Grundformen der Finanzierung. Eine Anwendung des neo-institutionalistischen Ansatzes der Finanzierungstheorie

Abstract

Basic Forms of Financing. An application of the neo-institutionalist approach to financing theory

The article sets out to explain why there are various forms or instruments of financing and why those forms have quite specific institutional characteristics. Financing is subdivision of participation; the various financing instruments as a whole lay down the manner in which the uncertain future returns on the financed investments will be distributed among those who provide a firm with capital. But that is not an adequate explanation of the function of financing instruments. Each financing instrument constitutes a specific combination of rights and possible actions of the capital investors, the object of which is to overcome undesired consequences of the originally assymmetrical distribution of information among investors and capital-seekers (irms). Four combinations of such rights and possible courses of action are analysed. It can be shown that they have the following qualities: Each right and each possible action benefits investors. The granting or creating of them thus increases their willingness to provide capital, which in turn benefits the receiver. The importance of the various rights or possible actions must not be assessed in isolation. The advantages accruing to investors from the granting of the individual rights or lines of action mutually reinforce each other, while the costs or disadvantages involved for the receiver because he has to grant individual rights and freedoms of action mutually diminish each other. The four combinations of rights and possible actions construed and discussed in the article are the four most important forms of financing in reality: participation in a partnership and in a public company, short-term borrowing without liens and long-term borrowing secured by liens.