136

7.4.1 Bank Consolidation and Small Firm Finance

136

7.4.2 Credit Crisis of 2007–2010 and Small Firm Finance

138

7.5 Suggestions for Future Research

139

7.6 Conclusions

140

References

141

Chapter 8: Applications of Behavioral Financeto Entrepreneurs and Venture Capitalists: Decision Making Under Risk and Uncertai

144

8.1 Introduction

144

8.2 Theoretical Framework

146

8.3 Previous Studies

147

8.4 Data

149

8.5 Research Method

150

8.5.1 Risk Premiums

150

8.5.2 Uncertainty Premiums

152

8.6 Results

152

8.6.1 Value and Weighting Functions Under Risk

152

8.6.2 Risk Premiums

153

8.6.3 Value and Weighting Functions Under Uncertainty

156

8.6.4 Uncertainty Premiums

157

8.6.5 Comparison Between Behavioral PremiumsUnder Risk and Uncertainty

158

8.7 Summary and Conclusions

159

8.8Appendix 1

161

8.9Appendix 2

165

8.10 Appendix 3

166

8.11Appendix 4

167

8.12 Appendix 5

169

8.13 Appendix 6

170

8.14Appendix 7

172

References

173

Chapter 9: Insights into the Psychological Profiles of Entrepreneurs

176

9.1 Introduction

176

9.2 Analysis

178

9.2.1 Data

178

9.2.2 Desire for Control

179

9.2.3 Social Anxiousness and Self-Monitoring

179

9.2.4 Affect and Well-Being

180

9.2.5 Optimism

181

9.2.6 Demographics and Correlations

181

9.2.7 Preferences

182

9.3 Conclusion

183

References

183

Part III: Issues in Growth and Beyond

185

Chapter 10: Firm Failure Prediction Models: A Critique and a Review of Recent Developments

186

10.1 Introduction

186

10.2 Classical Statistical Models

188

10.2.1 Multiple Discriminant Analysis

189

10.2.2 LOGIT Models, PROBIT Models, and Other Classical Statistical Models

190

10.2.3 Artificial Intelligence and Expert Systems Approaches

192

10.3 Small Firm Failure Prediction Studies

195

10.3.1 The Early Literature

195

10.3.2 Impact of Basel II and Recent Small Firm Studies

196

10.3.3 Existing Research on Small Business Failure

198

10.4 Psychological Phenomena as Possible Predictors of Business Success or Failure

199

10.4.1 The Importance of the Human Decision

199

10.4.2 The Role of Heuristics

199

10.4.2.1 The Affect Heuristic

200

10.4.2.2 The Representative (Similarity) Heuristic

201

10.4.2.3 The Availability or Recency Heuristic

201

10.4.2.4 Anchoring and Adjustment

202

10.5 Summary and Some Suggestions for Future Research

202

References

203

Chapter 11: The Evolution of Entrepreneurs and Venture Capitalists

206

11.1 Introduction

206

11.1.1 Background and Overview

206

11.2 Normative Model

207

11.2.1 Uncertainty

207

11.2.2 Expected Utility Model

207

11.2.3 Risk Attitude

207

11.3 The Evolution of Cognitive Biases

208

11.3.1 Evolutionary Psychology

208

11.3.2 Risk Preferences

208

11.3.3 Overconfidence and Optimism

210

11.3.4 Representativeness

211

11.3.5 Availability

211

11.3.6 Underreaction and Overreaction

212

11.3.7 Herding

212

11.4 The Effect of Cognitive Biases

213

11.4.1 Entrepreneurs

213

11.4.2 Venture Capitalists

215

11.5 Conclusion and Implications

215

References

216

Chapter 12: Statistical Databases for Research on the Financing of Small and Start-Up Firms in the United States: An Update a

219

12.1 Introduction

220

12.1.1 What Is a Statistical Database?

221

12.2 Major Statistics on Start-up Financing in the USA

222

12.2.1 The Kauffman Firm Survey (KFS)

222

12.2.2 Panel Study of Entrepreneurial Dynamics (PSED II)

224

12.2.3 Survey of Business Owners (SBO) 2002

226

12.3 Conclusions

228

12.4 Major Statistical Databases for Small Firm Financial Research in the USA—A Summary

229

12.4.1 Survey of Small Business Finances (NSSBF, 1987 and 1993 and SSBF, 1998)

229

12.4.2 Loans to Small Businesses by US Depository Institutions

231

12.4.2.1 June Call Reports on Lending to Small Firms

231

12.4.2.2 The Community Reinvestment Act (CRA) Database

233

12.4.3 The Survey of Consumer Finances (SCF)

235

12.4.4 Tax Return Data from the Statistics of Income Division of the Internal Revenue Service

237

12.4.5 NFIB Survey of Credit, Banks, and Small Business

239

12.5 Statistics for Time-Series Analysis of Small Business Financing Issues in the USA

240

12.5.1 Flow of Funds Accounts for Non-farm, Non-corporate Business in the USA

241

12.5.2 Senior Loan Officer Opinion Survey on Bank Lending Practices

242

12.5.3 Survey of Terms of Business Lending

242

12.5.4 Bureau of the Census, Quarterly Financial Reports

243

12.5.5 NFIB Survey on Small Business Trends

244

12.5.6 National Venture Capital Association (NVCA)/Thomson Financial Venture Capital Yearbook www.pwcmoneytree.com/moneytre

244

12.5.7 Center for Venture Research, University of New Hampshire, Angel Capital

245

12.5.8 Thomson Financial, Initial Public Offerings (IPOs) of Small Issuers

246

12.6 Conclusion

246

12.6.1 Survey of Small Business Finances

247

12.6.2 Call Reports and CRA Data

247

12.6.3 Survey of Terms of Business Lending

248

12.6.4 Survey of Consumer Finances

248

12.6.5 Finance Company Survey

248

References

249

Author Index

251

Subject Index

253