Volume 7 2016

Volume 7 2016 Editors: Robert T. Burrus, Economics J. Edward Graham, Finance University of North Carolina Wilmington University of North Carolina Wilmington Associate Editors: Doug Berg, Sam Houston State University Clay Moffett, UNC Wilmington Al DePrince, Middle Tennessee State University Robert Moreschi, Virginia Military Institute David Boldt, University of West Georgia Shahdad Naghshpour, Southern Mississippi University Kathleen Henebry, University of Nebraska, Omaha James Payne, Georgia College Lee Hoke, University of Tampa Shane Sanders, Western Illinois University Adam Jones, UNC Wilmington Robert Stretcher, Sam Houston State University Steve Jones, Samford University Mike Toma, Armstrong Atlantic State University David Lange, Auburn University Montgomery Richard Vogel, SUNY Farmington Rick McGrath, Armstrong Atlantic State University Bhavneet Walia, Western Illinois University Aims and Scope of the Academy of Economics and Finance Journal: The Academy of Economics and Finance Journal (AEFJ) is the refereed publication of selected research presented at the annual meetings of the Academy of Economics and Finance. All economics and finance research presented at the meetings is automatically eligible for submission to and consideration by the journal. The journal and the AEF deal with the intersections between economics and finance, but special topics unique to each field are likewise suitable for presentation and later publication. The AEFJ is published annually. The submission of work to the journal will imply that it contains original work, unpublished elsewhere, that is not under review, nor a later candidate for review, at another journal. The submitted paper will become the property of the journal once accepted, and not until the paper has been rejected by the journal will it be available to the authors for submission to another journal. Volume 6: Volume 7 of the AEFJ is sponsored by the Academy of Economics and Finance and the Department of Economics and Finance at the University of North Carolina Wilmington. The papers in this volume were presented at the Fifty- third Annual Meeting of the AEF in Pensacola Beach, FL. from February 11-13, 2016. The program was arranged by Dr. Mary Kassis, University of West Georgia. Volume 7 Table of Contents 2016 Peer-to-peer Equity Investments in Germany. A Note on Successful Company 1 Characteristics Parthepan Balasubramaniam, Florian Kiesel, and Dirk Schiereck Currency ETF Tracking Error 9 Robert B. Burney The Effect of U.S. Official Reserve Flows on the Japanese Yen-U.S. Dollar Exchange 17 Rate in a Business Cycle Pablo A. Garcia-Fuentes and Yoshi Fukasawa Economic Growth and Revitalization on Long Island: the Role of the Recreational 29 Fishing and Marine Economy Sheng Li, Richard Vogel, and Nanda Viswanathan Natural Disasters in Latin America: Disaster Type and the Urban-Rural Income Gap 35 Madeline Messick Budgetary Lags in Nigeria 47 Vincent Nwani Managerial Decisions and Player Impact on the Difference between Actual and Expected 57 Wins in Major League Baseball Rodney J. Paul, Greg Ackerman, Matt Filippi, and Jeremy Losak Comparative Return Distributions: Strangles versus Straddles 63 Glenn Pettengill and Sridhar Sundaram Towards A Global Framework for Impact Investing 73 Marc Sardy and Richard Lewin Another Clue in the Market Efficiency Puzzle 81 Karen Sherrill i Optimizing Strategies for Monopoly: The Mega Edition Using Genetic Algorithms and 87 Simulations Shree Raj Shrestha, Daniel S. Myers, and Richard A. Lewin, Rollins College1 How Retirees Prioritize Socializing, Leisure And Religiosity - A Research Based Study For 99 Planners. Aman Sunder, Swarn Chatterjee, Lance Palmer, and Joseph W. Goetz Early Child Health Intervention and Subsequent Academic Achievement 107 Bhavneet Walia Copyright 2016 by the Academy of Economics and Finance All Rights Reserved ii Academy of Economics and Finance Journal, Volume 7 Peer-to-Peer Equity Investments in Germany. A Note on Successful Company Characteristics Parthepan Balasubramaniam, Florian Kiesel, and Dirk Schiereck, Technische Universitaet Darmstadt, Germany Abstract Peer-to-peer investing is often considered to be a mass alternative to business angel investing. This paper introduces peer- to-peer investing as a new financing instrument for start-ups in the traditionally bank-based financial system of Germany and identifies characteristics that influence the funding success of peer-to-peer investing projects. Based on a comprehensive picture of the peer-to-peer investing platforms in Germany, we analyze 126 funded projects from the three largest German platforms Seedmatch, Companisto and Innovestment. Our results show that larger projects are more successful in funding while the smallest platform is less promising. Introduction Moenninghoff and Wieandt (2013) illustrate that the peer-to-peer equity investing markets in Europe are less developed than the peer-to-peer lending markets despite the emergence of the first investing platforms in 2006. Overall, peer-to-peer equity investing is still a hardly used financing source and by far smaller than the according hype in the media might expect. The market volume reached only a low-double digit amount early this decade and appears tiny in absolute terms compared to the overall investment volume managed globally by private equity and venture capital funds. But the compound monthly growth rate of 10% since the beginning of 2010 indicates the rapid growth of this innovative form of financial intermediation over the last years (Moenninghoff and Wieandt, 2013, p. 6-7). In Germany, not only the IPO and equity capital markets are comparably small compared to the overall economic strength of its economy, but also the peer-to-peer equity investing markets. One often claimed reason for this weakness lies in the less developed German venture capital (VC) industry which might restrict funding sources for young growth companies. With the upcoming of electronic peer-to-peer financing platforms, there are new alternative funding sources which address the VC gap. However, if a leading economy is confronted with a less developed VC community, it is unclear how this institutional background allows peer-to-peer investing platforms to generate sufficient capital supply for funding purposes of young ventures. Here our analyses start. We take a focus on peer-to-peer investing platforms in Germany which were established since 2010. The market is still hardly analyzed by empirical research on firm characteristics that can explain the success of funding campaigns on these platforms. Our results allow a deeper understanding of the effectiveness of peer-to-peer investing as an alternative financing source for start-ups, and to analyze the success factors of German peer-to-peer investment projects. The rest of the paper is organized as follows: The following chapter provides a more comprehensive description of peer- to-peer investing, in particular the German peer-to-peer investing market. We then analyze successful peer-to-peer investing projects empirically, examining the dependence of certain attributes. Finally, we briefly summarize our main results and offer our conclusion. The German Peer-to-Peer Investing Platforms and Instruments In Germany, peer-to-peer investing and trading platforms are highly regulated in the case of pure equity financing. Platforms, which allow equity financing via stock offerings, need a bank license for their businesses. Consequently, in an attempt to avoid strict regulation, most platforms in Germany decided to offer only hybrid financing instruments which are equity-like but not that strictly regulated. As a result, the German peer-to-peer investing market is dominated by platforms which claim to place equity but really bring together sponsors and founders/entrepreneurs for hardly fungible hybrid assets. These assets include a variety of configuration options. They all have in common being subordinated to traditional debt capital and primary to pure equity in terms of repayment. The existing flexibility in these contracts is the main advantage of these security designs which may also explain that in practice the peer-to-peer investing in Germany exists almost exclusively in hybrid forms of financing, where these are limited to silent partnerships, participation rights and subordinated shareholder loans, and only in very few transactions as stock equity investments. Table 1 gives an overview of the four forms of financing and security designs. 1 Academy of Economics and Finance Journal, Volume 7 Table 1: Characteristics of the four forms of per-to-peer investing financing Equity Silent Participation Subordinated Investment Partnership Right Shareholder Loan Type Equity Mezzanine Mezzanine Mezzanine Liability No No No No Profit sharing Yes Yes Yes Yes Loss sharing Yes Yes Yes No Share in the assets Yes Yes (atypical) No No Share in the Yes Yes Optional Yes liquidation proceeds Voting rights Yes Optional (atypical) No No Control rights Yes Yes No Yes Prospectus Yes (above 100,000 Yes Yes No requirement EUR) The peer-to-peer investing market is increasingly growing in Germany. It started from a very low base in 2011 at a volume of 450,000 EUR, with enormous growth in 2013 to a financing volume of 15 million EUR, which is an increase of around 250 per cent over 2012. The first half of 2014 amounted to 8.3 million EUR. Table 2 provides an overview of all German peer-to- peer investments which operate from Germany. Based on these figures, it can be assumed that the platforms

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