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Financing Corporate Growth in the Renewable Energy Industry

Series:

Christoph Ettenhuber

Financing constraints have been central to the political and economic debate about renewable energy development. This book addresses four related corporate finance questions. The first chapter reviews theoretical considerations and empirical evidence on so-called funding gaps. Chapters two and three analyze the genuine structures of equity and convertible debt offerings in the industry. The final part investigates to what extent business combinations are perceived as a valuable means to company growth. The analysis contains a variety of empirical findings that are novel to existing emerging industry and corporate finance research. It shows that many investors perceive the level of asymmetric information and regulatory risk, as well as the industry’s structure, to be detrimental to renewable energy finance.

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Table 1.1: Capacity development of selected renewable energy carriers 1990–2020e ....................................................................................... 2 Table 1.2: Renewable energy-induced direct employment effects .................... 5 Table 1.3: Major fossil fuel-importing and renewable energy-producing countries ............................................................................................ 6 Table 2.1: Key characteristics of the German cleantech industry ................... 22 Table 2.2: Overview of selected international studies on equity gaps ............. 34 Table 2.3: Overview of selected German studies on equity gaps .................... 36 Table 2.4: Equity gap perceptions among venture capital investors ............... 37 Table 3.1: Descriptive SEO sample characteristics ......................................... 50 Table 3.2: Logit regression results ................................................................... 54 Table 3.3: Estimated SEO probabilities ........................................................... 56 Table 3.4: Risk changes surrounding SEOs ..................................................... 58 Table 3.5 Impact of SEO proceeds on issuer cash balances ........................... 60 Table 3.6: Impact of SEO proceeds on issuer capital expenditures ................. 62 Table 3.7: Impact of SEO proceeds on issuer capital structure ....................... 63 Table 4.1: Descriptive convertible debt sample characteristics ....................... 73 Table 4.2: CDO and SEO short-term announcement effects ........................... 77 Table 4.3: CDO and SEO market and firm characteristics at issue ................. 78 Table 4.4: CDO and SEO financial distress indicators at issue ....................... 79 Table 4.5: Cross-section regression results ...................................................... 81 Table 4.6: Risk changes surrounding CDOs and SEOs ................................... 84 Table 5.1: Sample M&A transactions by acquirer/target continent of origin ............................................................................................... 94 Table 5.2: Sample M&A transaction characteristics ....................................... 94 Table 5.3: Short-term announcement effects of M&A transactions ................ 98 Table 5.4: Short-term announcement effects by renewable energy sub- sector ............................................................................................. 100 Table 5.5: Short-term announcement effects by transaction characteristics . 102 Table 5.6: Cross-section regression results .................................................... 104

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