A Probabilistic Framework for Risk Analysis of Widespread Flood Events: A Proof‐of‐Concept Study

This article presents a flood risk analysis model that considers the spatially heterogeneous nature of flood events. The basic concept of this approach is to generate a large sample of flood events that can be regarded as temporal extrapolation of flood events. These are combined with cumulative flood impact indicators, such as building damages, to finally derive time series of damages for risk estimation. Therefore, a multivariate modeling procedure that is able to take into account the spatial characteristics of flooding, the regionalization method top‐kriging, and three different impact indicators are combined in a model chain. Eventually, the expected annual flood impact (e.g., expected annual damages) and the flood impact associated with a low probability of occurrence are determined for a study area. The risk model has the potential to augment the understanding of flood risk in a region and thereby contribute to enhanced risk management of, for example, risk analysts and policymakers or insurance companies. The modeling framework was successfully applied in a proof‐of‐concept exercise in Vorarlberg (Austria). The results of the case study show that risk analysis has to be based on spatially heterogeneous flood events in order to estimate flood risk adequately.     

Capital structure decisions in family firms: empirical evidence from a bank-based economy

This paper analyzes the question if and how founding families influence the capital structure decision of their firms. By using a unique, partially hand-collected panel dataset of 660 listed German companies (5,135 firm years) over the period 1995–2006, we come up with the following results: German family firms have significantly lower leverage ratios than non-family firms. With respect to the question how families influence the capital structure of their firms, we can show that the family impact is mostly driven via management involvement. In this context, we also detect that the presence of a founder CEO has a strong negative effect on the leverage ratio. Our results prove to be stable against a battery of robustness tests, including the influence of other types of blockholders and the firms’ life cycle. Moreover, we use a propensity-score based matching estimator to alleviate concerns of reverse causality. Overall, our study suggests a strong, negative and causal relationship between family firm characteristics (especially family management) and the level of leverage.     

Disentangling Gut Feeling: Assessing the Integrity of Social Entrepreneurs

This paper analyzes how social venture capitalists evaluate the integrity of social entrepreneurs. Based on an experiment with 40 social venture capitalists and 40 students, we investigate how five attributes of the entrepreneur contribute to the assessment of integrity. These attributes are the entrepreneur’s personal experience, professional background, voluntary accountability efforts, reputation and awards/fellowships granted to the entrepreneur. Results indicate that social venture capitalists focus largely on voluntary accountability efforts of the entrepreneur and the entrepreneur’s reputation when judging integrity. For an overall positive judgment of integrity, it seems to be sufficient if either voluntary accountability efforts or reputation of the entrepreneur are high. By comparing social venture capitalists with students, we show that experience leads to a simpler decision model focusing on key attributes.     

Leverage and the performance of buyouts

In this paper we investigate the effects of debt usage on (risk-adjusted) equity returns in private equity-backed buyout transactions. We use a proprietary data set of more than 700 realized European and North American buyouts acquired between 1990 and 2006 to empirically assess theoretical predictions. Our results show a positive relationship between debt levels and equity returns indicating the return-enhancing effects related to leverage. However, our results also provide evidence that it is possible to ‘over-leverage’ a company, i.e. at very high levels of leverage (debt to total capital of approximately 90%) the increased company default risk outweighs the positive effects related to leverage resulting in decreasing equity returns. On the other side, we find no significant relationship between leverage and risk-adjusted equity returns which implies that the return increase through higher debt ratios comes along with increasing risk. In addition, we show that private equity sponsors successfully conduct debt-equity-arbitrage in times of favorable debt market conditions. This implies that these investors successfully time debt markets.     

Foundation ownership and shareholder value: an event study

Review of Managerial Science - Some of the largest listed firms in Western and Northern Europe are partly owned by foundations. So far, little research exists about the shareholder value effects of...     

New venture financing in Germany: Effects of firm and owner characteristics

Entrepreneurial activity by new ventures is an important driver of economic growth. Yet obtaining sufficient and/or appropriate financial means often represents a considerable challenge to entrepreneurs. Notably, reliable empirical evidence on financing patterns of young enterprises in Germany has so far been scarce. Using data from the KfW/ZEW Start-up Panel, a new large-scale dataset of newly founded ventures, we provide a comprehensive overview of financing structures and their firm- and owner-related drivers in German start-ups within the first months of their existence. Conceptually, we find pecking-order theory to hold for new ventures in Germany, although individual motives lead to partially deviant financing patterns. Moreover, our findings indicate that the extent of financing and the choice of capital sources are both driven by a multitude of firm as well as owner characteristics.