Essays On Entrepreneurial Financing

This thesis consists of three chapters on the impact of different government policies on entrepreneurial financing. In the first chapter, by quantitatively evaluating the impact of different personal bankruptcy regimes on entrepreneurship in a life-cycle model with occupational choices, I conclude that personal bankruptcy law affect entrepreneurship mainly through the insurance effect rather than the borrowing cost effect. In addition, I find that variations in bankruptcy regimes have very different impacts on households with different abilities, and changes in the length of post-bankruptcy punishments have the largest impact on entrepreneurship compared to variations in other dimensions of the bankruptcy regime. In the second chapter, I demonstrate in a model that firms could be credit-constrained due to aggregate uncertainty and the government could offer insurance in the form of loan guarantees to ease borrowing constraints for small businesses, thus increase the efficiency of the overall economy. The third chapter shows that different regulation on equity financing by financial institution could be an explanation for the large disparity in sectoral allocation of investments by Venture Capital industries between developed countries. I develop a simple principal-agent model shows that when three commonly documented characteristics of the high-tech industry coexist, the ability for lenders to vary the level of control contingent on performance becomes key. Thus venture capitalists as equity holders have a clear advantage in financing young high-tech firms in countries where equity financing from banks is not allowed.