Assessing and measuring the equity gap and the equity requirements for innovative SMEs
AbstractThis paper sets out to critically review the different approaches developed for the assessment and measurement of the equity gap for innovative firms, mainly SMEs, extending the quantitative approaches for equity gap developing a demand-side model that allows to predict the future demand for equity in precise terms. Through the application of an original model to a sample of Italian firms, we find that, the amount of equity needed, expressed in absolute terms, is on average tiny (147.3 K euro). Moreover, the size of the additional equity requirement is clearly influenced by the role of the current debt. The results of the cluster analysis confirm that the degree of innovation cannot be considered the main discriminating factor when it comes to the differences in equity requirement per unit of marginal sale; while the regression analysis reveals the pivotal role played by the enterprise’s year of foundation.
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Bibliographic InfoPaper provided by Universita di Modena e Reggio Emilia, Facoltà di Economia "Marco Biagi" in its series Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) with number 08011.
Length: pages 21
Date of creation: Jan 2008
Date of revision:
Finance; Equity gap; Innovative SMEs;
Find related papers by JEL classification:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O38 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Government Policy
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
- NEP-CFN-2008-01-26 (Corporate Finance)
- NEP-ENT-2008-01-26 (Entrepreneurship)
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