The last several years have witnessed a wide array of financial controversies concerning conflicts of interest between financial institutions offering related services to their customers. This policy debate continues in the light of well publicized legal actions taken to resolve the conflicts of interest when investment banks offer brokerage and stock analyst functions under one roof. Since the early 1990’s many investment banks and large commercial banks have made large equity investments in the venture capital market, while many of these same commercial banks started underwriting equity offerings through section 20 subsidiaries.
One effect of this trend is many IPO underwriters are prior equity investors in issuers. We examine the effects of underwriter venture investments in issuers on IPO offer prices and underwriting fees. Integrating the venture capital and underwriting functions can have positive or negative effects on IPO prices and underwriting fees, depending on the relative strength of the resulting moral hazard problems with IPO investors and the credibility of the due diligence process as well as the competitiveness of the market for underwriting services as explained below.
Virtual reality is a technology that creates new definition of Human Computer Interaction (HCI). HCI involves relation between human and technology, especially computer technology. Human acts as the user of computer technology. User Interface (UI) helps user to interact with computer system. UI development relates to display technology development. Before Graphical User Interface (GUI) exists, user interacts with the computer by typing command. For example, when users want to delete a file, they have to type the delete command and the file name. When GUI is introduced, it opens the new possibility for UI diversity. Direct manipulation is one of the interactions between user and computer system that emerges because of GUI. Direct manipulation uses a representation of reality that can be manipulated [20]. For example, one of the reality representations that are widely known is Recycle Bin icon featured in Windows Desktop. If users want to delete a file, they can drag the image or icon that represents the file and drop it to the Recycle Bin. Direct manipulation interface provides dynamic interaction between user and two-dimensional (2D) objects of interest [21].
Unlike regular direct manipulation, Virtual Reality (VR) presents three dimensional (3D) graphical representation of real environment for users to interact with as if the user is actually in the environment [19][21][20]. Users can freely wander through the Virtual Environment (VE) space. Therefore VE, which is 3D computer generated environment, offers moveable views onto 3D spaces. VR gives impression of involvement in a VE rather than external observation of such environment. VR is multi-sensory experience since it involves 3D stereoscopic display, tracker, and sound. Hence VR is able to make an immersive computer generated world, which creates feel of presence to the user. It means that the cognitive aspect becomes important.
In the literature, sometimes presence has different meaning. There is a definition of presence that can differentiate between immersion and presence. [1] Immersion is an objective description of the VR system such as display resolution. Presence is a subjective phenomenon such as sensation of being in a virtual environment (VE). There is also a definition of presence that is described empirically. Based on this definition, presence is categorized into two types as follow:
• Subjective presence. It is a chance that person assesses himself of herself to physically present in the VE.
• Objective presence. It is a chance that person is able to complete his or her task successfully. It relates to the ability of VE to work.
Presence is caused by several factors, such as vividness, interactivity, and user characteristic. [1] Vividness refers the capacity of a technology to generate a sensorially rich environment. It relates to the content of VE. Interactivity is the ability of users to take part in modifying the form and content of VE in a real time. User characteristic means that different person when being faced with the same VE can feel different level of presence because each person has different individuality.
Firms may face debt constraints for various reasons. Exogenous debt constraints may be due for example to the compliance to minimum capital requirements set to financial institutions. Frictions due to moral hazard or asymmetric information (see Jensen and Meckling, 1976 and Myers and Majluf, 1984) may also create debt constraints. Asymmetric information can also justify why the suppliers of credit may engage in credit rationing (see for example Fazzari et al., 1988, Stiglitz and Weiss, 1981 and Pawlina and Renneboog, 2005). This study investigates the effect of debt financing constraints on firm value, the timing of investment and optimal default decision and other important variables like the credit spreads.
We use a contingent claim approach incorporating risky pre-investment R&D options and also investigate the tax raising and social welfare implications of debt financing constraints. Lensik and Sterken (2002) use a real options approach without incorporating a stochastic model for debt and optimal capital structure and discuss conditions under which credit rationing by banks may apply. We analyze the effect of exogenous debt constraints and we then also endogenize debt constraints focusing on differential information between equity and debt holders with respect to the growth rate or volatility of the underlying asset.
