Over the last decade, information technology has contributed significantly to the evolution of financial markets, without, however, revolutionising the way in which financial institutions interact with one another. This may be about to change, as some market players are now predicting that new database technologies, such as blockchain and other distributed ledger technologies (DLTs), could be the source of an imminent revolution. This paper analyses the main features of DLTs that could influence their potential adoption by financial institutions and discusses how the use of these technologies could affect the European post-trade market for securities. The original protocol underlying DLTs has its roots in the anarchic world of virtual currencies, which operate outside the conventional financial system. The public debate on DLTs has also been very much focused on the revolutionary potential of the technology. This paper concludes that, irrespective of the technology used and the market players involved, certain processes that feature in the post-trade market for securities will still need to be performed by institutions. DLTs could, however, stimulate a reorganisation of financial markets, which could in turn: (i) reduce reconciliation costs, (ii) streamline the post-trade value chain, and (iii) allow more efficient use to be made of collateral and regulatory capital. It should, nevertheless, be remembered that research into DLTs and their uses is at an early stage. The scope for financial institutions to adopt DLTs and their potential impact on mainstream financial markets are still unclear. This paper discusses three potential models of how market players could adopt DLTs for performing core post-trade functions. The DLT could be adopted either: (i) in clusters, (ii) collectively, or (iii) peer to peer. The evaluation of the three adoption models assumes that they are all equally compatible with the regulatory framework. It shows that, assuming this to be the case, they would each have different advantages and costs. JEL Classification: G21, G23, L15, O33
This paper discusses how to use financial tools to support the national strategy public entrepreneurship and innovation. To implement the strategy public entrepreneurship and and reach the overall goal of building an innovative country, it's needed to conceive of the top-level design of the financial support system for innovation and entrepreneurship, make full use of financial strength, carry out the ideas of innovation and entrepreneurship thoroughly,promote the national strategy by financial guidance. In practice, it's needed to use the decentralization in governing to build a highly-efficient financial market environment for innovation and entrepreneurship, make full use of the function of banking institutions to support innovation and entrepreneurship, actively improve the multi-level capital markets to service innovation and entrepreneurship, strengthen international cooperation to improve the level of financial support to service innovation and entrepreneurship.
Applying the Monti-Klein framework, we examine the optimal financing strategy of a fi rm that requires funding for individual projects at an imperfect credit market. In particular, we study under which circumstances the firm should raise debt for projects separately (decentralized funding) or jointly (centralized funding) and how this organizational choice af fects the selection and resource allocation among projects. We fi nd that it is optimal to decentralize funding when competition at the credit market and the fi rm s level of equity are both either rather low or rather high. In this case, funding the strongest projects is optimal. For intermediate values of competition and equity, centralized funding is optimal. In this case, bundling strong projects with weak projects can be optimal (corporate socialism). All these funding strategies serve winner picking, i.e. the firm shifts disproportionately more funds to the pro table projects. In contrast to previous literature, winner picking and corporate socialism are not necessarily exclusive; rather, corporate socialism allows winner picking more aggressively.
This manuscript builds on my existing research program that (a) broadly seeks to analyze laws, regulations, instruments, and policy levers that inhibit a market’s ability to recognize an asset’s intrinsic value, whether in terms of financial, social, or human capital, and (b) explores and advances interdisciplinary corporate governance theories by employing a heterodox economic analytic to derive its proposal to the paradox of an unregulated virtual currency market (Bitcoins) and an overly regulated crowdfunding market (Kickstarter). The manuscript functions not only as an homage to Charles MacKay’s legendary 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, which described the human, social, and economic psychology of financial bubbles — particularly the Dutch tulip bulb bubble — but also as an offering of problems and proposals that crowdfunded and Kickstarted entrepreneurial businesses, including those funded by Bitcoin currencies, present for a wide swath of societal stakeholders. To describe the problem, this manuscript (i) describes behavioral finance, (ii) details the new entrepreneurial business possibilities that virtual currencies and crowdfunded entities can explore, (iii) describes how current rules and regulations represent unnecessary constraints to traditional equity-based funding models and concerning governance models of entrepreneurial enterprises, and (iv) questions why one form of capital deployment (currencies) may provide equity-like returns and unique governance, while the other form of investing (crowdfunding), provides only soft-dollar-like returns and no governance for middle-class investors. While both virtual currencies and crowdfunding represent risks, including economic bubble risk, this Article believes that a heterodox economic analysis demonstrates unnecessary constraints on entrepreneurial businesses imposed by extant regulation, regulators, and law and policymakers. To assuage these paradoxic problems for emerging business enterprises, this Article proposes a minarchist heterodox solution of modest statutory language that requires market-based solutions that employ needed risk reduction strategies while redeploying necessary capital to private startup business enterprises. This proposal thus benefits the middle class entrepreneurs, suppliers of capital, and job seekers harmed by the current regulatory regime, while permitting for an expansion of the U.S. and global economies.
Abstract We study transactions in which sellers fear being underpaid because their outside option is better known to the buyer. We rationalize various observed contracts as solutions to such smart buyer problems. Key to these solutions is granting the seller upside participation. In contrast, the lemons problem calls for granting the buyer downside protection. But, in either case, the seller (buyer) receives a convex (concave) claim. Thus, contracts usually associated with the lemons problem, such as debt or cash-equity offers, can be equally well manifestations of the smart buyer problem, although the two information asymmetries have opposite cross-sectional implications. Received December 23, 2014; accepted May 23, 2016 by Editor Uday Rajan.
Jeff Greene, Dennis Purcell, Brian Edelman, Doug Giordano · 9 authors
In a roundtable published in this journal a year ago, there was a clear consensus that the R&D function in big pharma was inefficient and in need of major restructuring, possibly through increased investments by venture capital and private equity firms. In this discussion, an accomplished group of industry practitioners begins by looking at the prospects for both venture capital and private equity to play meaningful roles in financing early‐ and mid‐stage drug development. In so doing, they explore questions like the following: Are there ways for big pharma and biotech to reduce “science risk” and make R&D funding more profitable and attractive to venture capital and private equity—and perhaps even hedge funds? What roles do you see for specialty PE firms like Symphony Capital and Paul Capital, which are now bundling mid‐stage development assets and securitizing royalties? Then the panelists turn to the broader life sciences industry and consider the outlook for leveraged private equity transactions involving marketed products, late‐stage development, and services. Here they consider issues like the following: Will PE be attracted to less‐R&D‐intensive activities like medtech and generics? Have the recent consolidation through mergers and reorganization of big pharma into decentralized business units created opportunities for carve‐outs of certain businesses? For big pharma and life sciences companies in general, the answers to such questions point to greater specialization and focus achieved partly through strategic alliances with venture capital, private equity, and even hedge funds, and involving marketed products and services as well as early‐stage drug development.
This paper examines the effect of regulatory institutions on venture capitalists' (VCs) investment activities in China. Interviews with VCs and systematic examinations on the investment data of 436 venture capital backed companies confirm that China's institutions affect the corporate governance structure of venture capital firms (VCFs) that in turn determine their investment strategies in stage financing, one of the most important mechanisms deployed in venture capital investment. Due to the regulatory restrictions, VCFs in China are divided into two groups in terms of corporate structure: limited partnership, which is a more decentralized organizational form; and, limited company structure, which is a more centralized organizational form. It is revealed that VCFs under limited partnership employ stage financing much more often than VCFs under limited company structure. Furthermore, for VCFs under limited partnership, their stage financing strategies are closely associated with agency problems and the performance of investment that is similar to the US practice. As for VCFs structured as limited companies, they rarely deploy stage financing and the structure of their stage financing do not show visible patterns.
For the new socialist countryside constuction and creation of a harmonious society,it has become imminent stage through financial innovations to enable vulnerable groups in rural areas enjoy the equal credit opportunity as far as possible.However,there has been a blood loss mechanism in present rural financial system due to China's economic and financial development strategy in the long run.Meanwhile,the microloan,which truly serves the rural vulnerable groups,has not been developed and generalized due to various practical condition constraints.The three cases of peer-peer loans to rural abroad show that microloan to rural poor can be propelled and developed by decentralized social forces in the appropriate institutional arrangements,achieving win-win balance among lenders,rural poor borrowers,microloan institutions and P2P platform to find a new ways of supporting rural vulnerable groups by microloan.In the present with increasingly sophisticated network technologies the experience of peer-peer loans to rural can be copied and spread,so it may be an important way for rural vulnerable groups access to sustainable finance sevices.
Private Equity Investment is a financial innovation under new economic situation, which highly contributes to the cultivation of multi-hierarchy capital market, the reduction of financial risk, and the promotion of hitech industry. However, Private Equity Investment develops very slowly in China, contrasting to the rapid growth of Chinese economy, making against the enhancement of power of capital allocation and decentralization of risk, making against industry innovation transition. It is no doubt of great significance that to fund in-depth analyses the Private Equity in the backdrop of China's current excess liquidity, financing pattern of inadequate optimization, and the capital market level is not rich, and other issues.
Mira Belenkiy, Melissa Chase, Markulf Kohlweiss, Anna Lysyanskaya
Abstract. Efficient non-interactive zero-knowledge proofs are a powerful tool for solving many cryptographic problems. We apply the recent Groth-Sahai (GS) proof system for pairing product equations (Eurocrypt 2008) to two related cryptographic problems: compact e-cash (Eurocrypt 2005) and simulatable verifiable random functions (CRYPTO 2007). We present the first efficient compact e-cash scheme that does not rely on a random oracle. To this end we construct efficient GS proofs for signature possession, pseudo randomness and set membership. The GS proofs for pseudorandom functions give rise to a much cleaner and substantially faster construction of simulatable verifiable random functions (sVRF) under a weaker number theoretic assumption. We obtain the first efficient fully simulatable sVRF with a polynomial sized output domain (in the security parameter). 1
Financial-right and property right are closely related but they two should belong to two different levels. Financial governance right is the right-balancing relationship between financing agents in the process of financial right segmentation from the level of corporate governance.And financial control is established on the basis of the incomplete contract theory,but financial control has several different meanings because of the importance of ,the distinction between narrow and broad senses of decision-making power,and the power implementation process etc. Financial-right configuration follows the basic principles of contribution and risk-taking and is the centralized and decentralized symmetrical arrangement of residual claim and residual control under the co-restriction of knowledge cost and agency cost.
As the characteristics of rural finance is presented with small exchange quantity,high frequency,decentralizing,covering large areas and lacking of avouch condition,the rural cooperative finance credit risk strategic tends to take it as its important feature to develop revenue correlation loan and make use of correct forecast to anticipate revenue and use separate elements and big number principle to carry through credit venture management.
With the recent years' development, institutional investors have played a more important role in corporate governance and operational decisions of China listed companies. However, the empirical research on the influence of institutional ownership on capital structure is rare. Based on the principle of minimizing financing cost, this paper constructs a dynamic optimizing model of capital structure from the angle of institutional ownership. We also use panel data of 568 China listed companies of manufacturing industry from 2002 to 2004 to make regression of fixed effects model. The evidences indicate that the percentage of institutional stockholdings has positive relation with capital structure, which means the debt ratio increases when the percentage of institutional stockholdings increases. We also find that the decentralized degree of institutional ownership is negatively related to capital structure, that is, a more decentralized degree of institutional ownership causes a lower debt ratio.
We examine the pyramidal ownership structure of a large sample of newly listed Chinese companies controlled by local governments or private entrepreneurs. Both types of the owners use layers of intermediate companies to control their firms. However, their pyramiding behaviors are likely affected by different property rights constraints. Local governments are constrained by the Chinese laws prohibiting free transfer of state ownership. Pyramiding allows them to credibly decentralize their firm decision rights to firm management without selling off their ownership. Private entrepreneurs are constrained by their lack of access to external funds. Pyramiding creates internal capital markets that help relieving their external financing constraints. Our empirical results support these conjectures. Local governments build more extensive corporate pyramids when they are less burdened with fiscal or unemployment problems, when they have more long-term goals, and when their firm decisions are more subject to market and legal disciplines. The more extensive pyramids are also associated with smaller "underpricing" when the firms go public. Entrepreneur owners construct more complex corporate pyramids when they do not have a very deep pocket - as indicated by whether they are among the top-100 richest people in China.
Open fund is the most representive and most revolutionary financial tool and new organization in the financial innovation. It has many advantages such as combinating investment, decentralized risk, financial affairs charged by experts, net valuble deal and management in scale. It can promote finance market development by making stock market prosper, optimizing financial organization and in the establishing internal relations.
What will the corporate finance department look like in the twenty-first century? Will it be staffed by CPAs, MBAs, computer information specialists? Will it even exist--absorbed instead by other departments? These were some of the tough questions 40 senior financial executives (from companies such as General Motors and Control Data), accounting educators (from schools such as Vanderbilt University, New York University and Senshu University in Japan) and CPAs (from accounting and consulting firms such as KPMG Peat Marwick, Price Waterhouse and Arthur Andersen & Co.) wrestled with for two days last April at a workshop in New York sponsored by the American Institute of CPAs management accounting executive committee. The goal of the workshop, mapping the future of financial management, was to help the committee envision the future of the finance function in businesses and thus help the Institute prepare its members for that future. As an opener, participants shared their views on the future of finance management by voting on various business management scenarios. Those with similar views were grouped in panels that constituted the management of a fictitious company; each panel member assumed a leading management role in the organization. Then each panel was asked to focus on its unique scenario, or endstate, and to develop a business plan for that endstate: the economic and business conditions that created and support it, the problems and opportunities it faces as it strives to survive, the tools it needs to prosper and the role of the finance department in this enterprise. Each panel then had to rationalize its end-state to the others in the workshop, defend its positions from challenges and report the weaknesses uncovered by working through the exercise. The five endstates were 1. Shareholder advocate--a back-to-basics focus on costs designed to boost shareholder wealth in the short run--even at the expense of future growth. The major role of the finance department is to root out activities that fail to produce immediate returns. 2. Business team--the management style is team oriented and the corporate goal is gaining market leadership by responding to market demand and customer needs. The role of finance is to dismantle excessive controls that paralyze meaningful analysis. 3. Managing risk--management recognizes it must confront multiple risks, including swiftly changing technology and severe business cycle and financial market swings. The principal role of finance is to act as a combination of internal hedge- and venture-fund managers. 4. Outsourcing--many of the corporation's finance functions--from payroll to general ledger and tax--are handled by outside organizations. The role of the finance department is no longer routine processing; it now is focused on control and standard-setting. 5. Decentralization--core business units are run relatively independently. Finance provides high-level analytical support. When the exercise was over, some of the participants came away with more than their original vision. In developing strategies and then being forced to defend them, some participants found their finance management views had changed somewhat. Some recognized advantages in endstates they had dismissed before. Others felt their original views were bolstered. And still others said they were considering shifting their allegiances or seeking to combine some endstate features with others. The bottom line: For some participants, the two-day exercise forced them to lay down some long-held views, recognizing that the future often is not a straight-line extension of the past. COMING TO CONSENSUS As a final exercise, participants were reassigned to different panels so they had to work with new colleagues--most of whom supported different endstates. Their new assignment was to search for common ground and create accommodations for their divergent views so they could agree on a new endstate. …