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FINANSMARK-Finansmarkedet

Home equity and private firm financing

Alternativ tittel: Betydningen av boligformue for finansiering av små- og mellomstore bedrifter.

Tildelt: kr 1,1 mill.

Prosjektleder:

Prosjektnummer:

328826

Prosjektperiode:

2022 - 2023

Midlene er mottatt fra:

Geografi:

Verdien av eiernes boliger hjelper dem med å finansiere bedriftene sine, og i våre foreløpige resultater finner vi at eiere faktisk låner mot sikkerhet i hjemmene sine for å få ny kapital til å skyte inn i bedriftene sine. I dette prosjektet vil vi undersøke viktigheten av denne finansieringskilden, og hvordan den varierer mellom ulike typer firmaer, hvor velstående eierne er og en rekke andre egenskaper. Vi undersøker også om disse bedriftene er mer eller mindre levedyktige på lang sikt. Vår forskning bruker data fra Skatteetaten kombinert med finansregnskap for selskapene. Med disse dataene kan vi på en unik måte studere hvordan eiere av små og mellomstore bedrifter finansierer bedriftene sine.

We attempt to show how home equity alleviates the financial constraints for existing firms. Our preliminary results show a positive correlation between home equity extraction of firm owners and new equity injection behavior into their own (private) firms. We exploit the cross-sectional heterogeneity among private firms and their owners to understand what drives the new equity injection behavior. We expect firms that exhibits weaker financial statements to face more difficulties in borrowing from external creditors, therefore, relies more on owners’ equity injections. We also analyse the owners’ personal characteristics, in particular their wealth. Our final set of tests focus on firm performance and survival in the post injection period. We leverage comprehensive data from the Norwegian tax authority. The data-set includes owner’s home ownership, public and private equity market holdings, board roles, etc.. It also documents corporate and financial information of all Norwegian firms over time. We map the individual owner’s data to their firms to directly track the fund flow from an individual to their firm. Overall, is home equity financing a sound investment decision for individual owners or not? Existing studies focus on the creation, rather than the follow-up on post-entry growth and long-run performance of private firms. We follow changes in private firms’ ownership and performance. Hence, our setting expands the existing research to a broader scope, the general private firms. We also investigate how owner’s personal financing behavior affects corporate performance, and why owners want to increase ownership stake and in which firms. It also allows us to evaluate whether it is a sound investment decision by studying the ultimate consequences of new equity injection to the firms. In the latter we also use owners' divorce to study the effects of changes in risk attitudes. Overall, we want to better understand how home equity supports firm financing.

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FINANSMARK-Finansmarkedet

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