Contractual Obligation of Claims. A Factor Influencing Investors Choices of Capital

George Obeng

Abstract


Advocacy for entrepreneurship and innovation to ease unemployment is stampeded by funding. Uncertainty of reward, unenforceability of rights in case of default, obscures attracting financiers. Risk of investment security and returns, information opaqueness and their effect on securing funding entrepreneurship has received little attention. The study investigated how contractual obligations of claims influence choice of capital in emerging markets, as against capital structure optimality intrusion in investors’ decision. A cohort of 250 potential investors responded to structured questionnaires in a survey, and quantitative approach used to analyse the data on how contractual obligation of claims affects choice of capital. The study revealed influence of security over assets and contracted claims on decisions. Perception of trust is gradually giving way to formality and choice of debt in investment decisions. Developing the bond market, trade off equity, is eminent to mobilize funds to develop entrepreneurship in emerging economies.

 

Key words: Capital structure; Contractual obligation; Entrepreneurship; Information                                                                                                                                                                                                                                                                                                        asymmetry.


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