INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE PROF. DR. SOPHIE MANIGART VLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY
Institutional Framework and SME Access to Finance
Feb 25, 2016
Institutional Framework and SME Access to Finance. Prof. dr. Sophie manigart Vlerick business school and ghent university. Funding growth is crucial for the success of companies. Development Stage. Source: EY; Frontier Economics; EVCA. 2. Most active crowdfunding categories. - PowerPoint PPT Presentation
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INSTITUTIONAL FRAMEWORK AND SME ACCESS TO FINANCE
PROF. DR. SOPHIE MANIGARTVLERICK BUSINESS SCHOOL AND GHENT UNIVERSITY
FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES
2
Development Stage
Source: EY; Frontier Economics; EVCA
© Vlerick Business School
© Vlerick Business School
MOST ACTIVE CROWDFUNDING CATEGORIES
© Vlerick Business School
FUNDS PAID OUT PER EQUITY BASED PROJECT
FUNDING GROWTH IS CRUCIAL FOR THE SUCCESS OF COMPANIES
2
Development Stage
Source: EY; Frontier Economics; EVCA
© Vlerick Business School
THE VENTURE FUNDING LANDSCAPE IN THE US COUNTS MANY DIFFERENT PLAYERS IN ALL STAGES
© Vlerick Business School
US COMPANIES RAISE MORE VC FUNDING
US EUFirst round $ 7 mio € 3,2 mioCumulative VC amount $21 mio €10,4 mio
© Vlerick Business School
1 2 3 4 5 6 7 8 9 100
20
40
60
80
100
120
140
160
180
Years after first VC investment
Aver
age
empl
oym
ent
THIS LEADS TO HIGHER GROWTH IN US COMPANIES
1 2 3 4 5 6 7 8 9 100
10000
20000
30000
40000
50000
60000
US firmsEU firms
Years after first VC investment
Aver
age
Sale
s (t
hous
and)
© Vlerick Business School
VC IN EUROPE IS THREATENED
Banks: Basel III regulation Insurance companies: Solvency II regulation
National/regional public policy focuses on small funds, but big money is needed Public policy invested 30%-40% of new money in
european VC funds between 2009-2012
© Vlerick Business School
BELGIUM SCORES LOW ON BROAD INSTITUTIONAL FACTORS
Source: Groh, Liechtenstein, Lieser, 201312
(Stock market, M&A)
Quality of education
© Vlerick Business School
A STRONG INSTITUTIONAL FRAMEWORK LEADS TO MORE SME FINANCING
SUPPLY OF FUNDING
Legality index Effectiveness of legal
system, absence of corruption, risk of contract repudiation,…
Self-dealing protection Legal protection of minority
shareholders
Creditor rights protection
DEMAND FOR FUNDING
One-share-one-vote
Bankruptcy regulation and execution Discharge available? Bankruptcy process costs?
Duration?
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LEGAL FRAMEWORK AND SME FINANCING IN EUROPE
MORE EQUITY RAISED IF…
Stronger legality index (+22%)
Better protection against self-dealing (+79%)
MORE DEBT RAISED IF…
Stronger legality index (+13%)
Stronger creditor rights (+12%)
Discharge after bankruptcy (+79%)
Quicker bankruptcy closing, lower closing costs
© Vlerick Business School
POSITION OF BELGIUM COMPARED TO UK
Belgium UKLegality index 20,82 20,41Minority protection 0,54 0,93Creditor rights 2,00 4,00Bankruptcy costs 4% 6%
© Vlerick Business School
CONCLUSION
Improving the legal (and, more broadly, the institutional) environment for Minority shareholders Creditors Entrepreneurs
would strongly enhance the availability of funding for SMEs
…at low cost for public policy!
© Vlerick Business School
FUNDING
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