MAN MIE002-2023-2-V
All mandatory papers for the exam
,Table of contents
Lecture 1 4
A REVIEW OF THE CAPITAL STRUCTURE THEORIES P Luigi, V. Sorin, Annals of
Faculty of Economics, 2009 4
Capital structure theory and new technology firms: is there a match? - Coleman and Robb 8
Entrepreneurship and growth - Wright and Stigliani 9
Lecture 2 11
Path Dependence in New Ventures’ Capital Structures; Samuelsson, M., A. Soederblom and A.
McKelvie, Entrepreneurship Theory and Practice, 2020 11
Funding gap, what funding gap? Financial bootstrapping: Supply, demand and creation of
entrepreneurial finance. Lam, W.; International Journal of Entrepreneurial Behaviour &
Research, 2010 15
Entrepreneurship and Growth – Wright and Stigliani 20
Lecture 3 26
Ready for funding? Entrepreneurial ventures and the pursuit of angel financing - Brush,
Edelman & Manolova 26
Strategic entrepreneurship, resource orchestration and growing spin-offs from universities,
M.Wright, B. Clarysse & S. Mosey, Technology Analysis & Strategic Management, 2012 28
Growing fast or slow? Understanding the variety of paths and the speed of early growth of
entrepreneurial science-based firms - Miozzo and DiVito 33
Lecture 4 35
A comparison of business angel and venture capitalist investment procedures: an agency
theory-based analysis - Van Osnabrugge 35
Sustaining trust to cross the Valley of Death: A retrospective study of business angels’
investment and reinvestment decisions, Lefebre V., G. Certhoux, M. Radu-Lefebre,
Technovation, 2020 37
Lecture 5 40
Convincing the crowd: Entrepreneurial storytelling in crowdfunding campaigns - Manning
and Bejarano 40
Extending Signaling Theory to Rhetorical Signals: Evidence from Crowdfunding;
Steigenberger, N. and H. Wilhelm, Organization Science, 2018 43
Lecture 10 47
Digitization in the Market for Entrepreneurial Finance: Innovative Business Models and New
Financing Channels; Bertoni, F, S. Bonini, V. Capizzi, M.G. Colombo, and S. Manigart,
Entrepreneurship Theory and Practice, 2021 47
2
, Why do startups pursue initial coin offering (ICO’s)? The role of economic drivers and social
identity on funding choice; Schückes, M., Gutmann,. T.; Small business Economics, 2021. 50
Lecture 12 54
Accounting and control, Entrepreneurship and Innovation: Venturing into New Research
Opportunities - Davila, Foster & Oyon 54
How managers approach data analytics: a typology through a Resource Orchestration
perspective, Peterson, J., Tahssain-Gay, L., Salvetat, D., Perez, F., Hennekam, S.,
Management Decision, 2023 57
3
, Lecture 1
A REVIEW OF THE CAPITAL STRUCTURE THEORIES P Luigi, V. Sorin, Annals
of Faculty of Economics, 2009
Introduction
Since Modigliani and Miller's 1958 "irrelevance theory," three major theories of corporate
capital structure have emerged:
Trade-Off Theory:
● Firms balance the benefits and costs of debt and equity, aiming for an optimal
structure considering market imperfections like taxes and agency costs.
Pecking Order Theory:
● Myers (1984) proposed a hierarchy where firms prefer internal financing, then
debt, and lastly equity, minimizing information asymmetry between insiders
and outsiders.
Market Timing Theory:
● Baker and Wurgler (2002) introduced the idea that current capital structure
reflects past attempts to time the equity market.
● Firms issue shares when overvalued and repurchase when undervalued, with
this market timing behavior persisting over time.
These theories provide frameworks for understanding how firms navigate capital structure
decisions in imperfect markets and varying conditions.
The Modigliani-Miller theorem
The Modigliani-Miller (M&M) Theorem, proposed in 1958, introduced the concept of capital
structure irrelevance. It assumes a firm with a set of expected cash flows and posits that the
way a firm divides its financing between debt and equity does not affect its market value. The
theory relies on the assumption of equal access to financial markets, allowing investors to
create homemade leverage. Two types of irrelevance propositions emerged: arbitrage-based
irrelevance, where arbitrage keeps firm value independent of leverage, and the conclusion
that, given a firm's investment policy, dividend payout choices do not impact share prices or
total shareholder returns.
However, subsequent research challenged M&M's irrelevance under various circumstances,
considering factors like taxes, transaction costs, bankruptcy costs, agency conflicts, adverse
selection, lack of separability between financing and operations, time-varying market
opportunities, and investor clientele effects. Empirical testing of the irrelevance proposition is
challenging due to the endogeneity of debt and firm value, driven by factors such as profits,
collateral, and growth opportunities.
While the Modigliani-Miller theorem may not offer a realistic depiction of how firms finance
operations, some argue that it provides a means of understanding why financing decisions
might matter. This perspective influenced the development of other theories in corporate
finance, such as the trade-off theory and the pecking order theory, which consider practical
implications of financing choices in imperfect markets.
4
All mandatory papers for the exam
,Table of contents
Lecture 1 4
A REVIEW OF THE CAPITAL STRUCTURE THEORIES P Luigi, V. Sorin, Annals of
Faculty of Economics, 2009 4
Capital structure theory and new technology firms: is there a match? - Coleman and Robb 8
Entrepreneurship and growth - Wright and Stigliani 9
Lecture 2 11
Path Dependence in New Ventures’ Capital Structures; Samuelsson, M., A. Soederblom and A.
McKelvie, Entrepreneurship Theory and Practice, 2020 11
Funding gap, what funding gap? Financial bootstrapping: Supply, demand and creation of
entrepreneurial finance. Lam, W.; International Journal of Entrepreneurial Behaviour &
Research, 2010 15
Entrepreneurship and Growth – Wright and Stigliani 20
Lecture 3 26
Ready for funding? Entrepreneurial ventures and the pursuit of angel financing - Brush,
Edelman & Manolova 26
Strategic entrepreneurship, resource orchestration and growing spin-offs from universities,
M.Wright, B. Clarysse & S. Mosey, Technology Analysis & Strategic Management, 2012 28
Growing fast or slow? Understanding the variety of paths and the speed of early growth of
entrepreneurial science-based firms - Miozzo and DiVito 33
Lecture 4 35
A comparison of business angel and venture capitalist investment procedures: an agency
theory-based analysis - Van Osnabrugge 35
Sustaining trust to cross the Valley of Death: A retrospective study of business angels’
investment and reinvestment decisions, Lefebre V., G. Certhoux, M. Radu-Lefebre,
Technovation, 2020 37
Lecture 5 40
Convincing the crowd: Entrepreneurial storytelling in crowdfunding campaigns - Manning
and Bejarano 40
Extending Signaling Theory to Rhetorical Signals: Evidence from Crowdfunding;
Steigenberger, N. and H. Wilhelm, Organization Science, 2018 43
Lecture 10 47
Digitization in the Market for Entrepreneurial Finance: Innovative Business Models and New
Financing Channels; Bertoni, F, S. Bonini, V. Capizzi, M.G. Colombo, and S. Manigart,
Entrepreneurship Theory and Practice, 2021 47
2
, Why do startups pursue initial coin offering (ICO’s)? The role of economic drivers and social
identity on funding choice; Schückes, M., Gutmann,. T.; Small business Economics, 2021. 50
Lecture 12 54
Accounting and control, Entrepreneurship and Innovation: Venturing into New Research
Opportunities - Davila, Foster & Oyon 54
How managers approach data analytics: a typology through a Resource Orchestration
perspective, Peterson, J., Tahssain-Gay, L., Salvetat, D., Perez, F., Hennekam, S.,
Management Decision, 2023 57
3
, Lecture 1
A REVIEW OF THE CAPITAL STRUCTURE THEORIES P Luigi, V. Sorin, Annals
of Faculty of Economics, 2009
Introduction
Since Modigliani and Miller's 1958 "irrelevance theory," three major theories of corporate
capital structure have emerged:
Trade-Off Theory:
● Firms balance the benefits and costs of debt and equity, aiming for an optimal
structure considering market imperfections like taxes and agency costs.
Pecking Order Theory:
● Myers (1984) proposed a hierarchy where firms prefer internal financing, then
debt, and lastly equity, minimizing information asymmetry between insiders
and outsiders.
Market Timing Theory:
● Baker and Wurgler (2002) introduced the idea that current capital structure
reflects past attempts to time the equity market.
● Firms issue shares when overvalued and repurchase when undervalued, with
this market timing behavior persisting over time.
These theories provide frameworks for understanding how firms navigate capital structure
decisions in imperfect markets and varying conditions.
The Modigliani-Miller theorem
The Modigliani-Miller (M&M) Theorem, proposed in 1958, introduced the concept of capital
structure irrelevance. It assumes a firm with a set of expected cash flows and posits that the
way a firm divides its financing between debt and equity does not affect its market value. The
theory relies on the assumption of equal access to financial markets, allowing investors to
create homemade leverage. Two types of irrelevance propositions emerged: arbitrage-based
irrelevance, where arbitrage keeps firm value independent of leverage, and the conclusion
that, given a firm's investment policy, dividend payout choices do not impact share prices or
total shareholder returns.
However, subsequent research challenged M&M's irrelevance under various circumstances,
considering factors like taxes, transaction costs, bankruptcy costs, agency conflicts, adverse
selection, lack of separability between financing and operations, time-varying market
opportunities, and investor clientele effects. Empirical testing of the irrelevance proposition is
challenging due to the endogeneity of debt and firm value, driven by factors such as profits,
collateral, and growth opportunities.
While the Modigliani-Miller theorem may not offer a realistic depiction of how firms finance
operations, some argue that it provides a means of understanding why financing decisions
might matter. This perspective influenced the development of other theories in corporate
finance, such as the trade-off theory and the pecking order theory, which consider practical
implications of financing choices in imperfect markets.
4
