A major difficulty in determining the appropriate risk premium for lending to small businesses is the lack of market value information. This paper develops a mean-variance model that uses available failure rate data to establish a benchmark risk premium for lending to firms in specific...

Entrepreneurship is not only used to create a business idea, but also to restructure a business in response to environmental conditions. Firms that issue equity after emerging from bankruptcy are unique in that they exhibit less asymmetric information than other firms that issue equity. They...

The paper presents an adverse selection-based explanation of the fact that some entrepreneurs choose to finance multiple projects together by issuing a single security and other entrepreneurs decide to finance each project separately. We consider the financing problem of an entrepreneur who has...

This paper is a first attempt at differentiating the problems of finance of the privately held small businesses from their larger counterparts. Small businesses, though not concerned with the problems and opportunities associated with publicly traded firms, have different types of complexities,...

Two main approaches have been utilized to explain the relationship between entrepreneurs and their investors. The first is based on the separation of ownership and management i.e. the so-called principal-agent approach. The second emphasizes trust and cooperation in the relationship. This...

Two recent papers examine the impact of corporate bankruptcy laws on new business start-ups in 29 countries over 1990 - 2008 (Peng et al., 2010; Lee et al., 2010). In this commentary, I briefly point out two significant issues which future researchers might want to consider. First, several countries...

In this article we first argue that researchers in the area of financial distress and failure cannot ignore the human/managerial/decision-making side of the business and just focus on the business' operations side; as has been the case so far for almost all the research in the area. We then...

A significant number of new business failures can be traced to the fact that the founder(s) missed the mark on many of these traits required for success. They may not have inspired confidence in anyone, including themselves. They may have been easily upset by problems. They may have had...

Much work has been done in the last two decades to estimate the determinants of bankruptcy of large firms. Very little work appears to have been attempted in the area of small firm bankruptcy. This paper goes some way to remedy the deficiency by estimating conditional logistic probability...

There are many studies of bank performance and bank failure in the literature. Most of these studies used banking ratios as variables in their models without giving consideration to their appropriateness, nor was much consideration given to the stability of those ratios through time and across...