The Academy of Entrepreneurial Finance (AEF), Los Angeles, CA, USA https://hdl.handle.net/10419/55900 2026-09-15T11:31:48Z 2026-09-15T11:31:48Z Ezeibekwe, Obinna Franklin https://hdl.handle.net/10419/319785 2025-06-26T01:00:17Z 2025-01-01T00:00:00Z

Title: Effects of bureaucratic corruption on firms' financial constraints Authors: Ezeibekwe, Obinna Franklin Abstract: This study provides the first empirical assessment of the causal impact of bureaucratic corruption on firms' financial constraints in Nigeria by calculating treatment effects using linear and non-linear estimators to account for potential heterogeneous treatment effects across firm groups. Formally, the theoretical framework models how corruption may facilitate or restrain firms' financial access by shaping their cost functions, which consequently influences their success or failure and ability to raise the collateral for borrowing. My analysis, using the bivariate probit method and two binary instruments, reveals that corruption significantly increases the probability of a representative MSME and firm being financially constrained by approximately 62 to 64 and 61 to 63 percentage points, respectively. When the IV estimator is utilized to calculate local effects, I find that the effect is about 90 to 91 percentage points for a typical MSME facing obstacles with obtaining business licenses and permits and tax administration, respectively. The effect is 92 percentage points for all firms using both instruments. Furthermore, the results show that Nigerian MSMEs are about 17 to 19 percentage points more likely to be financially constrained than large firms and that corruption's impact on firms' access to finance does not depend on firm size. Finally, firms that perceive corruption as a ''minor" barrier experience the most difficulty obtaining external finance. This study highlights the severe constraint that corruption poses to Nigerian firms' access to finance and advocates for regulatory amendments to address issues with the tax administration and the ease of obtaining business licenses and permits.

2025-01-01T00:00:00Z Onyele, Kingsley Onyekachi Ikwuagwu, Eberechi Umezurike, Innocent https://hdl.handle.net/10419/319787 2025-06-26T01:00:18Z 2025-01-01T00:00:00Z

Title: Formal financing of small and medium scale enterprises in Nigeria: A path to economic development? Authors: Onyele, Kingsley Onyekachi; Ikwuagwu, Eberechi; Umezurike, Innocent Abstract: This investigation assessed the influence of formal financing for small and medium-sized enterprises (SMEs) on the economic advancement of Nigeria, utilising annual time series data ranging from 1992 to 2022. Employing the Cobb-Douglas framework, control variables, including capital formation and labour, which could influence economic development, were incorporated into the empirical model to mitigate bias. Following initial tests for stationarity, it was determined that all variables achieved stationarity upon the first difference, a finding that validated the Vector Error Correction Mechanism (VECM) application. The analysis revealed that the credit extended to SMEs by commercial banks and the loans provided by microfinance banks exhibited a negative and significant influence on economic development, as measured by GDP per capita, in both the long and short term. The negative coefficients associated with the credit from commercial banks to SMEs and the loans from microfinance banks indicate that these financial institutions have not yet catalysed the requisite leap in Nigeria's economic development, probably due to the negative effects of unstable interest rates on lending. Both gross capital formation and labour demonstrated a significant impact on GDP per capita; however, the effect of labour was found to be negative. Consequently, it was concluded that financing for SMEs through commercial banks' credit and microfinance bank loans had a negative and significant effect on Nigeria's economic development. The study recommended that policymakers and regulatory bodies should empower and facilitate formal financial institutions, such as commercial banks and microfinance banks, to extend financial services to SMEs, thereby enhancing their productivity.

2025-01-01T00:00:00Z Galbraith, Craig S. https://hdl.handle.net/10419/319786 2025-06-26T01:00:19Z 2025-01-01T00:00:00Z

Title: Size premium in small business valuation: Analysis of closely-held firms Authors: Galbraith, Craig S. Abstract: One of the most misunderstood components of valuing a small closely-held business is how to address the impact of small size. Most closely-held enterprises are relatively small in size, with market values less than $1million. Many small mom and pop operations, or single owner-operator family businesses, often have market values even smaller. The most common method to account for size is to use the size premium reports from Kroll or another financial data service provider. However, these small firm premiums are determined exclusively from publicly-traded firms, where even the category of the smallest publicly-traded firms are still magnitudes larger than the typical small closely-held firm. This study examines the Kroll size premium data on publicly-traded firms and compares it with an analysis of size data from a proprietary database of closely-held firm transactions. We develop various models that better assess the impact of size on the cost of equity calculations for small, closely-held firms.

2025-01-01T00:00:00Z Cotei, Carmen Farhat, Joseph https://hdl.handle.net/10419/306240 2024-11-19T02:15:51Z 2024-01-01T00:00:00Z

Title: Thinking about starting a franchise business? Think again Authors: Cotei, Carmen; Farhat, Joseph Abstract: This study aims to explain the survival and exit outcome of franchise startups compared to other types of startups. Small business owners choosing to become franchisees have high expectations about business survival since "franchise is a proven business model that carries less risk." Using the Kauffman Firm Survey, we examine the survival patterns and M&A exit outcomes of a large sample of U.S. independent and franchise businesses started in 2004 and tracked over time for eight years. Our study provides unique results on the likelihood of survival and M&A exit of franchises relative to other startups. Although franchise businesses start larger, are very well-capitalized, and are led by highly educated owners, we find no significant difference in the survival rate between franchises and independent businesses. However, our results show a significant difference between the survival rate of franchises and those businesses started by purchasing "existing" firms. When the outcome is an M&A exit, the results show that franchises are 2.77 times more likely to exit via M&A than independent businesses, whereas "existing" businesses are 1.81 times more likely to exit via M&A than independent businesses. Overall, this study sheds more light on the controversial evidence on the survival and exit prospects of a large cohort of U.S. franchises, independent new businesses, and "existing" businesses.

2024-01-01T00:00:00Z