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ACRN Journal of Finance and Risk Perspectives
Vol. 4, Issue 1, Feb 2015, ISSN 2305-7394
SPECIAL ISSUE - ENTREPRENEURSHIP AND SOCIETAL PERSPECTIVES OF FINANCE AND RISK
TABLE OF CONTENTS
EDITORIAL BOARD
SOCIAL ENTREPRENUERSHIP AS CHALLENGE FOR SLOVAK SOCIAL SYSTEM
Daniela Majerčáková 1
1 Comenius University in Bratislava, Faculty of Management
Abstract. The most influential impulse for starting the social investments in Slovakia were the changes after 1989, when new business possibilities were opened under the free market´ conditions and the potential participation on the public affairs for everyone. First failures came in 2009 when social enterprises were created with the objective to increase the employment of people with disabilities. Unfortunately, from eight pilot social enterprises established in that time, prosecution was launched on four of them for misuse of subsidies and misunderstanding of concept of social entrepreneurship. The paper will be also focused on the problems connected to those topics, specifically from the point of view of social enterprises in Slovakia. We will use an analysis with the objective to identify the weaknesses and the sources of ineffectiveness of existing social enterprises and also to make some proposals how to eliminate the main sources of this status.
Keywords: social enterprises, weakness, strengthening, investments
PERFORMANCE-SENSITIVE DEBT FOR YOUNG AND INNOVATIVE FIRMS
Julia Daum 1, Prof. Dr. Andreas Dutzi 2
1,2 University of Siegen, Department of Business Administration, especially Accounting and
Corporate Governance
Abstract: This paper presents a literature review of performance-sensitive debt. Performance sensitivity is based on the idea of relating contractual terms and conditions to the valuation or performance of the firm. The three primary types of performance sensitivity identified in this article refer to covenants, performance pricing and collateralization.
The first and well-established research stream in analysing performance-sensitive debt is the agency theory questioning how performance-sensitive debt can mitigate information asymmetry or agency conflicts. As this is based on a rationality methodology, it does not completely explain the financing decision making in firms. A more comprehensive perspective can be offered by behavioural finance or strategic management literature, because it allows to study financial issues on an individual level of the firm. Both streams are not very well studied in finance literature, so that it offers many gaps for future research. This paper presents linkages between financial literature and managerial inputs or firm specificities that might help to better explain financing decisions of firms.
Keywords: Performance-sensitive debt, debt contracting, young and innovative firms, agency theory, behavioural finance, strategic literature
THE FORBES 400 AND THE GATES-BUFFETT GIVING PLEDGE
Kent Hickman 1, Mark Shrader 2, Danielle Xu 3, Dan Lawson 4
1,2,3 School of Business Administration, Gonzaga University
4 Department of Finance, Indiana University of Pennsylvania
Abstract: Large disparities in the distribution of wealth across the world’s population may contribute to political and societal instability. While public policy decisions regarding taxes and transfer payments could lead to more equal wealth distribution, they are controversial. This paper examines a voluntary initiative aimed at wealth redistribution, the Giving Pledge, developed by Warren Buffet and Bill and Melinda Gates. High wealth individuals signing the pledge commit to give at least half of their wealth to charity either over their lifetime or in their will. We attempt to identify personal characteristics of America’s billionaires that influence their decision to sign the pledge. We find several factors that are related to the likelihood of giving, including the individual’s net worth, the source of their wealth, their level of education, their notoriety and their political affiliation.
Keywords: Philanthropy, Giving Pledge, Forbes 400, wealth redistribution
SOCIAL STATEMENT APPROACH TO COOPERATIVE SOCIAL PERFORMANCE ASSESSMENT: A CASE OF LUME ADAMA FARMERS COOPERATIVE UNION IN ETHIOPIA
M. Karthikeyan 1
1 Dept. of Cooperatives, Institute of Cooperatives & Development Studies, Ambo University, Ethiopia
Abstract: Cooperatives are democratic organizations, which are for the members, of the members, and by the members. Cooperative accounting is an easy process which has different stages to process accounting data from various sources to produce and disseminate accounting information about the cooperative business in the form of accounting reports. Cooperatives are engaged not only in doing business but also rendering social services. Apart from preparing regular accounting statements and records they are expected to prepare social accounting reports since they engage in social projects to serve different stakeholders. They have to prepare social income statement, which contains social benefits and costs to members, employees, community and the government. Moreover, they have to prepare social balance sheet to show the position of social assets and liabilities. This paper adopted social statement approach. The application of cooperative social accounting and reporting is discussed to assess the social performance of Lume Adama farmers Cooperative Union as a case which is the first cooperative union organized in Ethiopia. Social Statement Approach was adopted and social accounting statements like social income statement and social balance sheet were used to show the social performance of the union. The study was also supported with Stakeholder Survey to elicit information from the stakeholders of the union. All the management committee members (9), all the employees (37), and 140 members and 140 non-members were selected as samples by simple random sampling procedure. The social accounting data from various accounting statements were collected as secondary data and processed through the preparation of social accounting and reporting tools such as social income statement and social balance sheet for five years to social performance of the cooperative union. Perceptions regarding social activities of the union were assessed among the stakeholders of the union. The responses were scored and the respondents were categorized based on their perception level into high, moderate and low. The union has been undertaking social projects and social activities for the benefit of the members, employees and the community where it exists. The social statements show that the cooperative union is engaging more in social projects like hospitals (clinic), bakery unit for employment creation, school for stakeholders’ children, and other welfare activities, which resulted in net social benefits to stakeholders. The stakeholders perceived highly on the social performance of the cooperative union since they have been benefiting from the social activities of the union. The cooperative union has created social reserve for the purpose of social activities. This is a model cooperative to other cooperatives in the country and adheres to and practices the cooperative principle of “concern for community”.
Keywords: Social accounting, social reporting, social statements, cooperative social responsibility, stakeholder survey
DE-RISKING VC INVESTING FOR OUTSTANDING ROI: AN INTERDISCIPLINARY APPROACH TOWARD THE INTEGRATION OF PEOPLE, PLANET AND PROFIT
Mariana Bozesan 1
1 Founder & General Manager, AQAL Capital, Munich
Co-Founder & President, AQAL Investing, Munich
Senior Research Fellow, Humboldt-Viadrina School of Governance, Berlin, Germany
Abstract: This paper makes the case for Integral Investing as a sustainable model for early stage investing. It argues that more sustainable de-risking tools could shift mainstream VC investing toward delivering higher financial returns and integral sustainability. It introduces the Theta Model as a de-risking process that integrates financial criteria with Environmental, Social, and Governance criteria, but also with behavioral, cultural, and individual assessment metrics. First, traditional Venture Capital practice and performance are compared with current developments toward more sustainable investing practices including impact investing. Then, the Theta Model is introduced as an evolutionary-based investment model rooted in Wilber’s Integral Theory. The paper shows how the model has been successfully applied in integral due diligence and what were the causes for its outstanding ROI. The paper closes by sharing the lessons learned from positive and negative investment examples and by offering a discussion on how all stakeholders from entrepreneurs to investors could benefit from such integral sustainability metrics in the future.
Keywords: Sustainable Finance, Sustainable and Responsible Investing, Integral Investing, Impact Investing, Integral Sustainability, Theta Model, AQAL, Ken Wilber.
RELATIONSHIP BETWEEN SOCIAL CAPITAL AND ENTREPRENEURSHIP IN THE DEVELOPING COUNTRIES
(A CASE STUDY, KURDISTAN PROVINCE OF IRAN)
Parviz Kafcheh 1, Seyed Erfan Hosseini 2
1 Assistant Professor of Strategy & Management, Department of Business Administration, University of Kurdistan
2 Master of Business Administration
Abstract: The focus of this paper is on the relationship between social capital and entrepreneurship in Kurdistan province industrial firms/companies. The demographic population in this research consists of the active companies in production industry with more than 10 employees. Totally, the research consists of 820 companies. Randomly, 256 companies have been selected with sampling method from a limited population.
The research method was based on survey. Data was collected with Likert's 5-points questionnaires. The questionnaires validity and reliability are based on conceptual method. The questionnaire permanency rate were calculated by means of Alph Coronbach (802%). The statistical methods were descriptive and deductive (Spearman Correlation Coefficient Test). The result show there is significant relationship among all the social capital dimensions (Cognitive, structural and correlation) and entrepreneurship.
Keywords: Social Capital, Structural Dimension, Correlation Dimension, Entrepreneurship.
ACRN Journal of Finance and Risk Perspectives
Vol. 4, Issue 1, Feb 2015, ISSN 2305-7394
SPECIAL ISSUE - ENTREPRENEURSHIP AND SOCIETAL PERSPECTIVES OF FINANCE AND RISK
TABLE OF CONTENTS EDITORIAL BOARD SOCIAL ENTREPRENUERSHIP AS CHALLENGE FOR SLOVAK SOCIAL SYSTEMDaniela Majerčáková 1
1 Comenius University in Bratislava, Faculty of Management
Abstract. The most influential impulse for starting the social investments in Slovakia were the changes after 1989, when new business possibilities were opened under the free market´ conditions and the potential participation on the public affairs for everyone. First failures came in 2009 when social enterprises were created with the objective to increase the employment of people with disabilities. Unfortunately, from eight pilot social enterprises established in that time, prosecution was launched on four of them for misuse of subsidies and misunderstanding of concept of social entrepreneurship. The paper will be also focused on the problems connected to those topics, specifically from the point of view of social enterprises in Slovakia. We will use an analysis with the objective to identify the weaknesses and the sources of ineffectiveness of existing social enterprises and also to make some proposals how to eliminate the main sources of this status.
Keywords: social enterprises, weakness, strengthening, investments
PERFORMANCE-SENSITIVE DEBT FOR YOUNG AND INNOVATIVE FIRMSJulia Daum 1, Prof. Dr. Andreas Dutzi 2
1,2 University of Siegen, Department of Business Administration, especially Accounting and
Corporate Governance
Abstract: This paper presents a literature review of performance-sensitive debt. Performance sensitivity is based on the idea of relating contractual terms and conditions to the valuation or performance of the firm. The three primary types of performance sensitivity identified in this article refer to covenants, performance pricing and collateralization.
The first and well-established research stream in analysing performance-sensitive debt is the agency theory questioning how performance-sensitive debt can mitigate information asymmetry or agency conflicts. As this is based on a rationality methodology, it does not completely explain the financing decision making in firms. A more comprehensive perspective can be offered by behavioural finance or strategic management literature, because it allows to study financial issues on an individual level of the firm. Both streams are not very well studied in finance literature, so that it offers many gaps for future research. This paper presents linkages between financial literature and managerial inputs or firm specificities that might help to better explain financing decisions of firms.
Keywords: Performance-sensitive debt, debt contracting, young and innovative firms, agency theory, behavioural finance, strategic literature
THE FORBES 400 AND THE GATES-BUFFETT GIVING PLEDGEKent Hickman 1, Mark Shrader 2, Danielle Xu 3, Dan Lawson 4
1,2,3 School of Business Administration, Gonzaga University
4 Department of Finance, Indiana University of Pennsylvania
Abstract: Large disparities in the distribution of wealth across the world’s population may contribute to political and societal instability. While public policy decisions regarding taxes and transfer payments could lead to more equal wealth distribution, they are controversial. This paper examines a voluntary initiative aimed at wealth redistribution, the Giving Pledge, developed by Warren Buffet and Bill and Melinda Gates. High wealth individuals signing the pledge commit to give at least half of their wealth to charity either over their lifetime or in their will. We attempt to identify personal characteristics of America’s billionaires that influence their decision to sign the pledge. We find several factors that are related to the likelihood of giving, including the individual’s net worth, the source of their wealth, their level of education, their notoriety and their political affiliation.
Keywords: Philanthropy, Giving Pledge, Forbes 400, wealth redistribution
SOCIAL STATEMENT APPROACH TO COOPERATIVE SOCIAL PERFORMANCE ASSESSMENT: A CASE OF LUME ADAMA FARMERS COOPERATIVE UNION IN ETHIOPIAM. Karthikeyan 1
1 Dept. of Cooperatives, Institute of Cooperatives & Development Studies, Ambo University, Ethiopia
Abstract: Cooperatives are democratic organizations, which are for the members, of the members, and by the members. Cooperative accounting is an easy process which has different stages to process accounting data from various sources to produce and disseminate accounting information about the cooperative business in the form of accounting reports. Cooperatives are engaged not only in doing business but also rendering social services. Apart from preparing regular accounting statements and records they are expected to prepare social accounting reports since they engage in social projects to serve different stakeholders. They have to prepare social income statement, which contains social benefits and costs to members, employees, community and the government. Moreover, they have to prepare social balance sheet to show the position of social assets and liabilities. This paper adopted social statement approach. The application of cooperative social accounting and reporting is discussed to assess the social performance of Lume Adama farmers Cooperative Union as a case which is the first cooperative union organized in Ethiopia. Social Statement Approach was adopted and social accounting statements like social income statement and social balance sheet were used to show the social performance of the union. The study was also supported with Stakeholder Survey to elicit information from the stakeholders of the union. All the management committee members (9), all the employees (37), and 140 members and 140 non-members were selected as samples by simple random sampling procedure. The social accounting data from various accounting statements were collected as secondary data and processed through the preparation of social accounting and reporting tools such as social income statement and social balance sheet for five years to social performance of the cooperative union. Perceptions regarding social activities of the union were assessed among the stakeholders of the union. The responses were scored and the respondents were categorized based on their perception level into high, moderate and low. The union has been undertaking social projects and social activities for the benefit of the members, employees and the community where it exists. The social statements show that the cooperative union is engaging more in social projects like hospitals (clinic), bakery unit for employment creation, school for stakeholders’ children, and other welfare activities, which resulted in net social benefits to stakeholders. The stakeholders perceived highly on the social performance of the cooperative union since they have been benefiting from the social activities of the union. The cooperative union has created social reserve for the purpose of social activities. This is a model cooperative to other cooperatives in the country and adheres to and practices the cooperative principle of “concern for community”.
Keywords: Social accounting, social reporting, social statements, cooperative social responsibility, stakeholder survey
DE-RISKING VC INVESTING FOR OUTSTANDING ROI: AN INTERDISCIPLINARY APPROACH TOWARD THE INTEGRATION OF PEOPLE, PLANET AND PROFITMariana Bozesan 1
1 Founder & General Manager, AQAL Capital, Munich
Co-Founder & President, AQAL Investing, Munich
Senior Research Fellow, Humboldt-Viadrina School of Governance, Berlin, Germany
Abstract: This paper makes the case for Integral Investing as a sustainable model for early stage investing. It argues that more sustainable de-risking tools could shift mainstream VC investing toward delivering higher financial returns and integral sustainability. It introduces the Theta Model as a de-risking process that integrates financial criteria with Environmental, Social, and Governance criteria, but also with behavioral, cultural, and individual assessment metrics. First, traditional Venture Capital practice and performance are compared with current developments toward more sustainable investing practices including impact investing. Then, the Theta Model is introduced as an evolutionary-based investment model rooted in Wilber’s Integral Theory. The paper shows how the model has been successfully applied in integral due diligence and what were the causes for its outstanding ROI. The paper closes by sharing the lessons learned from positive and negative investment examples and by offering a discussion on how all stakeholders from entrepreneurs to investors could benefit from such integral sustainability metrics in the future.
Keywords: Sustainable Finance, Sustainable and Responsible Investing, Integral Investing, Impact Investing, Integral Sustainability, Theta Model, AQAL, Ken Wilber.
RELATIONSHIP BETWEEN SOCIAL CAPITAL AND ENTREPRENEURSHIP IN THE DEVELOPING COUNTRIES (A CASE STUDY, KURDISTAN PROVINCE OF IRAN)
Parviz Kafcheh 1, Seyed Erfan Hosseini 2
1 Assistant Professor of Strategy & Management, Department of Business Administration, University of Kurdistan
2 Master of Business Administration
Abstract: The focus of this paper is on the relationship between social capital and entrepreneurship in Kurdistan province industrial firms/companies. The demographic population in this research consists of the active companies in production industry with more than 10 employees. Totally, the research consists of 820 companies. Randomly, 256 companies have been selected with sampling method from a limited population.
The research method was based on survey. Data was collected with Likert's 5-points questionnaires. The questionnaires validity and reliability are based on conceptual method. The questionnaire permanency rate were calculated by means of Alph Coronbach (802%). The statistical methods were descriptive and deductive (Spearman Correlation Coefficient Test). The result show there is significant relationship among all the social capital dimensions (Cognitive, structural and correlation) and entrepreneurship.
Keywords: Social Capital, Structural Dimension, Correlation Dimension, Entrepreneurship.