The Gramm-Leach-Bliley Act of 1999 provides thatfinancial holding companies can invest in private equity funds that supplyventure capital to entrepreneurial firms.In this study, the equityfinancing of the entrepreneurial firm is analyzed in relationship to thenon-verifiable cash flow of the...

We develop a model of equity financing risk (EFR; i.e., risky equity issuance costs) to study the joint effects of precautionary savings and research and development (R&D) investments on expected returns. Our evidence confirms the model: (1) financial slack (i.e., liquid assets relative to R&D)...