Nicholas Wilson

University of Leeds · Credit Management Research Centre (CMRC)

Equity finance is used to fund innovative and growth-oriented businesses because of its resilience during economic downturns and investors' willingness to undertake higher risks compared to other financing. During the pandemic, 6500 equity-funded firms obtained government-guaranteed loans from traditional banks and new lenders. Our analysis of the...

Private equity firms are often criticized for their short-term view when preparing their portfolio companies for the IPO. We investigate whether private equity-backed IPO firms are riskier than other IPO firms at the IPO and beyond. Our initial results show that they are not riskier than their peers at time of the IPO. However, PE firms often stay...

Private equity firms are often criticized for their short-term view when preparing their portfolio companies for the IPO. We investigate whether private equity-backed IPO firms are riskier than other IPO firms at the IPO and beyond. Our initial results show that they are not riskier than their peers at time of the IPO. However, PE firms often stay...

This paper investigates the survival of entrepreneurial firms during the pandemic period. Specifically, we focus on UK companies that received equity finance during their developmental stages before the onset of Covid-19. The equity finance investors in our study include venture capital and growth finance funds (both domestic and foreign), crowd fu...

In this paper we focus on the patterns of insolvency in the covid period, and the early outcomes of the loan guarantee schemes. Firstly, analysis of insolvent exits shows that the Covid-related pandemic is different from the previous crises in that the number of insolvencies decreased. Secondly, our multivariate analysis confirmed that the pattern...

Using data between 2009 and 2020, we provide a detailed description of the borrowers within the Enterprise Finance Guarantee (EFG) loan portfolio, analyse time to default and how it differs across lender types. For limited companies, we match additional financial and non-financial data from public and proprietary databases and profile the character...

Mechanical correlation bias is inherent in audit pricing studies when independent variables (X) are derived from firm level audit fees (Y). Such variables are endogenous by construction leading to biased estimates, since (mechanically) X determines Y and Y determines X. After reviewing the extant auditing/accounting literature where mechanical corr...

Mechanical correlation bias is inherent in audit pricing studies when independent variables (X) are derived from firm level audit fees (Y). Such variables are endogenous by construction leading to biased estimates, since (mechanically) X determines Y and Y determines X. After reviewing the extant auditing/accounting literature where mechanical corr...

We study the performance of UK PE-backed companies during the COVID-19 pandemic using two methods: a standard difference-indifferences model where we match PE-backed firms to similar, non-PE-backed firms based on pre-pandemic observable firm characteristics, and a novel synthetic difference-indifferences approach from Arkhangelsky et al. (2021). In...

The economic consequences of COVID-19 were severe with restricted economic activity generating a liquidity crisis for many firms. To address the systemic impact of this liquidity shock, governments around the world rapidly introduced a range of loan guarantee schemes. In the UK, more than 1 million businesses accessed these schemes. Using a novel,...

Existing evidence on the impact of PE ownership on portfolio company growth and performance focuses predominantly on the post buyout PE holding period. Using a sample of over 1,200 realized UK PE buyouts, we track the performance of target firms after the PE exit. We study average portfolio company growth rates in the post exit period relative to t...

This paper examines the impact of VC ownership beyond the IPO listing on important and consequential corporate decisions in a firm's lifetime. We find that VC funds delay the initiation of dividends by approximately two years, delay the use of external growth strategies, and postpone introduction to the corporate bond market. These results are cons...

Private equity (PE) funds typically invest in and acquire established companies (via buyout mechanisms) and implement value creation strategies that realize efficiency improvements and exploit entrepreneurial growth opportunities. This paper explores the relationships between PE backing of bought‐out companies and their post‐acquisition strategy to...

The UK has had a commitment to loan guarantee schemes since 1981 when it introduced the Small Firms Loan Guarantee (SFLG) scheme to address access to debt finance issues for smaller firms. Over the last 40 years, its support has been unwavering, and in the Covid-19 crisis, it once again turned to loan guarantees as a means of supporting smaller fir...

Academic research on private equity (PE) has been concerned with the management of PE funds, the returns to investors from investments in PE relative to the returns available in public equity markets and, more predominantly, the analysis of the post‐investment performance of PE portfolio firms. There has been less research on how PE firms select th...

Previous research has focused on a private equity (PE) firm’s role as principal in its relationship with an investee, but few studies have looked into their role as agents for their investors. We examine how a PE firm’s relationship as agent for limited partners (LPs) and banks influences its incentives to resolve financial distress in the investee...

Abstract Recent studies determining the effect of audit market competition on firm level audit fees have developed novel measures of an audit firm’s relative competitive position. Numan and Willekens (2012) find a relationship between audit fees and the ‘industry market share distance to the closest competitor’. Chu et al. (2018) provide evidence t...

The paper tests the impact of gender diversity and educational attainment of owners and company directors on the performance of private firms in the Slovak economy. The paper demonstrates that in retail trade the gender diversity both in owners and company directors within a company leads to higher total factor productivity and partially lower prop...

We consider two sources of innovation, technical and financial, and examine their separate and joint impacts, through the process of financial intermediation, on the nature of entrepreneurial opportunity. These impacts are time dependent and reflect the institutional context of entrepreneurship. As illustrations, we investigate three historical epi...

We apply polytomous response logit models to investigate financial distress and bankruptcy across three states for UK listed companies over a period exceeding 30 years and utilising around 20,000 company year observations. Results suggest combining accounting, market and macroeconomic variables enhances the performance, accuracy and timeliness of m...

Despite the huge audit pricing literature, there is a dearth of evidence on the temporal dynamics of audit fee adjustments and the persistence of audit fees. Based on a sample of 76,867 panel observations for a sample of UK companies audited by the Big 4 over the period 1998 to 2012, we employ consistent lagged dependent variable panel estimators t...

The equity gap, the difference between the amount of (risk) capital that would be invested under conditions of well-informed and competitive markets and the amount of capital actually invested, covers both startups and ventures moving beyond startup to the establishment and early growth phase. We provide estimates for the size of the equity gap for...

We analyse the expected impact of Brexit on private equity and its implications for management research. Specifically, we explore the implications for PE funds and funding, and at the portfolio firm level with respect to employment and performance.

It is well recognized that the nature of entrepreneurial activity varies by context and historical epoch. But are there systematic underlying factors that cause such significant differences in the entrepreneurial opportunity set? This paper presents a conceptualization of entrepreneurship based on the interaction of product market innovation and fi...

In this paper we examine evidence and patterns of the pricing of initial audit engagements covering various types of audit firms and auditees. In contrast to existing empirical studies we use a very large sample of UK private and public companies of all sizes covering a long time period, 1998-2012, utilising 792,705 company-year observations. We em...

In this study we aim to undertake a comprehensive examination of the audit market in the UK covering the population of limited companies that have and/or are required to file audited accounts. The study will examine over a longer period (1998-2012) the trends in the audit market, measures of market concentration, switching behavior and the determin...

This article analyses the survival probability of privately owned small and medium sized enterprises (SMEs) in Slovakia during the post-communist period up to and including the recent recessionary period. We build models within a failure prediction context developing ‘transition’ variables that relate to the origin and ownership of the company. Usi...

This paper analyzes the factors influencing the sovereign credit ratings of the new EU member states along with potential entrants. We model the ratings of the three rating agencies using a range of macroeconomic and governance variables and panel regression techniques. The unbalanced panel consists of ratings on fourteen countries over the years 1...

We explore the governance role of trusts in family firms and develop a typology that maps different configurations of boards and trustees with the longevity and efficiency of family firms. Suggestions are given for the proposed effects of these configurations, and comparisons are made with Carney, Gedajlovic, and Strike's “dead money” discussion. R...

A large literature has adumbrated the value-added role of private equity (PE) firms in backing buyouts. The present paper examines a different and hitherto unexplored issue: the role of financial restructuring in PE buyouts in the UK both before and after the financial crash of 2007. The UK evidence indicates that while PE buyouts had greater finan...

There is great interest in evaluating the impact of private equity investments on innovation and economic growth. However, there is no direct empirical evidence on the effects of such transactions on the innovation strategies of entrepreneurial firms. We fill this gap by examining a rich project-level data set consisting of entrepreneurial firms re...

Developing ‘Internal Rating Systems’ (IRB) for corporate risk management requires building risk (PD) models geared to the specific characteristics of corporate sub-populations (eg small and medium-sized enterprises (SMEs), private companies, listed companies, sector specific models), tuned to changes in the macro environment, and, of course, tailor...

Using a sample of 23,218 company-year observations of listed companies during the period 1980–2011, the paper investigates empirically the utility of combining accounting, market-based and macro-economic data to explain corporate credit risk. The paper develops risk models for listed companies that predict financial distress and bankruptcy. The est...

We explore the vexing question of whether family firms are more likely to survive than nonfamily firms, focusing on the role of board composition. Utilizing a unique data set of over 700,000 private family and nonfamily firms in the U.K. during 2007–2010, we find that family firms are significantly less likely to fail than nonfamily firms. We ident...

Small and medium size enterprises (SMEs) play a fundamental role in the economic performance of major economies especially in light of the new Basel Capital Accord. Several lending communities proposed to treat SMEs as retail clients to optimize capital requirements and profitability. In this context it is becoming critically important to have a de...

The paper analyses the factors influencing the sovereign credit ratings of the new EU member states along with potential entrants. We model the ratings of the three rating agencies using a range of macroeconomic and governance variables and panel regression techniques. The unbalanced panel consists of ratings on 14 countries over the years 1993 to...

The paper analyses the role of private equity in restructuring the UK corporate economy. It develops a theoretical synthesis to show that the evolution of the PE industry and firms in which it invested were governed by the relations of corporate governance between investor and investee companies. Effective governance relations were a necessary cond...

Few studies that have focused on developing credit risk models specifically for small and medium-sized enterprises (SMEs) have included non-financial informa-tion as a predictor of company creditworthiness. In this study we have available non-financial, regulatory compliance and "event" data to supplement the limited accounting data that is often a...

This report investigates listed family firms in the UK and focuses on their incidence, industrial and geographical context, governance and performance. At the time of writing we identified 70 family firms who were listed in the years 2007-2009. The firms were listed on the London Stock Exchange, ShareMark or the Plus Stock Exchange (the latter two...

We assess the recent economic and financial performance of U.K. private equity (PE) backed buyouts. Our empirical evidence, which is based on thousands of transactions, reveals that PE-backed buyouts achieved superior economic and financial performance in the period before and during the recent global recession, relative to comparable firms that di...

Both authors made an equal contribution to this research. 1 Directors ’ Pay and the Separation of Ownership from Control in UK SMEs: an empirical analysis This paper examines directors ’ pay for a sample of 629 UK SMEs from 1991 to 1995. Approximately half of the sample were closely-held (i.e., owner-managed) firms, which allowed empirical testing...

The founding directors of newly incorporated companies bring social capital (reputation, networks, business relationships) and human capital (task-related, professional and director experience) to a new venture and founding boards vary in degree of heterogeneity (size, diversity, turnover). This paper is exploratory and seeks to uncover new insight...

The founding directors of newly incorporated companies bring social capital (reputation, networks, business relationships) and human capital (task-related, professional and director experience) to a new venture and founding boards vary in degree of heterogeneity (size, diversity, turnover). This paper is exploratory and seeks to uncover new insight...

Private Equity restructuring of companies using debt finance has been criticised for increasing financial distress and bankruptcy in the corporate sector and this was especially so in the aftermath of the financial crisis. We build a unique data set comprising the population of over eight million company year observations and 153,000 instances of i...

This report investigates family businesses in the UK and focuses on their incidence, industrial and geographical context and their governance and performance relative to non-family businesses. The sample includes near population UK data for the period 2007 to 2009 of privately held incorporated firms (excluding listed/quoted firms) and analyses aro...

Few studies that have focused on developing credit risk models specifically for small and medium-sized enterprises (SMEs) have included non-financial information as a predictor of company creditworthiness. In this study we have available non-financial, regulatory compliance and “event” data to supplement the limited accounting data that is often avail...

The report, sponsored by the British Venture Capital Association, examines the characteristics of large samples of UK VC backed and non-VC backed buyouts that lead to their becoming insolvent over the period 1995-2009 and the processes that resolved distress. It also examines whether the proportion of secured debt recovered in the event of receiver...

This study examines the characteristics of the directors and owners of private companies in relation to insolvency risk, with a specific focus on the incidence and impact of female directors. We analyse data on over 900,000 limited companies in 2007-8 including over 17,000 that ceased trading due to insolvency. In the context of an enhanced failure...

We study the determinants of failure, defined as entering the bankruptcy process, in a unique dataset comprising the population of over 6.5 million private firms in the UK over the period 1995-2008, of which over 102,000 had failed. We focus on the role of leverage, whether the firm involved a management buyout or management buy-ins, and whether th...

This study examines the characteristics of the directors and owners of private companies in the UK with a specific focus on the incidence and impact of female directors and insolvency risk. We find that women are generally under-represented in the population of UK Company directors and this varies with industry sector and over time. Our analysis of...

Within the commercial client segment, small business lending is gradually becoming a major target for many banks. The new Basel Capital Accord has helped the financial sector to recognize small and medium sized enterprises (SMEs) as a client, distinct from the large corporate. Some argue that this client base should be treated like retail clients f...

Utilising a unique dataset of 502 UK IPOs we undertake an empirical analysis of the relationship between underpricing and value gains on flotation. We find support for our hypothesis that IPO underpricing is related to the extent of anticipated value gains on the private to public transition. We analyse alternative driving mechanisms behind this re...

In this paper we examine the reasons why buy-outs fail or need to be restructured and identify the implications for managers and investing institutions. It is evident that considerable attention needs to be given to assessing issues concerning industrial sectors, management and financing. In respect of the market, consideration needs to be given bo...

per seThis paper explores the impact of employee ownership on employee attitudes, using attitudinal data obtained from four UK bus companies which had adopted the ESOP form of employee share ownership. After reviewing the recent UK literature, the paper highlights the findings from US literature that a sense of ownership' is an important intervenin...

Avner Ben-Ner and Derek Jones cast doubt on the notion of a simple causal link between financial participation (FP) and productivity, and consequently on the validity of much of the empirical literature that has sought to quantify this relationship. This paper is an attempt to investigate this proposition. Our empirical reappraisal revealed that th...

This paper examines Board pay for a sample of 571 U.K. SMEs from 1991 to 1995. Approximately half of the sample were closely-held (i.e., owner-managed) firms which allowed empirical testing of models of the relationship between Board pay and ownership from control characteristics. Consistent with their need to align shareholder and manager incentiv...

The credit channel of monetary transmission suggests that monetary tightening results in a contraction of the supply of credit to firms who borrow via financial intermediaries. However, according to Meltzer (1960), the existence of an inter-firm credit flow appears to favour those firms most affected by credit rationing. This study re-analyzes Melt...

In the last decade, a debate has resurfaced about whether financial constraints stemming from asymmetric information and incentive problems play an important role in propagating monetary policy shocks. This paper investigates the monetary transmission mechanism in the UK and its impact on the availability of bank credit to small and medium size fir...

Trade credit is an important economic phenomenon, and a variety of theories have been put forward to explain the decisions firms make on credit extension. The ways in which credit can be used as a strategic tool to support corporate objectives has not, however, been fully discussed. The results presented here provide some support for the extant the...

Monetary policy contractions exacerbate credit constraints stemming from asymmetric information, incentive problems and limited collateral. During such periods financial intermediaries reduce the supply of credit to smaller businesses. Although trade credit is a less desirable alternative of corporate financing, it may play a special role in allevi...

In this paper, we develop, analyze, and test the hypothesis that partial employee ownership may be used as an institutional arrangement to economize on the costly problem of ex post opportunism inherent in the investment of specific human capital. Based on a unique survey of 655 British firms, we examine the empirical link between the likelihood of...

Previous research has consistently shown that a large number of firms are sufficiently dissatisfied with their bank relationship to have considered switching to an alternative bank. In practice, however, the number of firms which actually switch banks is relatively low. This paper examines empirical evidence from a postal survey of small firms in o...

Forward Links to Citing Articles Apology British Journal of Industrial Relations 43:4, 751 This paper explores the impact of employee ownership on employee attitudes, using attitudinal data obtained from four UK bus companies which had adopted the ESOP form of employee share ownership. After reviewing the recent UK literature, the paper highlights...

Reviews previous research on the links between business failures, macroeconomic conditions and insolvency law; and develops a mathematical, econometric model to investigate them further, using 1996-1998 UK data. Presents and discusses the results, which suggest that the 1986 Insolvency Act did help to reduce the overall level of business failures a...

Trade credit has been shown to be an important source of short-term finance for smaller firms but small firms are also suppliers of trade credit. There is little empirical evidence on the credit granting decisions of small firms. Previous empirical work (Petersen and Rajan, 1997; and Ng, Smith and Smith, 1999) has focused on credit granting and inv...

Asymmetric information models predict a 'pecking order' which reflects a combination of owner-manager preferences and external capital supply constraints whenever insiders know more about the true value of the firm's prospects than outsiders. The pecking order results in retained earnings being the most preferred source of finance, then debt and fi...

This paper explores the implications of the capabilities-based framework in the context of a decision for a firm: whether or not to outsource the sales function to outside contractors. It demonstrates that, along with the transaction cost perspective, the capabilities-based perspective can provide a useful way to think about contracting issues rela...

This paper investigates the motivations for a firm's demand for trade credit. Demand for credit is modelled as a function of transaction costs motivations, financing motivations, operational considerations, seller compliance issues and supplier marketing, whilst controlling for the firm's business environment and for firm characteristics such as si...

In this paper we evaluate payment scores in two contexts; that of predicting future payment behaviour and that of corporate failure prediction. The assessment of the ability and willingness of a firm to pay its creditors, and the likely timeliness of payments, are a major focus of both credit risk analysis (from the trade credit perspective) and go...

This paper examines the firm's decision to use factoring amongst a cross-sectional sample of 655 manufacturing companies using a rich firm-level database. The paper develops and tests hypotheses that explain this particular choice of credit and financial management policy. We find strong evidence of a 'financing demand' explanation for the use of f...

MICHAEL J. PEEL IS W1TH CARDIFF Business School, Wales, AL.Professor Nicholas Wilson is with ILeeds University Business School, England, and Carole Howorth is with Nottingham University Business School, England. Based on the results of a qtuestionnlaire survey, this paper provides some new evidence relating to late payment and credit and working ca...

Some years ago the derivatives group Refco advertised its financial risk management services under the slogan ‘Risk is everywhere’. There is, of course, an important truth here. The phenomenon of risk is pervasive in economic life as it is in life in general. Just as we learn to deal with the risks of crossing a road or driving a car (Graham 1988),...