Equity Financing of the Entrepreneurial Firm (ICPSR 1249)

Version Date: Mar 8, 2002

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Principal Investigator(s):
Frank A. Schmid, Federal Reserve Bank of St. Louis

https://doi.org/10.3886/ICPSR01249.v1

Version V1

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Summary

Equity financing of entrepreneurial firms has achieved a rapid increase over the past decade. Venture capital funds, which finance privately held start-ups, raised a record $92.3 billion in 2000. This is a 30-fold increase relative to 1990. At Nasdaq, initial public offerings raised an all-time high of $53.6 billion in 2000, which is 24 times as much as in 1990. This article studies venture equity financing and equity financing through initial public offerings against the background of asymmetric information between the entrepreneur and the (outside) investor. The analysis shows that venture capital financing (1) is superior to initial public offerings when the entrepreneur has low initial wealth relative to the size of the project and (2) is equivalent otherwise. This result highlights the importance of private equity in financing entrepreneurial enterprises. The Gramm-Leach-Bliley Act of 1999 allows banks to expand the scope of their activities in this arena. The act allows financial holding companies to provide equity financing to non-financial enterprises for up to ten years. In particular, the act defines a framework in which financial holding companies can sponsor private equity funds that may provide venture capital to entrepreneurial start-ups.

Citation

Schmid, Frank A. Equity Financing of the Entrepreneurial Firm. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. https://doi.org/10.3886/ICPSR01249.v1

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Distributor(s)

Inter-university Consortium for Political and Social Research
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Data Collection Notes

  1. The file submitted is a data file, 0011fsd.txt.

  2. These data are part of ICPSR's Publication-Related Archive and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator if further information is desired.

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Original Release Date

2002-03-08

Version History

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:
  • Schmid, Frank A. Equity Financing of the Entrepreneurial Firm. ICPSR01249-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2002-03-08. http://doi.org/10.3886/ICPSR01249.v1
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Notes

  • These data are flagged as replication datasets and are distributed exactly as they arrived from the data depositor. ICPSR has not checked or processed this material. Users should consult the investigator(s) if further information is desired.

  • The public-use data files in this collection are available for access by the general public. Access does not require affiliation with an ICPSR member institution.