Submitted in partial fulfilment of the requirements for degree Master of Management in Finance and Investments in Wits Business School of the University of the Witwatersrand / This research paper examines an economy with debt and discusses the mechanism through which a financial crisis may arise, taking into account the business cycle theories as advocated by amongst others; Karl Marx, Friederich Hayek, and John Keynes. It is found that there are various channels through which financial crises may arise. Secondly, this research paper investigates the mechanism through which bank credit propagates and prolongs the business cycle. The analysis of the data reveals that post the crisis, recoveries are slower in developed nations versus developing nations and that the deeper the recession, the longer it takes for a country to recover. Thirdly, this research paper determines the critical debt level at which economies will start to recover, following a period of economic fragility. Finally, recommendations which could contribute towards the mitigation of causes and/or effects of economic crisis are made. Key words: Bank Credit, Business Cycle / GR2018

O papel dos Bancos de Desenvolvimento é amplamente discutido há décadas, cuja presença e atuação possui defensores e críticos. No Brasil, desde sua fundação em 1952, o Banco Nacional de Desenvolvimento Econômico e Social (BNDES) está no centro dessas discussões, pois é um dos 4 maiores Bancos de Desenvolvimento do mundo, desempenhando um importante papel na economia brasileira. Esta investigação focou empresas listadas na Bolsa de Valores de São Paulo (Bovespa) no período de 2002 a 2014, com ênfase na relação entre restrição financeira e contratação de empréstimos do BNDES. Para tanto, foi utilizado o modelo de Sensibilidade do Investimento ao Fluxo de Caixa por meio de regressão por efeitos fixos, aleatórios e dados agrupados em painel de dados estático desbalanceado. Outro aspecto deste estudo foi verificar as diferenças entre as empresas que contrataram e que não contrataram empréstimos do BNDES em períodos relacionados à crise financeira global de 2008, cuja análise foi desenvolvida pelo teste de Diferença-em-Diferenças. Os resultados evidenciaram que, na amostra geral, houve restrição financeira nos dois grupos de empresas, sendo que a restrição foi maior nas empresas que contrataram empréstimos do BNDES. Nesse grupo, as empresas que contrataram empréstimos diretamente pelo BNDES (forma de apoio Direta ou modalidade Não Automática) tiveram maior restrição financeira. As instituições financeiras que operaram com o BNDES (forma de apoio Indireta ou modalidade Automática) tiveram as menores restrições financeiras. Com respeito à crise financeira, o teste mostrou que o nível de investimento e a restrição financeira do grupo de tratamento tiveram diferenças significativas nos períodos pré-crise e a partir da crise, o que pode indicar uma influência do BNDES na atenuação dos efeitos da crise. O estudo conclui que as empresas que contrataram empréstimos do BNDES possuem maior restrição financeira do que aquelas que não contrataram empréstimo. Além disso, este estudo salienta que na crise financeira de 2008, a presença de recursos financeiros do BNDES nessas empresas contribuiu para diminuir a restrição financeira, enquanto que as empresas que não contrataram empréstimos tiveram maior restrição. Essas constatações confirmam o papel do banco de desenvolvimento atuando em empresas que mostraram maior necessidade de capital, assim como redutor de restrição financeira em momentos de crise. / The role of Development Banks has been widely discussed for decades, whose presence and performance have defenders and critics. Since its founding in 1952, the National Bank for Economic and Social Development (BNDES) has been in the center of these discussions as it is among the 4 largest development banks in the world, playing an important role in the Brazilian economy. This research focused on companies listed on the São Paulo Stock Exchange (Bovespa) from 2002 to 2014, with emphasis on the relationship between financial restraint and BNDES loan contracting. For this, the Cash Flow Sensitivity model was used through regression by means of fixed, random effects and grouped data in an unbalanced static data panel. Another aspect of this study was to verify the differences between the companies that hired and did not borrow from the BNDES in periods related to the 2008 global financial crisis, whose analysis was developed by the Difference-in-Differences test. The results showed that, in the general sample, there was a financial constraint in both groups of companies, and the restriction was greater in the companies that contracted BNDES loans. In this group, companies that borrowed directly from the BNDES (direct support or non-automatic mode) had greater financial constraints. The financial institutions that operated with the BNDES (Indirect support form or Automatic mode) had the lowest financial restrictions. In relation to the financial crisis, the test showed that the level of investment and the financial constraint of the treatment group had significant differences in the pre-crisis and crisis periods, which may indicate an influence of the BNDES in mitigating the effects of the crisis. This study concludes that the companies that contracted BNDES loans have greater financial constraints than those that did not take out a loan. In addition, the study points out that in the financial crisis of 2008, the presence of BNDES financial resources, in these companies, contributed to reduce the financial constraint, while the companies that did not contract loans were more restricted. These findings confirm the role of the development bank working in companies that showed greater need for capital, as well as reducing financial constraint in times of crisis.

Debt holding by managers, i.e., inside debt, aligns the incentives of managers more closely with those of debtholders, reducing agency costs of debt (Jensen and Meckling (1976) and Edmans and Liu (2011)). My thesis investigates the effect of managerial ownership of debt on corporate risk-taking, bank loan contracting, and accounting conservatism. / In the first chapter I examine the effect of managerial ownership of debt on agency costs of debt problems related to risk-taking. I find that higher managerial ownership of debt implements lower corporate risk-taking, in terms of less investment in R&D, more investment in capital expenditures, and more corporate diversification. The role of inside debt in moderating risk-taking is more pronounced in firms with high level of default risk. These findings suggest that managers with large inside debt holdings are less likely to pursue risky projects that potentially transfer wealth from debtholders to shareholders. / In the second chapter I examine how terms of bank loans are related to managerial ownership of debt. Specifically, the analysis uncovers significant evidence of lower loan spreads for firms with larger debt ownership by CEOs. The negative relation is more pronounced when creditors face higher expropriation risk and when the CEO's expected retirement horizon is beyond loan maturity. I also find that loans to firms with larger managerial debt holdings are associated with smaller lending syndicates, fewer covenant restrictions, and less collateral requirement, consistent with lenders anticipating lower expropriation risk at these firms. / In the third chapter I examine the relation between accounting conservatism and managerial ownership of debt. Consistent with debt holdings by managers mitigating the debtholder-shareholder conflicts and reducing debtholders' demand for accounting conservatism, I find significant evidence of less conservative financial reporting at firms whose CEOs have accumulated more deferred compensation and pension benefits. This negative relation is more pronounced in firms with higher expected agency costs of debt and in firms that can credibly commit to a higher level of conservatism if required by debtholders. These findings are robust to using a number of alternative accounting conservatism measures and to correcting for potential endogeneity of managerial ownership of debt. / Xin, Xiangang. / Advisers: Danqing Young; Oliver M. Rui; Cong Wang. / Source: Dissertation Abstracts International, Volume: 73-07(E), Section: A. / Thesis (Ph.D.)--Chinese University of Hong Kong, 2011. / Includes bibliographical references (leaves 134-140). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Electronic reproduction. Ann Arbor, MI : ProQuest Information and Learning Company, [200-] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Abstract also in Chinese.

by Siu-yeung Chan. / Publication date from spine. / Thesis (Ph.D.)--Chinese University of Hong Kong, 1995. / Includes bibliographical references (leaves 254-278). / Chapter CHAPTER I --- INTRODUCTION --- p.1 / Chapter 1.1 --- Background of the Study --- p.1 / Chapter 1.2 --- Research Problems and Objectives --- p.5 / Chapter 1.3 --- Justification for the Study --- p.7 / Chapter 1.4 --- Research Model and Hypotheses --- p.9 / Chapter 1.4.1 --- Research Model --- p.9 / Chapter 1.4.2 --- Research Hypotheses --- p.10 / Chapter 1.5 --- Research Methodology --- p.12 / Chapter 1.6 --- Definitions of Key Terms --- p.14 / Chapter 1.7 --- Scope of the Study --- p.16 / Chapter 1.8 --- Organisation of the Thesis --- p.17 / Chapter CHAPTER II --- LITERATURE REVIEW ON BEHAVIOURAL DECISION THEORY --- p.19 / Chapter 2.1 --- Introduction --- p.19 / Chapter 2.2 --- Behavioural Decision Theory: Historical Development --- p.20 / Chapter 2.3 --- Bounded Rationality --- p.22 / Chapter 2.4 --- Lens Model --- p.25 / Chapter 2.5 --- Heuristics and Biases --- p.27 / Chapter 2.5.1 --- Overview --- p.27 / Chapter 2.5.2 --- Availability Heuristic --- p.28 / Chapter 2.5.3 --- Anchoring and Adjustment Heuristic --- p.29 / Chapter 2.5.4 --- Representativeness Heuristic --- p.31 / Chapter 2.5.5 --- Conjunction Fallacy --- p.32 / Chapter 2.5.6 --- Hindsight Bias --- p.34 / Chapter 2.5.7 --- Order Effects in Brief Updating --- p.35 / Chapter 2.5.7.1 --- Evidence Encoding --- p.36 / Chapter 2.5.7.2 --- Response Mode --- p.37 / Chapter 2.5.7.3 --- Adjustment Weighting --- p.38 / Chapter 2.5.7.4 --- Order Effects --- p.39 / Chapter 2.5.8 --- Framing Effect --- p.40 / Chapter 2.5.9 --- Sunk Cost Effect --- p.42 / Chapter 2.5.10 --- Confirmation Bias --- p.44 / Chapter 2.5.11 --- Accountability --- p.47 / Chapter 2.5.12 --- Base-Rate Fallacy --- p.49 / Chapter 2.5.12.1 --- Reduction of the Base-Rate Fallacy --- p.51 / Chapter 2.5.12.1.1 --- The Relevance of Base-Rate Information --- p.51 / Chapter 2.5.12.1.2 --- The Relevance of Case-Specific Evidence --- p.53 / Chapter 2.5.12.2 --- Effects of Need for Cognition on the Base-Rate Fallacy --- p.54 / Chapter 2.5.13 --- Overconfidence Effect --- p.56 / Chapter 2.5.13.1 --- Calibration and Calibration Curve --- p.58 / Chapter 2.5.13.2 --- Factors Affecting Appropriateness of Confidence --- p.60 / Chapter 2.5.13.2.1 --- Task Factors --- p.60 / Chapter 2.5.13.2.2 --- Environmental Factors --- p.61 / Chapter 2.5.13.2.3 --- Individual Difference Factors --- p.63 / Chapter 2.5.13.3 --- Methods Promoting Appropriate Confidence --- p.64 / Chapter 2.5.13.4 --- Appropriateness of Experts' Confidence --- p.67 / Chapter 2.5.13.5 --- Conceptual and Methodological Issues --- p.68 / Chapter 2.6 --- Contingent Decision Behaviour --- p.72 / Chapter 2.6.1 --- Overview --- p.72 / Chapter 2.6.2 --- Factors Influencing Contingent Decision Behaviour --- p.73 / Chapter 2.6.3 --- Effects of Task Variables on Selecting Decision Strategies --- p.74 / Chapter 2.6.3.1 --- Task Complexity --- p.74 / Chapter 2.6.3.2 --- Response Mode --- p.77 / Chapter 2.6.3.3 --- Information Display Mode --- p.77 / Chapter 2.6.3.4 --- Agenda Effect --- p.78 / Chapter 2.6.4 --- Effects of Context Variables on Selecting Decision Strategies --- p.78 / Chapter 2.6.5 --- Effects of Effort and Accuracy on Selecting Decision Strategies --- p.79 / Chapter 2.7 --- Integrated Framework for Behavioural Decision Theory --- p.81 / Chapter 2.7.1 --- Principle of Bounded Rationality and the Three Research Frameworks --- p.82 / Chapter 2.7.2 --- Lens Model and Heuristics-and-Biases Frameworks --- p.83 / Chapter 2.7.3 --- Lens Model and Contingent Decision Behaviour Frameworks --- p.84 / Chapter 2.7.4 --- Heuristics-and-Biases and Contingent Decision Behaviour Frameworks --- p.85 / Chapter 2.8 --- Chapter Summary --- p.85 / Chapter CHAPTER III --- LITERATURE REVIEW ON BEHAVIOURAL DECISION RESEARCH IN ACCOUNTING --- p.88 / Chapter 3.1 --- Introduction --- p.88 / Chapter 3.2 --- Overview of BDR in Accounting and the Major Determinants of Decision-Making Performance --- p.89 / Chapter 3.3 --- Heuristics and Biases --- p.93 / Chapter 3.3.1 --- Overview --- p.93 / Chapter 3.3.2 --- Availability Heuristic --- p.94 / Chapter 3.3.3 --- Anchoring and Adjustment Heuristic --- p.96 / Chapter 3.3.4 --- Order Effects in Belief Updating --- p.99 / Chapter 3.3.4.1 --- Overview --- p.99 / Chapter 3.3.4.2 --- Model Predictions --- p.100 / Chapter 3.3.4.3 --- Order Effects On Effectiveness --- p.102 / Chapter 3.3.4.4 --- Factors Affecting the Order Effects --- p.103 / Chapter 3.3.4.5 --- Summary of Accounting Research on the Order Effects in Belief Updating --- p.105 / Chapter 3.3.5 --- Conjunction Fallacy --- p.106 / Chapter 3.3.6 --- Framing Effect --- p.107 / Chapter 3.3.7 --- Confirmation Bias --- p.110 / Chapter 3.3.8 --- Hindsight Bias --- p.113 / Chapter 3.3.9 --- Accountability --- p.116 / Chapter 3.3.10 --- Base-Rate Fallacy --- p.118 / Chapter 3.3.10.1 --- Overview --- p.118 / Chapter 3.3.10.2 --- Attention to Base Rates --- p.119 / Chapter 3.3.10.3 --- Attention to Source Reliability --- p.123 / Chapter 3.3.10.4 --- Insensitivity to Sample Size --- p.127 / Chapter 3.3.10.5 --- Summary for Accounting Research on the Base-Rate Fallacy --- p.129 / Chapter 3.3.11 --- Overconfidence Effect --- p.129 / Chapter 3.3.11.1 --- Appropriateness of Auditors' Confidence --- p.130 / Chapter 3.3.11.2 --- Factors Affecting the Appropriateness of Auditors' Confidence --- p.131 / Chapter 3.4 --- Behavioural Decision Research in Financial Distress Prediction --- p.136 / Chapter 3.4.1 --- Overview --- p.136 / Chapter 3.4.2 --- Prediction Performance --- p.137 / Chapter 3.4.2.1 --- Prediction Accuracy --- p.137 / Chapter 3.4.2.2 --- Appropriateness of Confidence --- p.138 / Chapter 3.4.3 --- Factors Affecting Prediction Performance --- p.139 / Chapter 3.4.3.1 --- Overview --- p.139 / Chapter 3.4.3.2 --- Information Load --- p.139 / Chapter 3.4.3.3 --- Information Cue Choice Versus Weighing of Cues --- p.140 / Chapter 3.4.3.4 --- Base-Rate Information --- p.141 / Chapter 3.4.3.5 --- Task Predictability --- p.144 / Chapter 3.4.3.6 --- Reward Structure --- p.145 / Chapter 3.4.3.7 --- Individual Differences --- p.145 / Chapter 3.4.4 --- Group Judgment Accuracy --- p.146 / Chapter 3.4.5 --- Section Summary --- p.147 / Chapter 3.5 --- Motivation for the Current Study --- p.149 / Chapter 3.5.1 --- Research Opportunity 1 --- p.149 / Chapter 3.5.2 --- Research Opportunity 2 --- p.150 / Chapter 3.5.3 --- Research Opportunity 3 --- p.152 / Chapter 3.5.4 --- Research Opportunity 4 --- p.153 / Chapter 3.6 --- Chapter Summary --- p.154 / Chapter CHAPTER IV --- RESEARCH MODEL AND HYPOTHESES --- p.156 / Chapter 4.1 --- Introduction --- p.156 / Chapter 4.2 --- Research Model --- p.156 / Chapter 4.3 --- Research Hypotheses --- p.158 / Chapter 4.3.1 --- Hypothesis 1 --- p.158 / Chapter 4.3.2 --- Hypothesis 2 --- p.160 / Chapter 4.3.3 --- Hypothesis 3 --- p.163 / Chapter 4.3.4 --- Hypothesis 4 --- p.166 / Chapter 4.3.5 --- Hypothesis 5 --- p.168 / Chapter 4.4 --- Chapter Summary --- p.172 / Chapter CHAPTER V --- RESEARCH METHOD AND DESIGN --- p.173 / Chapter 5.1 --- Introduction --- p.173 / Chapter 5.2 --- Research Method --- p.173 / Chapter 5.3 --- Experimental Design --- p.175 / Chapter 5.4 --- Subjects --- p.177 / Chapter 5.5 --- Construction of the Experiment Instrument --- p.179 / Chapter 5.5.1 --- Selection of Sample Firms for Prediction Tasks --- p.180 / Chapter 5.5.1.1 --- Definition of Firms being in Financial Distress --- p.180 / Chapter 5.5.1.2 --- Identification of Firms in Financial Distress --- p.182 / Chapter 5.5.1.3 --- Selection of Healthy Firms --- p.182 / Chapter 5.5.1.4 --- Sample Firms in the Instrument --- p.183 / Chapter 5.5.2 --- Selection of Financial Ratios --- p.184 / Chapter 5.5.2.1 --- Logit Analysis --- p.185 / Chapter 5.5.2.2 --- Pilot Interviews --- p.187 / Chapter 5.5.2.3 --- Final Financial Ratios Used in the Instrument --- p.188 / Chapter 5.5.3 --- Modification of the Need for Cognition Scale --- p.189 / Chapter 5.5.4 --- Translation of the Experiment Instrument --- p.191 / Chapter 5.5.5 --- Pretest of the Experiment Instrument --- p.191 / Chapter 5.6 --- Administration of Experiment --- p.192 / Chapter 5.7 --- Operationalisation and Measurement of Variables --- p.193 / Chapter 5.7.1 --- Relevance of Base-Rate Information --- p.193 / Chapter 5.7.2 --- Need For Cognition --- p.195 / Chapter 5.7.3 --- Perceived Informativeness of Case-Specific Evidence --- p.197 / Chapter 5.7.4 --- Appropriateness of Confidence --- p.199 / Chapter 5.8 --- Data Analysis Methods --- p.201 / Chapter 5.9 --- Chapter Summary --- p.203 / Chapter CHAPTER VI --- ANALYSIS OF DATA --- p.205 / Chapter 6.1 --- Introduction --- p.205 / Chapter 6.2 --- Descriptive Data about the Subjects --- p.205 / Chapter 6.3 --- Stepwise Logit Analysis --- p.207 / Chapter 6.4 --- Statistical Testing for Hypotheses --- p.210 / Chapter 6.4.1 --- Testing Hypothesis 1 --- p.211 / Chapter 6.4.2 --- Unbalanced ANOVA Model --- p.212 / Chapter 6.4.3 --- Testing the Base Rate Pre-occupied by the Subjects --- p.215 / Chapter 6.4.4 --- Testing Hypothesis 2 --- p.217 / Chapter 6.4.5 --- Testing Hypothesis 3 --- p.218 / Chapter 6.4.6 --- Testing Hypothesis 4 --- p.220 / Chapter 6.4.7 --- Testing Hypothesis 5 --- p.222 / Chapter 6.5 --- Supplementary Statistical Testing of Hypotheses --- p.224 / Chapter 6.5.1 --- Separate Models for Hypotheses 2 to 5 --- p.224 / Chapter 6.5.2 --- Effects of Other Interactions --- p.224 / Chapter 6.5.3 --- Analysing NC As a Continuous Variable --- p.225 / Chapter 6.5.4 --- Repeated Measures ANOVA --- p.226 / Chapter 6.5.5 --- Additional Analysis ´ؤ Controlling for Task Predictability --- p.228 / Chapter 6.6 --- Chapter Summary --- p.232 / Chapter CHAPTER VII --- "SUMMARY, DISCUSSIONS AND IMPLICATIONS" --- p.234 / Chapter 7.1 --- Recap of the Study --- p.234 / Chapter 7.2 --- Conclusions and Discussions --- p.237 / Chapter 7.2.1 --- Hypothesis 1 --- p.237 / Chapter 7.2.2 --- Hypothesis 2 --- p.239 / Chapter 7.2.3 --- Hypothesis 3 --- p.241 / Chapter 7.2.4 --- Hypothesis 4 --- p.243 / Chapter 7.2.5 --- Hypothesis 5 --- p.244 / Chapter 7.2.6 --- Overall Conclusions --- p.246 / Chapter 7.3 --- Implications for Theory --- p.246 / Chapter 7.4 --- Implications for Practice --- p.248 / Chapter 7.5 --- Limitations of the Study --- p.249 / Chapter 7.6 --- Recommendations for Further Research --- p.252 / REFERENCES --- p.254 / APPENDIX A: EXPERIMENT INSTRUMENT (IN ENGLISH) --- p.279 / APPENDIX B: EXPERIMENT INSTRUMENT (IN CHINESE) --- p.306 / APPENDIX C: STEPWISE LOGIT ANALYSIS RESULTS --- p.333

Thesis (M.M. (Research))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Governance, 2016. / Most economies today are calling upon their or rather are starting to rely on their Small and Medium business Enterprises to stimulate the economy and also help address issues of unemployment. However it is also believed that even though this maybe the case, most economies still don’t give SMEs enough funding. The underlying public assumption is that all that is needed for SMEs to thrive is access to funding, as such this study sought to investigate the role of financial access in the success of SMEs. The study had intended to use financial ratios as proxies for success, however, the record keeping of the SMEs or lack thereof impeded this intention, so the study measured the success of the enterprise as perceived by the owner. The study sampled SMEs from all for regions of Swaziland, and besides a descriptive analysis that were carried out to examine the utilization of credit by the SMEs. This study also used a statistical model known as the Logit model, to determine the effect that credit access had on the success of the SME and also assess the challenges/barriers that the SMEs faced when trying to access funding. The results of this study deviated from the underlying public assumption, as they showed that an SME owner that had access to funding had reduced odds of success, if anything the results showed that the success of an SME did not entirely depend on the availability of funding, and there were other potent factors that posed as barriers to financial access. / DM2016

This dissertation addresses three topics on information economics. Generally, information is not perfect or costless as classical economics assumes. Thus, a consumer searches information at his cost or a seller provides information at his cost. First, chapter 2 presents a theoretical model where a consumer searches for local brand information. We show that a national brand providing information has a larger market share. Second, chapter 3 presents a theoretical model where a store randomizes prices and advertises the price changes. We show that at equilibrium the advertising intensity is negatively related to price and price density function is "U" shaped. As advertising costs decrease, average price decreases with more competition. Also as advertising costs decrease from the maximum to zero, price density function changes from monopoly price spike to nonprofit price spike. Thirdly, chapter 4 presents an example where information imperfection is not remedied so information asymmetry remains to cause moral hazard. The deposit insurance rate of a bank is set uniformly regardless of its loan quality because the government cannot discern the quality. Then, a failed bank has higher efficiency in good economic years by spending less on loan monitoring but lending aggressively, but has lower efficiency in difficult years because of its growing non-performing loan. The efficiency of Korean banks between 1990 and 1997 is measured by DEA (Data Envelopment Analysis), and the regression shows that the efficiency of the failed bank is affected by moral hazard. / Graduation date: 2003

In the first essay, "Why Won't You Forgive Me? Evidence of a Financial Misreporting Stigma in Bank Loan Pricing," we examine the relation between bank loan pricing and intentional financial misreporting. Firms that misreport financial information pay greater spreads on their bank loans for five years following their restatements, whether benchmarked against their pre-restatement loans or similar loans made to matched non-misreporting firms. Misreporting firms that promptly replace certain parties who are potentially related to the misreporting see their spreads fall to benchmark levels within three years following restatement. Large fractions of firms, however, do not promptly replace the potentially related parties and continue to pay premiums over benchmark spread levels for five years following restatement. The results suggest that misreporting creates a long-lasting and costly stigma, but that certain actions can reduce the duration of the stigma. In the second essay, "Can Shareholder-Creditor Conflicts Explain Weak Governance? Evidence from the Value of Cash Holdings," we look into whether shareholder-creditor conflicts generate costs large enough to prevent improvements in governance. If firms choose to remain weakly governed, some cost must prevent improvements. We address our research question by estimating the value of cash as a function of governance, leverage, and the interaction of the two. We find that governance increases the value of cash, but that leverage reduces the gain from strong governance. However, the magnitudes are far too small to explain why weak governance firms remain weakly governed. Our estimates suggest more than 80 percent of weakly governed firms would increase the value of their cash by improving governance. In fact, half of weakly governed firms would increase the value of their cash holdings by $0.35 or more per dollar held by improving governance. Our focus on cash holdings does not seem to drive our results, nor do endogenous governance choices or nonlinearities reverse our conclusions.

There are many different forms of financing for small businesses and two common financing options mentioned in the study, bank loans and Venture Capital.Venture Capital is a form of risk capital financing, investing in unlisted stock market. The feature of the arrangement is that those people are trying to find companies that can offer unique, attractive and in demand products on a strong growing market. Since VC-firms are taking a big risk in cooperation with the investment, the VC-company strong demands while assessments are made on the company will generate a return in the future. Bank loans are the most common form of financing for companies in the market. Requirements and assessment under the law is hard especially for small businesses because financing entails high risks. Banks require that the liquidity management in the enterprise should be stable because the bank's main objective is to repayment of debt and the interest payable on the capital. The purpose of this study is to examine the requirements and assessments VC-firms and banks make use of the financing of small businesses.

<p>There are many different forms of financing for small businesses and two common financing options mentioned in the study, bank loans and Venture Capital.Venture Capital is a form of risk capital financing, investing in unlisted stock market. The feature of the arrangement is that those people are trying to find companies that can offer unique, attractive and in demand products on a strong growing market. Since VC-firms are taking a big risk in cooperation<strong> </strong>with the investment, the VC-company strong demands while assessments are made on the company will generate a return in the future.</p><p>Bank loans are the most common form of financing for companies in the market. Requirements and assessment under the law is hard especially for small businesses because financing entails high risks. Banks require that the liquidity management in the enterprise should be stable because the bank's main objective is to repayment of debt and the interest payable on the capital.</p><p>The purpose of this study is to examine the requirements and assessments VC-firms and banks make use of the financing of small businesses.</p><p> </p>

Many communities in Canada are experiencing high levels of unemployment, poverty, social breakdown and environmental degradation. In an effort to address these problems, individuals, community groups and all levels of government, are experimenting with an approach to development called community economic development (CED). CED is a grassroots, bottom-up process that focuses on the creation of stable, viable, and equitable local economies. In trying to implement CED strategies, communities and individuals face many obstacles, one of the most significant of which is a lack of capital. Credit unions are locally-owned and controlled co-operative financial institutions with access to significant pools of “local” capital and therefore logical places for communities to turn. This thesis explores ways these institutions can support community economic development in their communities. An examination of the literature and interviews with credit union leaders and CED practitioners, demonstrate that most credit unions are not involved in CED lending. Nor are they particularly committed to CED ideals. This being said, however, the research shows that there are a few credit unions, in both Canada and the United States, that do participate in CED. These credit unions--some with a holistic commitment to CED, others with a partial commitment--support CED in a variety of ways, only one of which is through financing. In addition to providing access to capital, these credit unions fulfil other support functions such as providing technical assistance, building “community” and supporting community infrastructure development. Credit unions that participate in CED are not typical of the credit union movement. Most credit unions do not play a role in supporting community economic development in their communities. The study found that there are significant barriers to their participation in CED, barriers such as a lack of vision, the nature of CED lending, and competition from private financial institutions. In order for credit unions to participate in CED, these barriers must be removed. Ways to reduce some of the barriers are explored in the thesis. The research shows that in order to be able to participate in CED, credit unions require: a committed leadership, staff with community development expertise, new deposits of capital, a means of subsidizing the costs of CED lending, and institutional mechanisms that reduce risk as well as government support. Ways for credit unions to fulfil these needs are outlined. Lastly, research findings are summarized and conclusions are drawn about the role individual credit unions can play in CED. The kinds of initiatives credit union centrals, governments and planners can adopt to support credit unions in this work also explored.