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The Capital Structure Decisions of New Firms

34 Pages Posted: 20 Feb 2009  

Alicia Robb

University of Colorado at Boulder; Next Wave Impact

David T. Robinson

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

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Date Written: February 11, 2009


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.

Keywords: entrepreneurial finance, pecking order, start ups

JEL Classification: G32, M13

Suggested Citation

Robb, Alicia and Robinson, David T., The Capital Structure Decisions of New Firms (February 11, 2009). Available at SSRN: or

Alicia Robb (Contact Author)

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO 80309
United States

Next Wave Impact ( email )

7455 Park Lane Road
Longmount, CO 80503
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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
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Duke Innovation & Entrepreneurship Initiative ( email )

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Durham, NC 27701
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