The Capital Structure Decisions of New Firms: Second in a Series of Reports Using Data from the Kauffman Firm Survey

20 Pages Posted: 1 Nov 2008 Last revised: 31 Mar 2010

See all articles by Alicia Robb

Alicia Robb

University of Colorado at Boulder; Next Wave Impact; Federal Reserve Banks - Federal Reserve Bank of Atlanta

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: November 1, 2008

Abstract

This paper investigates the capital structure choices that firms make in their initial year of operations, 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 heavily on friends and family-based funding sources. This striking fact holds even when we purge each firm's credit score of variation due to demand-side credit characteristics. The heavy reliance on external debt underscores the importance of well functioning credit markets for the success of nascent business activity.

Keywords: capital structure, start-up, startup, funding, Kauffman Firm Survey, debt, sources

Suggested Citation

Robb, Alicia and Robinson, David T., The Capital Structure Decisions of New Firms: Second in a Series of Reports Using Data from the Kauffman Firm Survey (November 1, 2008). Available at SSRN: https://ssrn.com/abstract=1292552 or http://dx.doi.org/10.2139/ssrn.1292552

Alicia Robb (Contact Author)

University of Colorado at Boulder ( email )

Leeds Business School
Boulder, CO 80309
United States

Next Wave Impact ( email )

7455 Park Lane Road
Longmount, CO 80503
United States

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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