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The Capital Structure Decisions of New FirmsAlicia RobbKauffman Foundation; University of California, Santa Cruz David T. RobinsonDuke University - Fuqua School of Business; National Bureau of Economic Research (NBER) February 11, 2009 Abstract: This paper investigates the capital structure choices that firms make in their initial year of operation, using restricted-access data from the Kauffman Firm Survey. Contrary to many accounts of startup activity, the firms in our data rely heavily on external debt sources such as bank financing, and less extensively on friends and family-based funding sources. This fact is robust to numerous controls for credit quality, industry, and business owner characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.
Number of Pages in PDF File: 34 Keywords: entrepreneurial finance, pecking order, start ups JEL Classification: G32, M13 working papers seriesDate posted: February 20, 2009Suggested CitationContact Information
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