Undercapitalization

Abstract: This study investigates the relationship between the evolution of real options values and associated financing policies for Belgian companies in the sector of bio-industries. Each firm's situation regarding the relevant types of real options is stylistically represented through a scenario tree. The consumption of a time-to-build or a growth option is respectively considered as a success or a failure in company development. Empirically, several variables enable us to locate each company along the tree at any time. The study of transitions leads us to discover that failures tend to trigger higher leverage, unlike in the trade-off theory. Yet, the increases in debt maturity, in lease and in convertible financing confirm our predictions. Overall, we emphasize evidence of undercapitalization and of proper, yet insufficient, use of hybrid financing by biotech companies.

Abstract: This article relies on a national survey of community‐based housing development organizations to profile production levels, spatial coverage, funding sources, and nondevelopmental roles of the nonprofit housing development sector. It also uses Urban Institute case study results and secondary data sources to examine continuing barriers to increased production in the sector and the evolution of institutional responses to those barriers. Nationwide, about 13 percent of all recent federally supported housing units (excluding public housing) have been sponsored by nonprofit developers. This production is distributed very unevenly; relatively few developers produce the bulk of units, and regional disparities are marked. Long‐standing barriers to efficient production at higher volumes continue: Undercapitalization, high‐risk developments, patchwork systems of finance, and the difficulty of demonstrating the social payoff of community development investments constrain even the most sophisticated portions...

Abstract: This article examines the phenomenon of values-based firms being sold to larger mainstream firms. Its focus is on the sensemaking rationale offered by a New Zealand ecopreneur who sold an organic beverage company after 20 years at the helm. The company case study is presented through two enterprise development narratives based on alternative sensemaking modes. Key values-related challenges arising in ecopreneurial business are identified, including (1) adhering to the founder's values, (2) growing the business sustainably, (3) deciding whether and when to expand ownership to cope with undercapitalization, (4) deciding who to bring in as new owners to ensure values alignment, (5) determining how and when the founder might leave and (6) ensuring the attractiveness of the sustainability values so that they might be retained. Other factors implicated in the sale of values-based firms are also postulated. It is argued that, although ecopreneurs might be accused of selling out their principles by selling up, there is some evidence that eco-brands are being maintained and that growth prospects could be improved after acquisition. Serial ecopreneurship may even extend social benefits. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.

Abstract: We ask whether past macro-economic and bank-specific shocks experienced and survived by a bank affect its current capitalization and risk-taking. Using Call Report data from 1984 to 2010, we find that a bank's experience shapes its capital structure and risk appetite. Banks that have survived periods of undercapitalization tend to implement higher equity ratios and take less risk in the periods following such crises, as measured by net charge-offs, non-performing loans, or earnings volatility 10-25 years later. However, observing high rates of failure among other banks stirs banks in the opposite direction. The evidence is suggestive of institutional memory affecting banks' capital and risk-taking.