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Brander, James A., Raphael Amit, and Werner Antweiler, 2002, “Venture Capital Syndication: Improved Venture Selection versus the Value-Added Hypothesis,” Journal of Economics and Management Strategy.
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The author gratefully acknowledges comments and contributions by Tamim Bayoumi, Douglas Cumming, Danny Leung, Lou Perotta, Richard Rémillard, Virginie Traclet, Ann Turner, and seminar participants at the Department of Finance Canada, as well as excellent research assistance provided by Natalia Barrera and Maria Lucia Guerra Bradford.
The rule limits a single shareholder to no more than 20 percent of voting shares in a bank with equity exceeding C$8 billion.
A larger percentage than in the United States.
SMEs are defined as businesses with fewer than 500 employees and with annual revenues less than C$50 million, excluding unincorporated firms with less than C$30,000 in revenues, non-profit organizations, government organizations, cooperatives, and financing and leasing companies.
These numbers are based on the annual Surveys of Suppliers of Business Financing, where loans with authorized amounts of less than C$1 million are considered to be made to SMEs.
The share of SMEs in total bank lending has dropped even more, as the banks have moved toward more household lending.
For three-quarters of SMEs, a chartered bank is the main financial institution they deal with, while for one-fifth a credit union plays this role.
Three-quarters of the affected SMEs reported that the changeover was handled well.
With reduction in labor-sponsored fund activity in Ontario (see below), the numbers for the domestic funds rose to C$3.4 million and 40 percent, respectively, in 2006.
Since 2002, the amount of VC capital available for investment has been at least double the annual amount invested.
Ontario is currently phasing out the tax incentives.
The question of how the returns of LSVCCs compare with those of other Canadian venture funds is unsettled. Brander and others (2002) find a significantly negative coefficient on a dummy for the funds with preferential tax status in their regressions for VC returns. On the other hand, according to Duruflé (2006), there is no significant difference between various types of funds in Canada, with returns being poor across the board.
An agreement has recently been reached on eliminating withholding taxes on cross-border interest payments between Canada and the United States.
According to a global VC survey by Deloitte (2007), 40 percent of U.S. respondents and 28 percent of global respondents cite Canada’s unfavorable tax environment as a key reason for not investing in Canada.
For a C$1 million offering, regulation-related expenses amount on average to 8 percent of the offering if listed in one jurisdiction and 16 percent if listed in thirteen. Corresponding figures for a C$10 million offering are 2 percent and 4 percent, respectively.
As a drawback, this measure may be an disincentive for SMEs to grow above that limit.
These purposes include purchasing land, buildings or equipment, and improving buildings or equipment.
Furthermore, the Alt-A segment amounted to another 25 percent of originations and 15 percent of outstanding mortgages.
Estimates of non-conforming, or “adverse-credit” mortgage lending in the United Kingdom vary from 6 to 10 percent of total originations in 2006. The Bank of England (2007) estimates the share of adverse credit mortgages to be about 3-4 percent of outstanding stock, but its definition, which includes only loans to borrowers with a history of significant debt arrears, appears to be more restrictive than that used in Canada.
Although that practice was used, and abused, in the United States.
Unwillingness to incur a reputation risk, with involvement in non-prime mortgages requiring more aggressive collection efforts, potentially generating negative publicity, may also have played a role.
While large U.S. banks typically do not offer subprime loans either, many of them are involved via subsidiaries.
The threshold was 75 percent until April 20, 2007.
The United States is in the 62nd place.
Constant monthly payments on a new mortgage are set up in such a way that they would allow the mortgage to be repaid in full, with interest, in 25 years. At the end of the 5-year term, the borrower makes a balloon payment for the principal outstanding or, more typically, renews the mortgage for another 5-year term.
The share of variable-rate mortgages shrank to about one-quarter of the total market in 2006, as short-term rates rose.
Some of these products, such as option ARMs, were originally conceived as “flexibility products” for people with high, but uneven income streams. However, the option of keeping initial payments low has largely turned them into “affordability products” in practice.
Interestingly, considerable amount of innovation occurred in the mortgage insurance market, where it may have been driven by the entry of new competitors.
Canadian mortgage brokers only link borrowers and lenders, but do not originate mortgages.
More recently, the posted rates on longer-maturity mortgages may not have been much higher than on shorter-maturity ones, but banks are much less willing to provide discounts on the former than on the latter.
Until June 2005, only fixed-rate mortgages could be included in the NHA MBS pools.
There has also been a limited number of floating rate note offerings.