Financing Decisions Along a Firm's Life-Cycle: Debt as a Commitment Device

41 Pages Posted: 8 Nov 2009

See all articles by Julia Hirsch

Julia Hirsch

Universidad Autónoma de Querétaro

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Leibniz Institute for Financial Research SAFE

Date Written: November 6, 2009

Abstract

We analyze the life-cycle patterns of a firm's financing decisions and their interaction with future growth and development decisions. The framework derives three different financing sequences (debt-debt, equity-debt, equity-equity financing) which we link to existing empirical research. Furthermore, by adopting a life-cycle approach we are able to go one step beyond existing empirical research and derive testable hypotheses with respect to differences in the financing decisions of firms due to project, firm, market and country characteristics as well as the impact of a possible lack of start-up financing possibilities on firm dynamics.

Keywords: financing decisions, life-cycle, firm growth, path-dependencies

JEL Classification: D92, G32

Suggested Citation

Hirsch, Julia and Walz, Uwe, Financing Decisions Along a Firm's Life-Cycle: Debt as a Commitment Device (November 6, 2009). Available at SSRN: https://ssrn.com/abstract=1501153 or http://dx.doi.org/10.2139/ssrn.1501153

Julia Hirsch

Universidad Autónoma de Querétaro ( email )

Cerro de las Campanas S/N, Las Campanas
Queretaro, 76010
Mexico

Uwe Walz (Contact Author)

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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