People and Faculty

Julie Elston

Finance

Julie Elston

People and Faculty

Julie Elston

Overview

Publications

Academic Journal

Finance

“Dividends, Executive Compensation, and Agency Costs: Empirical Evidence From Germany”

Details

Academic Journal

Finance

“Financing the Entrepreneurial Decision: An Empirical Approach Using Experimental Data on US High Technology Entrepreneurs”

This paper empirically examines the role of risk attitudes and wealth on financing choices for successful US entrepreneurs. Our approach uses both survey data and data from economics based field experiments, which enables us control for the risk attitudes of entrepreneurs. Empirical findings suggest that lower levels of wealth increase the probability of using a Small Business Innovation Research (SBIR) grant, but lower levels of wealth also reduce the probability of using loan financing. In addition results show that higher levels of risk aversion, but not wealth, increase the probability of financing firm start-ups with earnings from a second job. Overall, findings suggest that both wealth and risk attitudes may play an important role in the financing choice of entrepreneurs.

Details

Academic Journal

Finance

“Risk Attitudes, Wealth and Sources of Entrepreneurial Start-up Capital”

Details

Academic Journal

Finance

“Venture Capital, Ownership Structure, Accounting Standards and IPO Underpricing: Evidence from Germany”

This study investigates the impact of venture capital (VC), ownership structure, and accounting standards on initial public offering (IPO) underpricing in Germany. Using data from Germany's Neuer Markt (NM), we test two key hypotheses regarding IPO underpricing; first, whether VC ownership and higher levels of post-IPO insider ownership result in lower underpricing, and second, whether additional information disclosure results in lower underpricing. Besides the standard underpricing measure, we also use a modified underpricing measure to better assess true entrepreneurial wealth loss. Robust findings indicate that none of these factors are significant in lowering IPO underpricing, which suggests the importance of examining standard theories within alternative institutional environments. Results are consistent with the stylized fact that Germany's NM firms had relatively minimal use of VC financing, which may point to not only a weaker role for venture capitalists in Germany but fewer incentives to reduce information asymmetry arising from outside ownership.

Details

Academic Journal

Finance

“Corporate Governance and Capital Accumulation: Firm Level Evidence from Italy”

This study investigates the impact of investor protection on firm ownership and investment decisions in a model where investor protection is allowed to vary across firms. Using firm panel data for Italy, we construct firm level variables to capture the degree of investor protection which is specific to the firm and observable by outside shareholders. Empirical evidence indicates that the stronger the investor protections the lower the fraction of equity that is owned by insiders. Results also suggest that higher insider equity ownership is linked to a larger risk premium and higher costs of capital for the firm. Finally, our findings indicate that the magnitude of capital stock distortions is important when shareholder protection is weak and ownership concentration is high.

Details

Academic Journal

Finance

“Can Institutional Change Impact High-Technology Firm Growth: Evidence from Germany's Neuer Markt”

To facilitate the transformation of the German economy from the traditional manufacturing industries towards emerging new technologies, a new segment of the Frankfurt exchange was introduced in 1997 the Neuer Markt. To examine whether the Neuer Markt was successful, we compare the relationship between firm size and growth for firms listed on the Neuer Markt and contrast the results with two benchmarks: (1) for German firms prior to the 1990s (to reflect the older traditional manufacturing sector) and (2) for the stylized results for the US. This study provides evidence that not only did many new firms obtain funding from the Neuer Markt; but that for the first time in recent history, Germany succeeded in enabling smaller firms to grow faster than larger firms. This suggests that the new policies were not only successful in promoting a new type of firm that otherwise might not exist, but in transforming the sources of growth and innovation within the German economy.

Details

Academic Journal

Finance

“Finance, Control and Profitability: An Evaluation of German Bank Influence”

Bank intermediated finance has been cited frequently as the preferred means for channeling funds from savers to firms. Germany is the prototypical economy where powerful universal banks allegedly exert substantial influence over firms. Despite frequent assertions about the advantages of a bank relation, empirical support is mixed. With a unique dataset and a focus on the fragility/sturdiness of inferences, this paper evaluates German bank influence in terms of three hypotheses: (1) do bank influenced firms enjoy lower finance costs? (No); (2) is bank influence a solution to control problems? (Yes); (3) do bank influenced firms have higher profitability? (No).

Details

Academic Journal

Finance

“Bank Influence, Firm Performance and Survival”

Details

Academic Journal

Finance

“Executive Compensation and Agency Costs in Germany”

With the growth of international mergers like DaimlerChrysler, interest in executive compensation practices abroad, particularly in Germany, has increased. Using unique data sources for Germany, we find that similar to US firms, German firms also have agency problems caused by the separation of ownership from control, with ownership dispersion leading to higher compensation. In addition, there is evidence that bank influence has a negative impact on compensation.

Details

Academic Journal

Finance

“Financial Factors and Investment in Belgium, France, Germany, and the United Kingdom: A Comparison Using Company Panel Data”

We construct company panel data sets for manufacturing firms in Belgium, France, Germany, and the United Kingdom, covering the period 1978-1989. These data sets are used to estimate empirical investment equations, and to investigate the role played by financial factors in each country. A robust finding is that cash flow and profits terms appear to be both statistically and quantitatively more significant in the United Kingdom than in the three continental European countries. This is consistent with the suggestion that financial constraints on investment may be relatively severe in the more market-oriented U.K. financial system.

Details

Academic Journal

Finance

“Bank-firm relationships, financing and firm performance in Germany”

Close bank”firm relationships that characterize the financial systems in Germany and Japan are often credited for reducing agency costs and increasing access to capital, thus improving the performance of firms. Critics of these banking systems cite the alternative possibility that conflicts of interests may also arise from both the banks' multiple roles with the firm, and the opportunity the banks have to use private information to shift risk or to otherwise participate in rent-seeking activities. We extend the empirical literature by systematically investigating the impact of bank-influence on the financing choices and performance of the firm. We find that bank-influenced firms in Germany do benefit from increased access to capital. There is, however, no evidence to support the hypothesis of either higher profitability or growth for bank-influenced firms. Results suggest that the interest payments to debt ratio is significantly higher for bank-influenced firms, which supports the hypothesis that German universal banks may engage in rent-seeking activities and provides evidence of a conflicting interests between creditors and shareholders.

Details

Academic Journal

Finance

“Does firm size matter? Evidence on the impact of liquidity constraints on firm investment behavior in Germany”

This paper examines the link between liquidity constraints and investment behavior for German firms of different sizes from 1970 to 1986. Results indicate that medium sized firms appear to be more liquidity constrained in their investment behavior than either the smallest or largest firms in the study, suggesting that the unique German infrastructure designed to assist the small firm has indeed succeeded in alleviating, to some degree, such liquidity constraints. Findings also support the hypothesis that the emerging competition and internationalism which characterized the German financial markets in the 1980s, have been improving access to capital for some groups of firms.

Details