The Capital Structure Decisions of New Firms

34 Pages Posted: 20 Feb 2009  

Alicia Robb

University of California, Berkeley - Coleman Fung Institute for Engineering Leadership; Kauffman Foundation; University of Colorado at Boulder

David T. Robinson

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

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

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: https://ssrn.com/abstract=1345895 or http://dx.doi.org/10.2139/ssrn.1345895

Alicia Robb (Contact Author)

University of California, Berkeley - Coleman Fung Institute for Engineering Leadership ( email )

130 Blum Hall #5580
Berkeley, CA 94720-5580
United States

Kauffman Foundation ( email )

4801 Rockhill Road
Kansas City, MO 64110-2046
United States

HOME PAGE: http://www.kauffman.org/kfs

University of Colorado at Boulder ( email )

1070 Edinboro Drive
Boulder, CO 80309
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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